Supreme Judicial Court Rules Governing The Clients' Security Board
S.J.C. Rule 4:04 CLIENTS' SECURITY BOARD AND FUND
A Clients' Security Board (Board) shall be appointed by the full court. This Board shall consist of seven members of the Massachusetts bar to serve as public trustees to receive, hold, manage, and distribute the funds allocated to the Board from the annual fees assessed under subsection (1) of Rule 4:03. Such funds shall be held by the Board in trust and known as the Clients' Security Fund (Fund). The purpose of the Fund is to discharge, as far as practicable and in a reasonable manner, the collective professional responsibility of the members of the Massachusetts bar with respect to losses caused to the public by defalcations of members of the bar, acting either as attorneys or as fiduciaries (except to the extent to which they are bonded, or to the extent such losses are otherwise covered).
(1) The Massachusetts Bar Association, each county bar association (including the Boston Bar Association as the county bar association for Suffolk county) and other appropriate organizations may submit to the court not more than three nominees for each vacancy on the Board. The full court shall select from these nominees or from any other members of the bar a person to fill each vacancy, and shall designate a Chairman, and a Vice Chairman to act in the absence for any cause of the Chairman.
(2) When the Board is first selected, one member shall be appointed for a term of one year, one for a term of two years, one for a term of three years, one for a term of four years, and one for a term of five years. When the sixth and seventh members of the Board are first selected, one member shall be appointed for a term of four years and one for a term of five years. All terms (except to fill an unexpired term) thereafter shall be for five years and no member shall succeed himself after two consecutive full terms, in addition to any term of less than five years, either by original appointment or to complete an unexpired term. He shall be eligible, however, for reappointment for further terms after a lapse of one or more years. A member whose term has expired shall continue in office until a successor is appointed.
Section 3. Meetings of the Board shall be held at the call of the Chairman or a majority of the members, and shall be held at least once each year, upon reasonable notice. Four members shall constitute a quorum. A majority of the members present at a duly constituted meeting may exercise any powers held by the Board.
Section 4. The Board, members of the Board, and the staff of the Board shall be immune from liability for any conduct in the course of their official duties. Adopted June 3, 1974, effective September 1, 1974; amended September 17, 1975, effective January 1, 1976; May 25, 1982, effective September 1, 1982; amended effective August 3, 1982; February 1, 1991; October 14, 1997; October 1, 1998, effective November 2, 1998.
RULE 4:05 CLAIMS BY CLIENTS FOR REIMBURSEMENT OF LOSSES
Section 1. The Board may consider applications by clients for reimbursement of losses discovered after the effective date of these rules, and may honor, pay, or reject such claims in whole or in part to the extent that funds are available and in accordance with such rules, regulations, and principles as may be in force from time to time, especially the provisions of this Chapter Four. All reimbursements shall be a matter of grace, not right, and no client, beneficiary, employer, organization, or other person shall have any right or interest in the Fund. No decision to grant or deny reimbursement shall be subject to judicial review in a court of either appellate or original jurisdiction.
Section 2. No application for reimbursement from the Fund shall be allowed unless the attorney of the client applicant
(1) was, at the time the claim arose, a member of the Massachusetts bar with an office within the Commonwealth and engaged in active practice, and
(2) shall have died, or have been disbarred or suspended from the practice of law, or have resigned from the Massachusetts bar.
Section 3. The Board, in determining in its discretion whether any application for reimbursement from the Fund shall be allowed, shall attempt in the public interest to establish fair, reasonable, and consistent principles for the allowance and rejection of claims in the circumstances existing from time to time, and shall consider the following matters and factors together with such other circumstances as the Board may deem appropriate and relevant:
(1) The amounts available and likely to become available to the Fund for payment of claims; the size and number of claims likely to be presented in the future; the total amount of losses caused by defalcations of any one attorney or associated groups of attorneys; and the unreimbursed amounts of claims theretofore recognized by the Board as meriting reimbursement but for which complete reimbursement has not been made.
(2) The amount of the claimant's loss as compared with the amount of the then known losses sustained by other applicants who may merit reimbursement from the Fund; the degree of hardship suffered by the claimant as compared with that suffered by other applicants; and any negligence or conduct of the claimant which may have contributed to the loss.
Section 4. In addition to other conditions and requirements, the Board may require any applicant, as a condition of any payment from the Fund, to execute such instruments, to take such action, and to enter into such agreements as the Board may direct, including assignments, subrogation agreements, trust agreements, and promises to cooperate with the Board in making and prosecuting claims or charges against any person. The Board may request individual lawyers and bar associations to assist it in the investigation of claims.
Section 5. At any stage of its investigation, the Board may issue a subpoena requiring the attendance and testimony of a witness, including the respondent, and the production of any evidence, including books, records, correspondence or documents, relating to any matter in question in the investigation. The subpoena shall require a witness to appear before the Board or its counsel at a specified date and time and shall specify any evidence to be produced. Testimony may be taken electronically or otherwise.
Section 6. The Board may issue a subpoena requiring the attendance and testimony of a witness, and the production of any evidence, including books records, correspondence or documents, relating to any matter in question in the proceeding. Any request by the respondent for such a subpoena shall be made in writing to the Board which may forthwith issue the subpoena. The subpoena shall require a witness to appear before the Board at a specified date and time and shall specify the evidence, if any, to be produced.
Adopted June 3, 1974, effective September 1, 1974; amended effective September 14, 1977; April 15, 1996; amended December 11, 2003, effective January 1, 2004.
RULE 4:06 MISCELLANEOUS POWERS AND DUTIES OF CLIENTS' SECURITY BOARD
Section 1. In addition to other powers the Board, in order to carry out its functions and duties,
(1) may adopt, with the approval of this court, rules and regulations not inconsistent with these rules;
(2) may enforce, in its discretion, claims for restitution arising by subrogation, assignment, or otherwise;
(3) may invest or direct the investment of the Fund, or any portion thereof, in such investments as the Board may deem appropriate, and may cause funds to be deposited in any bank, banking institution, savings bank, or federally insured savings and loan association in this Commonwealth provided, however, that the Board shall have no obligation to cause the Fund or any portion thereof to be invested and may delegate some or all of its duties under this subsection (3) to the Administrator of the Board of Bar Overseers;
(4) may employ and compensate consultants, agents, legal counsel, and employees, and, subject to the prior written approval of this court or a justice thereof, may make contracts for the performance of administrative and similar services, for obtaining surety bond or insurance coverage useful or appropriate in providing protection to clients of attorneys, and for other goods and services appropriate in the performance of the Board's duties and may assign for administrative purposes its duties under subsection (4) to the Administrator of the Board of Bar Overseers, in accordance with the Board's written directions, which may be amended by the Board;
(5) may sue in the name of the Board, without joining any or all of its individual members; and
(6) may perform other acts necessary or proper for the efficient administration of the Fund.
Section 2. Money shall be disbursed from the Fund Only upon written order issued by action of the Board pursuant to this Chapter Four. At least once each year, and at such additional times as the court may order, the Board shall file with this court a written report of its administration of the Fund.
Section 3. The Board annually, and at such other times as this court may direct, shall obtain an independent audit by a certified public accountant of funds received and paid out by it in connection with the administration of the Fund. The cost of any such audit shall be paid from the Fund.
Adopted June 3, 1974, effective September 1, 1974. Amended October 1, 1998, effective November 2, 1998.
RULE 4:07 does not pertain to the Clients' Security Board
RULE 4:08 INTERPRETATION OF CHAPTER FOUR OF THESE RULES
Section 1. The Board of Bar Overseers or the Clients' Security Board may request this court for an interpretation of any portion of this Chapter Four, and for advice and instructions as to their powers and duties. Either of these boards may submit to the court suggestions or proposals for revisions, modifications, or improvement of this Chapter Four, including proposals for affording protection to clients by surety bonds, group insurance of attorneys, or other means of insurance or indemnity coverage.
Section 2. Except where powers are expressly given to the full court, or the context indicates clearly that the full court alone is to have the power, the powers of this court may be exercised by a justice, subject to any appropriate review.
Adopted as Rule 4:07 June 3, 1974, effective September 1, 1974. Renumbered as Rule 4:08 effective February 1, 1993.
RULE 4:09 AMENDMENT, MODIFICATION, REPEAL
This court may amend, modify, or repeal this Chapter Four of these rules at any time without prior notice and, in its discretion, may provide for the dissolution and winding up of the Clients' Security Fund.
Adopted as Rule 4:08 June 3, 1974, effective September 1, 1974. Renumbered as Rule 4:09 effective February 1, 1993.