Thursday, June 18, 2026
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State Bar Is Auditing Client-Trust Accounts for 400 Licensees
By a MetNews Staff Writer
The State Bar announced yesterday that it has begun notifying 400 attorneys, selected at random from a cross-section of licensees, that they will be the subjects of a mandatory compliance review of their 2025 client-trust account recordkeeping, marking a fourfold increase from last year’s first-ever mandatory audits.
Highlighting that the goal of the review is to detect and deter the mishandling of funds entrusted to advocates, the licensing body initiated a pilot program with 21 law-firm volunteers in 2024 and launched the mandatory review process last year, covering accounts held by 100 randomly chosen California lawyers.
Yesterday’s press release reports that, “[t]hrough the first two years of the reviews, the State Bar has often found attorneys, whether at large firms, medium-size firms, or solo practitioners, are not complying with important recordkeeping requirements which, if were in place, would prevent negligent trust fund management errors.”
Reporting Rules
The audits follow the adoption of new reporting rules in 2023, under which California lawyers are obligated to register any trust accounts with the State Bar, as well as provide the associated year-end balances, as part of their license-renewal process, and last year’s enactment of new Business and Professions Code sections, §§6091.3 and 6091.4.
Sec. 6091.3 imposes new obligations on lawyers and banks as of January, including a mandate that an attorney provide a State Bar number—or, in the case of a firm, that information associated with a designated lawyer—when establishing a new trust account, and a requirement that the financial institution maintain records reflecting the data and to “incorporate…the…number for known client trust accounts where [it] was previously not collected.”
Attorneys and law firms are further required, under §6091.4, to “provide to the State Bar or its agents all requested information, records, or communications…related to the receipt, holding, and disbursement of funds, securities, or other property in which the licensee, limited liability partnership, or law corporation knows or reasonably should know a client or other person has an interest” when requested by the body as part of an “investigative audit.”
Compliance Review
Rules of the State Bar Rule 2.6 outlines the requirements for a licensee to complete a compliance review, specifying:
“[A] licensee, if selected by the State Bar, must comply with and complete a trust account compliance review, investigative audit, and any requirements of a mandatory corrective action plan resulting from the findings of the compliance review….If a licensee is selected for a compliance review or investigative audit, all licensees at the licensee’s firm must cooperate with requests for information….”
Special Counsel to the State Bar Office of Regulation Steven Moawad commented yesterday:
“These reviews are designed to support attorneys and their staff in building strong, reliable recordkeeping practices that protect clients and reinforce confidence in the legal profession. By continuing these compliance reviews, we aim to provide clarity, promote accountability, and ensure that every attorney is equipped to meet their ethical obligations.”
Client Funds
California attorneys manage over $14 billion in client funds across the state. According to the Office of Chief Trial Counsel (“OCTC”), insufficient fund reports relating to lawyer-administered trust accounts declined 27% between 2024 and 2025, dropping from 1,017 to 738, continuing a downward trend from the peak of just over 1,400 in 2023.
The body attributed the decrease to “preventive efforts by OCTC” and the 2023 launch of the new reporting rules.
Those rules were adopted following a 2020 finding by a federal judge that now-disbarred California attorney Tom Girardi had improperly taken $2 million in client funds and widespread criticism of the State Bar for failing to take disciplinary action against Girardi until 2021, when his misdeeds were widely reported in the media.
No details were provided by the State Bar as to how the attorneys are “randomly selected” for an audit.
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