AB 3279 Regulatory Compliance Bulletin

On September 12, 2024, Governor Gavin Newsom signed into law AB 3279, one of the more significant bills enacted during this legislative session having a direct impact on financial institutions’ operations, including banks, relating to a client trust account (“CTA”) maintained with a bank by a licensed member of the California State Bar. Due to recently publicized malfeasance by a Bar member, resulting in the alleged misapplication of client funds, one core purpose of this bill is to enable the State Bar to track and confirm a CTA’s account balance activities as regularly and independently reported by a licensed member to the Bar. Detailed below are some of the key features of this bill.

Summary

The Collection of an Attorney’s State Bar License Number

Historically, while a bank has maintained CTAs for members of the State Bar, the bank has had no affirmative statutory obligation to collect and retain the member’s State Bar license number. A new California Business and Professions Code section 6091.3(a) is added under AB 3279 requiring the bank to collect and retain an attorney’s State Bar license number, effective January 1, 2026, only when the license “number is made available to the financial institution by the attorney associated with the client trust account in the format described” in section 6091.3(c), detailed below. Accordingly, the bank is at liberty to open a CTA for the attorney even if the attorney fails or declines to provide a license number; under the bill, the number merely must be tendered in a certain format by the attorney to the bank at the time the CTA is established. The bank does not act as an enforcement arm of the State Bar relating to a CTA. Of course, a bank independently could as a regular step in its due diligence or “know your customer” process in establishing a CTA require a license number from an attorney associated therewith as a matter of policy.

Requirement to Provide Information

Under new Business and Professions Code section 6091.3(b), on or after March 1, 2026, and annually on or before March 1 thereafter, a bank must “electronically provide via secure file transport protocol or another format mutually acceptable to the financial institution and the State Bar, the following for every client trust account actually known to the financial institution associated with an attorney’s State Bar license number:”

1. The name of the bank in which the CTA is held;
2. The name of the attorney or law firm associated with the CTA;
3. The account number of the CTA;
4. The attorney’s State Bar license number associated with the CTA; and
5. The CTA balance as of December 31 of the previous year. If December 31 is a holiday, the account balance as of the preceding business day may be reported.

Note this obligation under section 6091.3(b) to provide information is only for those CTAs associated with an attorney’s State Bar license number.

Standard Form to Submit a License Number

Under new Business and Professions Code section 6091.3(c), on or before January 1, 2026, the State Bar must create a standard form for use by an attorney licensed to practice in California wherein the attorney must submit the attorney’s license number and the name and account number of all applicable associated CTAs to the financial institution pursuant to new California Business and Professions Code section 6091.3(d), detailed below.

Attorney’s Obligation to Furnish License Number

Under new Business and Professions Code section 6091.3(d), on or before July 1, 2026, the State Bar must require a California licensed attorney to furnish the attorney’s license number to the financial institution where the attorney maintains a CTA. If the CTA is maintained by a law firm, the firm must designate a member of the firm to provide the number. The attorney must submit the completed form to the central location designated by the financial institution for service of legal process pursuant to Code of Civil Procedure section 684.115, if any. If the bank has not yet designated a central location under section 684.115, AB 3279 is an additional incentive to do so promptly. Under new Business and Professions Code section 6091.3(e), a financial institution receiving the form under section 6091.3(d) must incorporate into its books and records the attorney’s license number for known CTAs where the number was not previously collected.

IOLTA

Under new Business and Professions Code section 6091.3(f), the new obligations under AB 3279 are not intended to replace or supplant the obligations of a bank relating to IOLTAs in Business and Professions Code sections 6211 and 6212. This subsection is viewed necessary because the obligations to maintain and to report IOLTAs and to remit paid interest relating to IOLTAs continue regardless of the attorney maintaining the IOLTA with or without a license number.

Protection Against a Private Right of Action

Under new Business and Professions Code section 6091.3(g), statutory protection is afforded a bank and its officers, directors, and employees with regard to the discharge or the alleged failure to discharge these new obligations under AB 3279.

Conclusion

The new statutory obligations attaching to a bank under AB 3279 require the bank to adopt new policies and procedures from opening a new CTA for a California licensed attorney to annually reporting information regarding all CTAs for which the data is available as set forth in section 6091.3(b). A new field for capturing an attorney’s license number must be made available to new account bankers gathering information at account opening where a CTA is involved. New file transport protocols must be developed or enhanced to enable the information filing obligation relating to CTAs. While March 1, 2026, may appear distant, it could rapidly come upon us.