There have been two important changes to the Virginia State Bar’s Clients’ Protection Fund in the last few years, writes Executive Director Karen Gould in a mid-year report to Bar Council.
First, in 2017, the Supreme Court of Virginia reduced the yearly fee assessment on active lawyers from $25 to $10. And, in 2018, the General Assembly passed legislation extending the sunset provision on the assessment – for up to $25 a year – to July 1, 2023.
These changes were made with the support of the Bar Council and the Supreme Court of Virginia in recognition of the fund’s importance to a self-regulated legal profession in Virginia, as well as the current fiscal health of the fund itself.
Gould’s full report follows.
During the 2018 legislative session, at the request of the Virginia State Bar, the General Assembly amended Virginia Code § 54.1-3931 to extend the sunset provision for the Clients’ Protection Fund assessment from July 1, 2020, to July 1, 2023. Governor Northam signed the legislation, and it became effective July 1, 2018.
The Supreme Court of Virginia approved allowing the VSB, in the 2018 legislative session, to seek an extension of the sunset provision from July 1, 2020, to July 1, 2023. The VSB’s governing body, Council, also unanimously authorized the VSB to seek the three-year extension. The assessment would have terminated on July 1, 2020 if no action had been taken. The assessment is currently set at $10 per active member by the Supreme Court of Virginia.
The fund is a critical component of self-regulation. There is no other profession that assesses its members to make up for the dishonest acts of others. Although claims against the fund are unpredictable, recent years have seen payouts of approximately $330,000 a year. Projections as of 2018 indicate that, with a consistent balance of $9 million, income from investments should cover payments from the fund, ensuring the health of the corpus of the fund for the long term. With approximately 31,000 active members, the $10 assessment will generate enough cash flow to fund payments on a consistent basis.
The decrease in the assessment from $25 to $10, ordered by the Supreme Court of Virginia on September 28, 2017, effective July 1, 2018, has lowered the flow of lawyers’ money into the Clients’ Protection Fund. In calendar year 2017, with the fee at $25, the CPF assessment raised $807,010, and the fund was at $9.75 million as of April 2018. When the Court reduced the fee to $10, it was estimated that the annual collection would decrease to approximately $330,000 a year. And during the 2018 dues season (July – December 2018), the CPF assessment raised $326,065.
The fund balance on December 31, 2018, was $10,146,128.
The Clients’ Protection Fund Board met in Charlottesville on Friday, January 11, 2019, for its second of three regularly scheduled meetings this fiscal year. It deliberated on 12 cases, including five new petitions in which petitioners were seeking recompense for financial losses incurred due to the conduct of a deceased or dishonest Virginia lawyer. Awards from the Clients’ Protection Fund will become final and announced after the 30-day reconsideration period passes.
The board also heard subcommittee and financial reports, as well as a number of administrative matters. Its next meeting is in Richmond on May 3, 2019.Updated: Jan 24, 2019
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