Legal Ethics Opinion No. 1417 

   Personal Interest Affecting Representation--Trust Accounts:
Attorney's Duty to Insure All Funds Placed In Trust Account--
Propriety of Attorney Depositing Client Funds Into Bank in Which 
             Attorney is Director/Shareholder/Counsel

You have advised that, in the course of a real estate
transaction, Attorney A deposits his client's funds in excess of
$l00,000 to his trust account and disburses them within one or
two days of closing.  Attorney A is a director and stockholder of
the bank into which the funds have been deposited and frequently
represents the bank in legal matters.  The bank is insured by the
FDIC which agency's regulations insure only the first $l00,000 of
client's funds on deposit in Attorney A's trust account.

You have asked the committee to opine as to (l) whether Attorney
A has a duty to be sure that all of his client's funds are
insured by the FDIC; (2) if Attorney A has such a duty, may it be
waived by the client; (3) if Attorney A's interests in the bank
are in conflict with his client's interest in the safety of his
uninsured funds; and (4) if the issues would be resolved
differently if the funds remained in escrow for more than one or
two days.

The appropriate and controlling disciplinary rules relevant to
your inquiries are DR 9-l02(C) which requires that a "bank" or
"banking institution" into which an attorney may deposit client
funds must be a "bank or savings and loan association authorized
by Federal or State law to do business in the State of Virginia
and in which deposits are insured by an agency of the Federal
Government"; and DR 5-l0l(A) which precludes a lawyer from
accepting employment if the exercise of his professional judgment
on behalf of his client may be affected by his own financial,
business, property, or personal interests, except with the
consent of his client after full and adequate disclosure.

The committee has earlier opined that the plain language of DR
9-l02(C) would not permit investing clients' funds in an
Automatic Investment Management service which would invest such
funds in Repurchase Agreements.  See LEO #l265.

It is the opinion of the committee that the plain language of DR
9-l02(C), referencing insurance of bank accounts into which
client funds are placed, does not explicitly require that all
funds placed into such accounts be insured; the Rule simply
requires that the bank or banking institution participate in the
federal insurance program.  Since there is no duty to assure that
all funds are insured, the committee does not reach the question
as to whether any such duty may be waived by the client.

The committee further opines that the Attorney A's involvement
with the bank, serving as director, shareholder, and counsel,
constitutes a personal interest such as those envisioned by DR
5-l0l(A).  The committee believes that, in the instant matter,
the primary obligation of Attorney A is to the client for whom he
conducts a real estate transaction.  Thus, the committee is of
the opinion that, since Attorney A's service as director and
shareholder of the bank constitutes a personal interest, he may
not deposit client funds into the bank without having made full
disclosure and having received consent from his real estate
client.  Furthermore, the committee cautions that if Attorney A
knows or should know that the financial condition of the bank is
precarious, his duty to his real estate client requires that he
not deposit client funds into that financial institution without
specific authorization from the client.

Finally, the committee believes that the length of time during
which the funds remain in escrow bears no relationship to the
ethical duties owed by Attorney A to the client.

Committee Opinion
May 14, 1991