Section 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.