Ethics Opinion 107aNEW YORK STATE BAR ASSOCIATION Professional Ethics Committee Opinion
Opinion #107(a) – 01/29/1970 (29-69)
existing clients, client consent, disclosure, funds of client, rebate, title
Topic: Commissions and rebates
Digest: Proper for a lawyer to accept referral fee from investment agent for placing certificates of deposit in financial institutions with funds of clients as long as full disclosure is made to client and client consents.
Canons: Former Canon 8
A financial company has offered to enter into an arrangement with an attorney whereby the attorney would receive stipulated fees for causing funds of the attorney’s clients to be referred to said company for investment in certificates of deposit in various savings and loan associations. The proposed fee agreement provides that the attorney must return his fee in whole if a client’s funds are withdrawn in six months or less, and that half the fee must be refunded if withdrawal is made within a year. The proposed agreement further provides that fees will be paid on the attorney’s personal accounts, but not until an equal amount is placed by the attorney for his clients.The attorney inquires whether he may accept such referral fees, and if so, whether he must disclose the arrangement to his client or remit the fee to his client.
This opinion represents a modification of Opinion 107 (1969) relating to referral fees received by lawyers from investment agents for placing clients funds in certificates of deposit with financial institutions. In that opinion the last sentence of the first paragraph stated:”In the event that the client desires that any commission paid to the attorney be remitted to the client, the attorney must do so, and disclosure of this fact should be made to the company granting the fee, since this fact may affect its willingness to grant such fee.”It is the Committee’s view that this sentence should be modified by deleting there from the words, “and disclosure of this fact should be made to the company granting the fee since this fact may affect its willingness to grant such fees unnecessary.