§ 497. Attorneys fiduciary funds; interest-bearing accounts. 1. An
"interest on lawyer account" or "IOLA" is an unsegregated
interest-bearing deposit account with a banking institution for the
deposit by an attorney of qualified funds.

2. "Qualified funds" are moneys received by an attorney in a fiduciary
capacity from a client or beneficial owner and which, in the judgment of
the attorney, are too small in amount or are reasonably expected to be
held for too short a time to generate sufficient interest income to
justify the expense of administering a segregated account for the
benefit of the client or beneficial owner. In determining whether funds
are qualified for deposit in an IOLA account, an attorney may use as a
guide the regulation adopted by the board of trustees of the IOLA fund
pursuant to subdivision four of section ninety-seven-v of the state
finance law.

2-a. "Funds received in a fiduciary capacity" are funds received by an
attorney from a client or beneficial owner in the course of the practice
of law, including but not limited to funds received in an escrow
capacity, but not including funds received as trustee, guardian or
receiver in bankruptcy.

3. A "banking institution" means a bank, trust company, savings bank,
savings and loan association, credit union or foreign banking
corporation whether incorporated, chartered, organized or licensed under
the laws of this state or the United States, provided that such banking
institution conducts its principal banking business in this state.

4. (a) An attorney shall have discretion, in accordance with the code
of professional responsibility, to determine whether moneys received by
an attorney in a fiduciary capacity from a client or beneficial owner
shall be deposited in non-interest, or in interest bearing accounts. If
in the judgment of an attorney any moneys received are qualified funds,
such funds shall be deposited in an IOLA account in a banking
institution of his or her choice offering such accounts.

(b) The decision as to whether funds are nominal in amount or expected
to be held for a short period of time rests exclusively in the sound
judgment of the lawyer or law firm. Ordinarily, in determining the type
of account into which to deposit particular funds held for a client, a
lawyer or law firm shall take into consideration the following factors:

(i) the amount of interest the funds would earn during the period they
are expected to be deposited;

(ii) the cost of establishing and administering the account, including
the cost of the lawyer or law firm's services;

(iii) the capability of the banking institution, through
subaccounting, to calculate and pay interest earned by each client's
funds, net of any transaction costs, to the individual client.

(c) All qualified funds shall be deposited in an IOLA account unless
they are deposited in:

(i) a separate interest bearing account for the particular client or
client's matter on which the interest will be paid to the client; or

(ii) an interest bearing trust account at a banking institution with
provision by the bank or by the depositing lawyer or law firm for
computation of interest earned by each client's funds and the payment
thereof to the client.

(d) Notwithstanding the deposit requirements of this subdivision, no
attorney or law firm shall be liable in damages nor held to answer for a
charge of professional misconduct for failure to deposit qualified funds
in an IOLA account.

5. No attorney or law firm shall be liable in damages nor held to
answer for a charge of professional misconduct because of a deposit of
moneys to an IOLA account pursuant to a judgment in good faith that such
moneys were qualified funds.

6. a. An attorney or law firm which receives qualified funds in the
course of its practice of law and establishes and maintains an IOLA
account shall do so by (1) designating the account as "(name of
attorney/law firm IOLA account)" with the approval of the banking
institution; and (2) notifying the IOLA fund within thirty days of
establishing the IOLA account of the account number and name and address
of the banking institution where the account is deposited.

b. The rate of interest payable on any IOLA account shall be not less
than the rate paid by the banking institution on similar accounts
maintained at that institution, and the banking institution shall not
impose on such accounts any charges or fees greater than it imposes on
similar accounts maintained at that institution.

c. With respect to IOLA accounts, the banking institution shall:

(i) Remit at least quarterly any interest earned on the account
directly to the IOLA fund, after deduction of service charges or fees,
if any, are applied.

(ii) Transmit to the IOLA fund with each remittance a statement
showing at least the name of the account, service charges or fees
deducted, if any, and the amount of net interest remitted from such
account.

(iii) Transmit to each attorney or law firm which maintains an IOLA
account a statement showing at least the name of the account, service
charges or fees deducted, if any, and the amount of interest remitted
from such account.

(iv) Be permitted to impose reasonable service charges for the
preparation and issuance of the statement.

(v) Have no duty to inquire or determine whether deposits consist of
qualified funds.

7. a. Payment from an IOLA account to or upon the order of the
attorney maintaining such account shall be a valid and sufficient
release of any claims by any person or entity against any banking
institution for any payments so made.

b. Any remittance of interest to the IOLA fund by a banking
institution pursuant to this section shall be a valid and sufficient
release and discharge of any claims by any person or entity against such
banking institution for any payment so made, and no action shall be
maintained against any banking institution solely for opening, offering,
or maintaining an IOLA account, for accepting any funds for deposit to
any such account or for remitting any interest to the IOLA fund.

8. Nothing contained in this section shall be construed to require any
banking institution to offer, accept or maintain IOLA accounts.

9. All papers, records, documents or other information identifying an
attorney, client or beneficial owner of an IOLA account shall be
confidential and shall not be disclosed by a banking institution except
with the consent of the attorney maintaining the account or as permitted
by any law, regulation or adminstrative requirement.

10. An attorney or law firm that can establish that compliance with
subdivision six of this section has resulted in any banking service
charges or fees shall be entitled to reimbursement of such expense from
the interest on lawyer account fund by filing a claim with supporting
documentation with the fund.