Senate Bill S9129

2025-2026 Legislative Session

Directs the chief administrator of the courts to develop and implement a random audit compliance program to conduct periodic financial audits of law firms; and provides for funding of the program

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Current Bill Status - In Senate Committee Judiciary Committee

Introduced
- In Committee Assembly
- In Committee Senate
- On Floor Calendar Assembly
- On Floor Calendar Senate
- Passed Assembly
- Passed Senate
Delivered to Governor
Signed By Governor

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Date of Action	Assembly Actions - Lowercase Senate Actions - UPPERCASE
Feb 26, 2026	print number 9129a
Feb 26, 2026	amend and recommit to judiciary
Feb 05, 2026	referred to judiciary

Bill Amendments

Original

A (Active)

2025-S9129 - Details

Current Committee:: Senate Judiciary
Law Section:: Judiciary Law
Laws Affected:: Add §212-a, amd §212, Judy L; amd §97-t, St Fin L

2025-S9129 - Summary

Directs the chief administrator of the courts to develop and implement a random audit compliance program to conduct periodic financial audits of law firms that engage in the private practice and create and manage real estate escrow trust accounts in the state in order to ensure proper handling of IOLTA accounts; provides for the funding of the random audit compliance program.

2025-S9129 - Sponsor Memo

                                 
BILL NUMBER: S9129

SPONSOR: BYNOE
 
TITLE OF BILL:

An act to amend the judiciary law, in relation to directing the chief
administrator of the courts to develop and implement a random audit
compliance program to conduct periodic audits of law firm financial
accounts; and to amend the state finance law, in relation to the funding
of the random audit compliance program

 
PURPOSE:

The purpose of this bill is to establish "The Random Audit Compliance
Program". Preserving identity of funds and property of others; fiduciary
responsibility; commingling and misappropriation of client funds or
property; maintenance of bank accounts; record keeping; examination of
records. This program has three main purposes.

Education. The central purpose of the program is to educate New York
attorneys on the proper method of compliance with the record-keeping and
ethical responsibilities under Court Rule 1.15(d) and Rule of Profes-
sional Conduct 1.15.

Deterrence. Just knowing that there is an active auditing program is an
incentive to keep good records and to avoid temptation to misuse trust
funds.

Detection of misappropriation. The random selection process will help
the state uncover lawyer theft.These cases will be investigated and
prosecuted in accordance with the rules, regulations, and procedures of
the respective Judicial Department where the suspected violation or
violations had taken place.

 
SUMMARY OF PROVISIONS:

Section 1 of this bill adds a new section (section 212-a) to the New
York State Judiciary Law, which would direct the chief administrator of
the courts to develop and implement a state-wide "random audit compli-
ance program" ("the program") to conduct periodic audits of law firms
that engage in the private practice of creating and managing Real Estate
Escrow Trust Accounts within the State of New York.

Section 2 of this bill would direct the chief administrator of the
courts to consult with the office of information technology services
director, or the director's qualified designee, to develop and implement
a software program that will be used to randomly select law firms for
such audit. The software program selection process must ensure that
every law firm, regardless of size, has an equal chance of being
selected for an audit. No law firm shall be selected for a random audit
under this law, within a five-year period from the most recent random
audit selection of such law firm.However, this law shall not limit the
ability to audit a law firm for cause during that same five-year period.

This section goes on to grant the chief administrator the authority to
enter into an agreement to license for use, an existing program provid-
ing such capability.


Section 3 of this bill establishes that if a law firm happens to have
more than one location within the state, the audit would include all
such offices within the firm.This section adds a provision which breaks
down what would be collected from a law firm during an audit under this
program, there being one or more auditors permitted to perform the
audit, who is eligible to represent the company during the process of
such an audit, and the rules and procedures which the auditors must
following during the audit process.

Section 4 of this bill would direct the chief administrator of the
courts to establish the random audit compliance program within the
office of the lawyers' fund for client protection, which shall coordi-
nate with the chief administrator to implement this program.This section
also allows the board of trustees within such office be responsible for
the hiring of auditors, provided that each of these auditors possess an
appropriate advanced degree and/or certification for the role, as deter-
mined by the board of trustees and in conjunction with such authorities
hiring procedures and criteria which predate the effective date of this
legislation.However, the board of trustees will still retain the author-
ity to alter or amend such criteria, as they see fit.

This section goes on to grant the chief administrator additional author-
ity to promulgate rules and regulations to implement the provisions of
this section and defines the terms "law firm" and "firm" within the
context of this bill.

Section 5 of this bill would establish that this program be funded by
moneys within the lawyer's fund for client protection.

Section 6 of this bill would establish the effective date.

 
JUSTIFICATION:

In 2025, a former real estate attorney was sentenced to up to ten and a
half years in prison for stealing a combined total of $1,791,600 collec-
tively from 32 of his clients, between March 2021 and November 2024.He
committed these thefts by withholding sale proceeds or down payment
funds from those individuals. Cases such as that one are not a new
occurrence. A recent report released by Newsday found that since New
York State established the "Lawyers' Fund for Client Protection" in
1982, more than $112 million in stolen real estate escrow money had been
reimbursed by the fund, to the victims of such a crime.

According to a 2025 report produced by the New York City Bar, New York
faces an upward trend in trust violations, with the Lawyers' Fund paying
out 94 awards totaling $11.6 million in 2024-a 31% increase in the
number of awards and a 90% increase in payouts from the previous
year.The New York City Bar continued that in 2024, real property escrow
losses accounted for $9.9 million in awards, while theft of settlement
proceeds accounted for another $415,476. In comparison, New Jersey (with
about one-fifth of the number of attorneys as New York) paid $1.1
million in client protection awards over a 12-month period.

Since 1981, The Supreme Court of New Jersey has operated their own
program for random audits of attorney trust and business account records
to determine compliance with New Jersey's recordkeeping rule, R 1:21-6,
and ethics rule RPC 1.15 ("Safekeeping Property").Since New Jersey began
this program, several other states have taken up similar legisla-
tion.These being: California, Connecticut, Delaware, Iowa, Kansas, North
Carolina, Vermont, and Washington State. Some examples of these states
that have proven this program to be successful.

New Jersey has completed over 18,000 audits since first enacting the
program in 1981. Only 4.5% of these audits referred for discipline due
to the nature of the violation.  Connecticut saw a drastic improvement
in compliance rates, with the percentage of audits requiring no correc-
tive action increasing from 14% in 2017 to 30% in 2024.

 
LEGISLATIVE HISTORY:

New Legislation hundred eightieth day after it the addition, amendment
and/or the implementation of this act and completed on or before such

 
FISCAL IMPLICATIONS:

None to the state.

 
EFFECTIVE DATE:
This act shall take effect exactly on the one shall have become law.
Effective immediately, repeal of any rule or regulation necessary for on
its effective date are authorized to be made effective date.

2025-S9129 - Bill Text download pdf

                             
                     S T A T E   O F   N E W   Y O R K
 ________________________________________________________________________
 
                                   9129
 
                             I N  S E N A T E
 
                             February 5, 2026
                                ___________
 
 Introduced  by  Sen.  BYNOE  -- read twice and ordered printed, and when
   printed to be committed to the Committee on Judiciary
 
 AN ACT to amend the judiciary law, in relation to  directing  the  chief
   administrator  of  the  courts to develop and implement a random audit
   compliance program to conduct periodic audits of  law  firm  financial
   accounts; and to amend the state finance law, in relation to the fund-
   ing of the random audit compliance program
 
   THE  PEOPLE OF THE STATE OF NEW YORK, REPRESENTED IN SENATE AND ASSEM-
 BLY, DO ENACT AS FOLLOWS:
 
   Section 1. The judiciary law is amended by adding a new section  212-a
 to read as follows:
   §  212-A.  RANDOM AUDIT COMPLIANCE PROGRAM. 1. THE CHIEF ADMINISTRATOR
 OF THE COURTS SHALL DEVELOP AND  IMPLEMENT  A  STATE-WIDE  RANDOM  AUDIT
 COMPLIANCE  PROGRAM  ("THE  PROGRAM")  TO CONDUCT PERIODIC AUDITS OF LAW
 FIRMS THAT ENGAGE IN THE PRIVATE PRACTICE AND  CREATE  AND  MANAGE  REAL
 ESTATE  ESCROW  TRUST ACCOUNTS WITHIN THE STATE OF NEW YORK. THE PURPOSE
 OF THE PROGRAM IS TO ENSURE THAT LAW FIRMS APPROPRIATELY  HANDLE  CLIENT
 FUNDS,  MAINTAIN  REQUIRED RECORDS OF CLIENTS' FUNDS AND ATTORNEYS' FEES
 AS DESCRIBED IN THE  RULES  OF  COURT  AND  THE  RULES  OF  PROFESSIONAL
 CONDUCT,  AND UTILIZE GENERALLY ACCEPTED ACCOUNTING PRACTICE IN MANAGING
 THEIR TRUST ACCOUNTS. THESE GOALS WILL BE ACCOMPLISHED THROUGH:
   (A) EDUCATING NEW YORK ATTORNEYS ON THE PROPER  METHOD  OF  COMPLIANCE
 WITH  THE RECORD KEEPING AND ETHICAL RESPONSIBILITIES UNDER THE NEW YORK
 RULES OF PROFESSIONAL CONDUCT, 22 NYCRR 1200, RULE 1.15;
   (B) PROVIDING A DETERRENT EFFECT DUE TO  THE  PRESENCE  OF  AN  ACTIVE
 AUDITING  PROGRAM  AND  AN  INCENTIVE  TO KEEP GOOD RECORDS AND TO AVOID
 TEMPTATION TO MISUSE TRUST FUNDS; AND
   (C) THE DETECTION OF MISAPPROPRIATION OF CLIENT FUNDS.
   2. THE CHIEF ADMINISTRATOR SHALL CONSULT  WITH  THE  DIRECTOR  OF  THE
 OFFICE  OF INFORMATION TECHNOLOGY SERVICES, OR SUCH DIRECTOR'S DESIGNEE,
 TO DEVELOP AND IMPLEMENT A SOFTWARE PROGRAM THAT  WILL  RANDOMLY  SELECT
 LAW  FIRMS WITHIN THE STATE FOR AUDIT. ALTERNATIVELY, THE CHIEF ADMINIS-
 TRATOR MAY ENTER INTO AN  AGREEMENT  TO  LICENSE  FOR  USE  AN  EXISTING
 PROGRAM  PROVIDING  SUCH  CAPABILITY.  THE  PROGRAM MUST ENSURE THAT THE
 
  EXPLANATION--Matter in ITALICS (underscored) is new; matter in brackets
                       [ ] is old law to be omitted.

                                                            LBD14666-02-6
 S. 9129                             2
 
 SELECTION PROCESS PROVIDES THAT EVERY LAW FIRM, REGARDLESS OF SIZE,  HAS
 AN  EQUAL  CHANCE  OF BEING SELECTED FOR AN AUDIT. THE PROGRAM MUST ALSO
 ENSURE THAT A LAW FIRM MAY ONLY BE SELECTED FOR RANDOM AUDIT ONCE  IN  A
 FIVE-YEAR  PERIOD. THIS PROVISION SHALL NOT LIMIT THE ABILITY TO AUDIT A
 LAW FIRM FOR CAUSE DURING THE SAME FIVE-YEAR PERIOD.
   3. AN AUDIT OF A LAW FIRM THAT MAINTAINS MORE THAN ONE LOCATION WITHIN
 THE STATE SHALL ENTAIL AN AUDIT OF ALL OFFICES LOCATED WITHIN THE STATE.
 AN AUDIT OF A LAW FIRM THAT MAINTAINS A LOCATION WITHIN  THE  STATE  AND
 ONE OR MORE LOCATIONS OUTSIDE OF THE STATE SHALL ENTAIL AN AUDIT OF ONLY
 THE OFFICE OR OFFICES LOCATED WITHIN THE STATE.
   4.  (A)  A  LAW FIRM AUDITED UNDER THIS SECTION AND ANY RULES OR REGU-
 LATIONS PROMULGATED PURSUANT  TO  THIS  SECTION  SHALL  BE  REQUIRED  TO
 PROVIDE RECORDS FOR ALL TRUST ACCOUNTS, BUSINESS ACCOUNTS, AND FIDUCIARY
 ACCOUNTS.  EVERY AUDIT WILL ENTAIL A TWO-YEAR REVIEW OF BANK STATEMENTS,
 CANCELLED CHECKS, WIRE ADVICES, DEPOSIT SLIPS, THREE-WAY TRUST RECONCIL-
 IATIONS, CLIENT TRUST LEDGERS, CHECKBOOK STUBS  OR  REGISTERS,  AND,  IF
 NECESSARY,  CASE  FILES,  AS  WELL AS ANY OTHER DOCUMENTS OR RECORDS THE
 CHIEF ADMINISTRATOR MAY  SPECIFY  OR  THE  AUDITOR  DEEMS  NECESSARY  TO
 ADVANCE OR COMPLETE THE AUDIT.
   (B) AN AUDIT MAY BE PERFORMED BY ONE OR MORE AUDITORS.
   (C) A SENIOR ATTORNEY WITH KNOWLEDGE OF THE LAW FIRM'S FINANCIAL PRAC-
 TICES  SHOULD  BE  PRESENT FOR THE AUDIT. IF SUCH ATTORNEY IS NOT AVAIL-
 ABLE, A RESPONSIBLE PERSON KNOWLEDGEABLE ABOUT  THE  BOOKS  AND  RECORDS
 MUST BE PRESENT FOR THE AUDIT.
   (D)  THE  AUDITOR WILL CONDUCT AN INITIAL INTERVIEW TO OBTAIN DETAILED
 INFORMATION ABOUT THE LAW FIRM'S RECORDKEEPING PROCEDURES.  THE  AUDITOR
 SHALL  REVIEW THE FIRM'S TRUST AND BUSINESS ACCOUNT BOOKS AND RECORDS TO
 DETERMINE COMPLIANCE WITH THE RULE REQUIREMENTS AND WILL VERIFY THAT ALL
 FUNDS ENTRUSTED TO THE ATTORNEY HAVE BEEN SAFEGUARDED IN THE  ATTORNEY'S
 TRUST ACCOUNT.
   (E)  THE  AUDITOR  WILL  DOCUMENT  ANY RECORDKEEPING DEFICIENCIES ON A
 DEFICIENCY CHECKLIST AND WILL PROVIDE A COPY OF THE COMPLETED  CHECKLIST
 TO THE LAW FIRM. THE AUDITOR ALSO WILL DISCUSS WITH THE ATTORNEY OR WITH
 THE  RESPONSIBLE  PERSON  IN  CHARGE OF THE ATTORNEY'S BOOKS THE ACTIONS
 REQUIRED TO CORRECT ANY DEFICIENCIES.
   5. (A) IF NO ISSUES ARE DISCOVERED DURING THE AUDIT, A CLOSING  LETTER
 SHALL  BE  SENT TO THE LAW FIRM CONFIRMING COMPLIANCE WITH RULE REQUIRE-
 MENTS.
   (B) IF MINOR DEFICIENCIES ARE DISCOVERED DURING THE AUDIT, A DEFICIEN-
 CY LETTER DESCRIBING SHORTCOMINGS THAT REQUIRE CORRECTIVE  ACTION  SHALL
 BE  SENT TO THE LAW FIRM. THE FIRM SHALL HAVE FORTY-FIVE DAYS TO RESPOND
 WITH INFORMATION ABOUT THE CORRECTIVE ACTION THAT HAS BEEN TAKEN. IF THE
 RESPONSE IS ACCEPTABLE, THE MATTER WILL BE CLOSED. IF THE FIRM DOES  NOT
 RESPOND, THE MATTER MAY BE REFERRED TO FOR DISCIPLINARY ACTION.
   (C) IF MAJOR DEFICIENCIES, SUCH AS MISAPPROPRIATION OF CLIENTS' FUNDS,
 ARE DISCOVERED DURING THE AUDIT PROCESS, THE MATTER SHALL IMMEDIATELY BE
 REFERRED  TO  THE ATTORNEY GRIEVANCE COMMITTEE OF THE APPELLATE DIVISION
 IN THE DEPARTMENT WHERE THE ATTORNEY OR ATTORNEYS OF THE FIRM ARE ADMIT-
 TED TO PRACTICE. A COPY OF THE REFERRAL SHALL BE  PROVIDED  TO  THE  LAW
 FIRM.
   6. (A) THE RANDOM AUDIT COMPLIANCE PROGRAM SHALL BE ESTABLISHED WITHIN
 THE  OFFICES  OF  THE  LAWYERS' FUND FOR CLIENT PROTECTION. THE BOARD OF
 TRUSTEES OF THE FUND SHALL COORDINATE WITH THE  CHIEF  ADMINISTRATOR  OF
 THE  COURTS TO IMPLEMENT THE PROGRAM AND SHALL BE RESPONSIBLE FOR HIRING
 PROGRAM AUDITORS. FUNDING FOR THE PROGRAM SHALL BY PROVIDED BY THE FUND.
 S. 9129                             3

   (B) EACH AUDITOR HIRED MUST HAVE AN ADVANCED DEGREE IN  ACCOUNTING  OR
 CERTIFICATIONS IN FRAUD EXAMINATION.
   7.  THE  CHIEF ADMINISTRATOR SHALL PROMULGATE RULES AND REGULATIONS TO
 IMPLEMENT THE PROVISIONS OF THIS SECTION. IN THE DISCRETION OF THE CHIEF
 ADMINISTRATOR, SUCH RULES AND REGULATIONS MAY ALLOW FOR  DIFFERENCES  IN
 AUDIT PROCEDURES BASED ON THE SIZE OR LOCATION OF A LAW FIRM, THE VOLUME
 OF  MATTERS  HANDLED  BY  THE  LAW  FIRM AND ANY REVIEW MEASURES ALREADY
 IMPLEMENTED BY A JUDICIAL DEPARTMENT.
   8. FOR THE PURPOSES OF THIS SECTION, THE TERMS "LAW FIRM"  AND  "FIRM"
 INCLUDE  LAW PRACTICES COMPRISED OF MULTIPLE ATTORNEYS, SOLE PRACTITION-
 ERS, AND INDIVIDUALS OR FIRMS THAT PROVIDE LEGAL SERVICES ON A FULL-TIME
 OR PART-TIME BASIS, REGARDLESS OF CORPORATE ENTITY FORM.
   § 2. Subdivision 2 of section 212 of the judiciary law is  amended  by
 adding a new paragraph (ff) to read as follows:
   (FF)  ESTABLISH,  IMPLEMENT  AND  OVERSEE  THE RANDOM AUDIT COMPLIANCE
 PROGRAM DESCRIBED IN SECTION TWO HUNDRED TWELVE-A OF THIS ARTICLE.
   § 3. Section 97-t of the state finance law, as amended by chapter  103
 of  the laws of 1990 and subdivision 2 as separately amended by chapters
 103 and 190 of the laws of 1990, is amended to read as follows:
   § 97-t. Lawyers' fund for client protection of the state of New  York.
 1. There is hereby established in the custody of the state comptroller a
 special  fund  to  be  known  as the "lawyers' fund for [clients] CLIENT
 protection of the state of New York".
   2. The full amount of the allocable portion of the biennial  registra-
 tion  fee  collected  pursuant to the provisions of section four hundred
 sixty-eight-a of the judiciary law and such other monies as may be cred-
 ited or otherwise transferred from any other fund or source, pursuant to
 law, including  voluntary  contributions,  together  with  any  interest
 accrued  thereon,  shall be deposited to the credit of the lawyers' fund
 for client protection of the state of New York.  All  deposits  of  such
 revenues not otherwise required for the payment of claims as hereinafter
 prescribed  shall  be  secured by obligations of the United States or of
 the state having a market value equal at all times to the amount of such
 deposits and all banks and trust companies are authorized to give  secu-
 rity  for such deposits. Any such revenues in such fund, may be invested
 in obligations of the United States or of the state, or  in  obligations
 the  principal and interest on which are guaranteed by the United States
 or by the state.
   3. MONEYS IN THE FUND SHALL ALSO BE AVAILABLE TO THE TRUSTEES  OF  THE
 LAWYER'S  FUND  FOR  CLIENT  PROTECTION  FOR THE PURPOSES OF FUNDING THE
 RANDOM  AUDIT  COMPLIANCE  PROGRAM  DESCRIBED  IN  SECTION  TWO  HUNDRED
 TWELVE-A OF THE JUDICIARY LAW.
   §  4. Severability.   If any clause, sentence, paragraph, subdivision,
 section or part of this act shall be adjudged by any court of  competent
 jurisdiction  to  be invalid, such judgment shall not affect, impair, or
 invalidate the remainder thereof, but shall be confined in its operation
 to the clause, sentence, paragraph, subdivision, section or part thereof
 directly involved in the controversy in which  such judgment shall  have
 been rendered. It is hereby declared to be the intent of the legislature
 that  this  act  would have been enacted even if such invalid provisions
 had not been included herein.
   § 5. This act shall take effect on the one hundred eightieth day after
 it shall have become a law.  Effective immediately, the addition, amend-
 ment and/or repeal of any rule or regulation necessary for the implemen-
 tation of this act on its effective date are authorized to be  made  and
 completed on or before such effective date.

2025-S9129A (ACTIVE) - Details

Current Committee:: Senate Judiciary
Law Section:: Judiciary Law
Laws Affected:: Add §212-a, amd §212, Judy L; amd §97-t, St Fin L

2025-S9129A (ACTIVE) - Summary

2025-S9129A (ACTIVE) - Sponsor Memo

                                 
BILL NUMBER: S9129A

SPONSOR: BYNOE
 
TITLE OF BILL:

An act to amend the judiciary law, in relation to directing the chief
administrator of the courts to develop and implement a random audit
compliance program to conduct periodic audits of law firm financial
accounts; and to amend the state finance law, in relation to the funding
of the random audit compliance program

 
PURPOSE:

The purpose of this bill is to establish "The Random Audit Compliance
Program". Preserving identity of funds and property of others; fiduciary
responsibility; commingling and misappropriation of client funds or
property; maintenance of bank accounts; record keeping; examination of
records. This program has three main purposes.

Education. The central purpose of the program is to educate New York
attorneys on the proper method of compliance with the record-keeping and
ethical responsibilities under Court Rule 1.15(d) and Rule of Profes-
sional Conduct 1.15.

Deterrence. Just knowing that there is an active auditing program is an
incentive to keep good records and to avoid temptation to misuse trust
funds.

Detection of misappropriation. The random selection process will help
the state uncover lawyer theft.These cases will be investigated and
prosecuted in accordance with the rules, regulations, and procedures of
the respective Judicial Department where the suspected violation or
violations had taken place.

 
SUMMARY OF PROVISIONS:

Section 1 of this bill adds a new section (section 212-a) to the New
York State Judiciary Law, which would direct the chief administrator of
the courts to develop and implement a state-wide "random audit compli-
ance program" ("the program") to conduct periodic audits of law firms
that engage in the private practice of creating and managing Real Estate
Escrow Trust Accounts within the State of New York.

Section 2 of this bill would direct the chief administrator of the
courts to consult with the office of information technology services
director, or the director's qualified designee, to develop and implement
a software program that will be used to randomly select law firms for
such audit. The software program selection process must ensure that
every law firm, regardless of size, has an equal chance of being
selected for an audit. No law firm shall be selected for a random audit
under this law, within a five-year period from the most recent random
audit selection of such law firm.However, this law shall not limit the
ability to audit a law firm for cause during that same five-year period.

This section goes on to grant the chief administrator the authority to
enter into an agreement to license for use, an existing program provid-
ing such capability.


Section 3 of this bill establishes that if a law firm happens to have
more than one location within the state, the audit would include all
such offices within the firm.This section adds a provision which breaks
down what would be collected from a law firm during an audit under this
program, there being one or more auditors permitted to perform the
audit, who is eligible to represent the company during the process of
such an audit, and the rules and procedures which the auditors must
following during the audit process.

Section 4 of this bill would direct the chief administrator of the
courts to establish the random audit compliance program within the
office of the lawyers' fund for client protection, which shall coordi-
nate with the chief administrator to implement this program.  This
section also allows the board of trustees within such office be respon-
sible for the hiring of auditors, provided that each of these auditors
possess an appropriate advanced degree and/or certification for the
role, as determined by the board of trustees and in conjunction with
such authorities hiring procedures and criteria which predate the effec-
tive date of this legislation. However, the board of trustees will still
retain the authority to alter or amend such criteria, as they see fit.

This section goes on to grant the chief administrator additional author-
ity to promulgate rules and regulations to implement the provisions of
this section and defines the terms "law firm" and "firm" within the
context of this bill.

Section 5 of this bill would establish that this program be funded by
moneys within the lawyer's fund for client protection.

Section 6 of this bill would establish the effective date.

 
JUSTIFICATION:

In 2025, a former real estate attorney was sentenced to up to ten and a
half years in prison for stealing a combined total of $1,791,600 collec-
tively from 32 of his clients, between March 2021 and November 2024. He
committed these thefts by withholding sale proceeds or down payment
funds from those individuals. Cases such as that one are not a new
occurrence. A recent report released by Newsday found that since New
York State established the "Lawyers' Fund for Client Protection" in
1982, more than $112 million in stolen real estate escrow money had been
reimbursed by the fund, to the victims of such a crime.

According to a 2025 report produced by the New York City Bar, New York
faces an upward trend in trust violations, with the Lawyers' Fund paying
out 94 awards totaling $11.6 million in 2024-a 31% increase in the
number of awards and a 90% increase in payouts from the previous year.
The New York City Bar continued that in 2024, real property escrow loss-
es accounted for $9.9 million in awards, while theft of settlement
proceeds accounted for another $415,476.In comparison, New Jersey (with
about one-fifth of the number of attorneys as New York) paid $1.1
million in client protection awards over a 12-month period.

Since 1981, The Supreme Court of New Jersey has operated their own
program for random audits of attorney trust and business account records
to determine compliance with New Jersey's recordkeeping rule, R 1:21-6,
and ethics rule RPC 1.15 ("Safekeeping Property"). Since

New Jersey began this program, several other states have taken up simi-
lar legislation.These being: California, Connecticut, Delaware, Iowa,
Kansas, North Carolina, Vermont, and Washington State. Some examples of
these states that have proven this program to be successful.

New Jersey has completed over 18,000 audits since first enacting the
program in 1981. Only 4.5% of these audits referred for discipline due
to the nature of the violation.

Connecticut saw a drastic improvement in compliance rates, with the
percentage of audits requiring no corrective action increasing from 14%
in 2017 to 30% in 2024.

 
LEGISLATIVE HISTORY:

New Legislation

 
FISCAL IMPLICATIONS:

None to the state.

 
EFFECTIVE DATE:
This act shall take effect exactly on the one hundred eightieth day
after it shall have become law. Effective immediately, the addition,
amendment and/or repeal of any rule or regulation necessary for the
implementation of this act on its effective date are authorized to be
made and completed on or before such effective date.

2025-S9129A (ACTIVE) - Bill Text download pdf

                             
                     S T A T E   O F   N E W   Y O R K
 ________________________________________________________________________
 
                                  9129--A
 
                             I N  S E N A T E
 
                             February 5, 2026
                                ___________
 
 Introduced  by  Sen.  BYNOE  -- read twice and ordered printed, and when
   printed to be committed to the Committee  on  Judiciary  --  committee
   discharged, bill amended, ordered reprinted as amended and recommitted
   to said committee
 
 AN  ACT  to  amend the judiciary law, in relation to directing the chief
   administrator of the courts to develop and implement  a  random  audit
   compliance  program  to  conduct periodic audits of law firm financial
   accounts; and to amend the state finance law, in relation to the fund-
   ing of the random audit compliance program
 
   THE PEOPLE OF THE STATE OF NEW YORK, REPRESENTED IN SENATE AND  ASSEM-
 BLY, DO ENACT AS FOLLOWS:
 
   Section  1. The judiciary law is amended by adding a new section 212-a
 to read as follows:
   § 212-A. RANDOM AUDIT COMPLIANCE PROGRAM. 1. THE  CHIEF  ADMINISTRATOR
 OF  THE  COURTS  SHALL  DEVELOP  AND IMPLEMENT A STATE-WIDE RANDOM AUDIT
 COMPLIANCE PROGRAM ("THE PROGRAM") TO CONDUCT  PERIODIC  AUDITS  OF  LAW
 FIRMS  THAT  ENGAGE  IN  THE PRIVATE PRACTICE AND CREATE AND MANAGE REAL
 ESTATE ESCROW TRUST ACCOUNTS WITHIN THE STATE OF NEW YORK.  THE  PURPOSE
 OF  THE  PROGRAM IS TO ENSURE THAT LAW FIRMS APPROPRIATELY HANDLE CLIENT
 FUNDS, MAINTAIN REQUIRED RECORDS OF CLIENTS' FUNDS AND  ATTORNEYS'  FEES
 AS  DESCRIBED  IN  THE  RULES  OF  COURT  AND  THE RULES OF PROFESSIONAL
 CONDUCT, AND UTILIZE GENERALLY ACCEPTED ACCOUNTING PRACTICE IN  MANAGING
 THEIR TRUST ACCOUNTS. THESE GOALS WILL BE ACCOMPLISHED THROUGH:
   (A)  EDUCATING  NEW  YORK ATTORNEYS ON THE PROPER METHOD OF COMPLIANCE
 WITH THE RECORD KEEPING AND ETHICAL RESPONSIBILITIES UNDER THE NEW  YORK
 RULES OF PROFESSIONAL CONDUCT, 22 NYCRR 1200, RULE 1.15;
   (B)  PROVIDING  A  DETERRENT  EFFECT  DUE TO THE PRESENCE OF AN ACTIVE
 AUDITING PROGRAM AND AN INCENTIVE TO KEEP  GOOD  RECORDS  AND  TO  AVOID
 TEMPTATION TO MISUSE TRUST FUNDS; AND
   (C) THE DETECTION OF MISAPPROPRIATION OF CLIENT FUNDS.
   2.  THE  CHIEF  ADMINISTRATOR  SHALL  CONSULT WITH THE DIRECTOR OF THE
 OFFICE OF INFORMATION TECHNOLOGY SERVICES, OR SUCH DIRECTOR'S  DESIGNEE,
 TO  DEVELOP  AND  IMPLEMENT A SOFTWARE PROGRAM THAT WILL RANDOMLY SELECT
 LAW FIRMS WITHIN THE STATE FOR AUDIT. ALTERNATIVELY, THE CHIEF  ADMINIS-
 TRATOR  MAY  ENTER  INTO  AN  AGREEMENT  TO  LICENSE FOR USE AN EXISTING
 PROGRAM PROVIDING SUCH CAPABILITY. THE  PROGRAM  MUST  ENSURE  THAT  THE
 SELECTION  PROCESS PROVIDES THAT EVERY LAW FIRM, REGARDLESS OF SIZE, HAS

 
  EXPLANATION--Matter in ITALICS (underscored) is new; matter in brackets
                       [ ] is old law to be omitted.
                                                            LBD14666-04-6
 S. 9129--A                          2
 
 AN EQUAL CHANCE OF BEING SELECTED FOR AN AUDIT. THE  PROGRAM  MUST  ALSO
 ENSURE  THAT  A LAW FIRM MAY ONLY BE SELECTED FOR RANDOM AUDIT ONCE IN A
 FIVE-YEAR PERIOD. THIS PROVISION SHALL NOT LIMIT THE ABILITY TO AUDIT  A
 LAW FIRM FOR CAUSE DURING THE SAME FIVE-YEAR PERIOD.
   3. AN AUDIT OF A LAW FIRM THAT MAINTAINS MORE THAN ONE LOCATION WITHIN
 THE STATE SHALL ENTAIL AN AUDIT OF ALL OFFICES LOCATED WITHIN THE STATE.
 AN  AUDIT  OF  A LAW FIRM THAT MAINTAINS A LOCATION WITHIN THE STATE AND
 ONE OR MORE LOCATIONS OUTSIDE OF THE STATE SHALL ENTAIL AN AUDIT OF ONLY
 THE OFFICE OR OFFICES LOCATED WITHIN THE STATE.
   4. (A) A LAW FIRM AUDITED UNDER THIS SECTION AND ANY  RULES  OR  REGU-
 LATIONS  PROMULGATED  PURSUANT  TO  THIS  SECTION  SHALL  BE REQUIRED TO
 PROVIDE RECORDS FOR ALL TRUST ACCOUNTS, BUSINESS ACCOUNTS, AND FIDUCIARY
 ACCOUNTS. EVERY AUDIT WILL ENTAIL A TWO-YEAR REVIEW OF BANK  STATEMENTS,
 CANCELLED CHECKS, WIRE ADVICES, DEPOSIT SLIPS, THREE-WAY TRUST RECONCIL-
 IATIONS,  CLIENT  TRUST  LEDGERS,  CHECKBOOK STUBS OR REGISTERS, AND, IF
 NECESSARY, CASE FILES, AS WELL AS ANY OTHER  DOCUMENTS  OR  RECORDS  THE
 CHIEF  ADMINISTRATOR  MAY  SPECIFY  OR  THE  AUDITOR  DEEMS NECESSARY TO
 ADVANCE OR COMPLETE THE AUDIT.
   (B) AN AUDIT MAY BE PERFORMED BY ONE OR MORE AUDITORS.
   (C) A SENIOR ATTORNEY WITH KNOWLEDGE OF THE LAW FIRM'S FINANCIAL PRAC-
 TICES SHOULD BE PRESENT FOR THE AUDIT. IF SUCH ATTORNEY  IS  NOT  AVAIL-
 ABLE,  A  RESPONSIBLE  PERSON  KNOWLEDGEABLE ABOUT THE BOOKS AND RECORDS
 MUST BE PRESENT FOR THE AUDIT.
   (D) THE AUDITOR WILL CONDUCT AN INITIAL INTERVIEW TO  OBTAIN  DETAILED
 INFORMATION  ABOUT  THE LAW FIRM'S RECORDKEEPING PROCEDURES. THE AUDITOR
 SHALL REVIEW THE FIRM'S TRUST AND BUSINESS ACCOUNT BOOKS AND RECORDS  TO
 DETERMINE COMPLIANCE WITH THE RULE REQUIREMENTS AND WILL VERIFY THAT ALL
 FUNDS  ENTRUSTED TO THE ATTORNEY HAVE BEEN SAFEGUARDED IN THE ATTORNEY'S
 TRUST ACCOUNT.
   (E) THE AUDITOR WILL DOCUMENT  ANY  RECORDKEEPING  DEFICIENCIES  ON  A
 DEFICIENCY  CHECKLIST AND WILL PROVIDE A COPY OF THE COMPLETED CHECKLIST
 TO THE LAW FIRM. THE AUDITOR ALSO WILL DISCUSS WITH THE ATTORNEY OR WITH
 THE RESPONSIBLE PERSON IN CHARGE OF THE  ATTORNEY'S  BOOKS  THE  ACTIONS
 REQUIRED TO CORRECT ANY DEFICIENCIES.
   5.  (A) IF NO ISSUES ARE DISCOVERED DURING THE AUDIT, A CLOSING LETTER
 SHALL BE SENT TO THE LAW FIRM CONFIRMING COMPLIANCE WITH  RULE  REQUIRE-
 MENTS.
   (B) IF MINOR DEFICIENCIES ARE DISCOVERED DURING THE AUDIT, A DEFICIEN-
 CY  LETTER  DESCRIBING SHORTCOMINGS THAT REQUIRE CORRECTIVE ACTION SHALL
 BE SENT TO THE LAW FIRM. THE FIRM SHALL HAVE FORTY-FIVE DAYS TO  RESPOND
 WITH INFORMATION ABOUT THE CORRECTIVE ACTION THAT HAS BEEN TAKEN. IF THE
 RESPONSE  IS ACCEPTABLE, THE MATTER WILL BE CLOSED. IF THE FIRM DOES NOT
 RESPOND, THE MATTER MAY BE REFERRED TO FOR DISCIPLINARY ACTION.
   (C) IF MAJOR DEFICIENCIES, SUCH AS MISAPPROPRIATION OF CLIENTS' FUNDS,
 ARE DISCOVERED DURING THE AUDIT PROCESS, THE MATTER SHALL IMMEDIATELY BE
 REFERRED TO THE ATTORNEY GRIEVANCE COMMITTEE OF THE  APPELLATE  DIVISION
 IN THE DEPARTMENT WHERE THE ATTORNEY OR ATTORNEYS OF THE FIRM ARE ADMIT-
 TED  TO  PRACTICE.  A  COPY OF THE REFERRAL SHALL BE PROVIDED TO THE LAW
 FIRM.
   6. (A) THE RANDOM AUDIT COMPLIANCE PROGRAM SHALL BE ESTABLISHED WITHIN
 THE OFFICES OF THE LAWYERS' FUND FOR CLIENT  PROTECTION.  THE  BOARD  OF
 TRUSTEES  OF  THE  FUND SHALL COORDINATE WITH THE CHIEF ADMINISTRATOR OF
 THE COURTS TO IMPLEMENT THE PROGRAM AND SHALL BE RESPONSIBLE FOR  HIRING
 PROGRAM AUDITORS. FUNDING FOR THE PROGRAM SHALL BY PROVIDED BY THE FUND.
   (B)  EACH  AUDITOR HIRED MUST HAVE AN ADVANCED DEGREE IN ACCOUNTING OR
 CERTIFICATIONS IN FRAUD EXAMINATION.
 S. 9129--A                          3
 
   7. THE CHIEF ADMINISTRATOR SHALL PROMULGATE RULES AND  REGULATIONS  TO
 IMPLEMENT THE PROVISIONS OF THIS SECTION. IN THE DISCRETION OF THE CHIEF
 ADMINISTRATOR,  SUCH  RULES AND REGULATIONS MAY ALLOW FOR DIFFERENCES IN
 AUDIT PROCEDURES BASED ON THE SIZE OR LOCATION OF A LAW FIRM, THE VOLUME
 OF  MATTERS  HANDLED  BY  THE  LAW  FIRM AND ANY REVIEW MEASURES ALREADY
 IMPLEMENTED BY A JUDICIAL DEPARTMENT.
   8. FOR THE PURPOSES OF THIS SECTION, THE TERMS "LAW FIRM"  AND  "FIRM"
 INCLUDE  LAW PRACTICES COMPRISED OF MULTIPLE ATTORNEYS, SOLE PRACTITION-
 ERS, AND INDIVIDUALS OR FIRMS THAT PROVIDE LEGAL SERVICES ON A FULL-TIME
 OR PART-TIME BASIS, REGARDLESS OF CORPORATE ENTITY FORM.
   § 2. Subdivision 2 of section 212 of the judiciary law is  amended  by
 adding a new paragraph (gg) to read as follows:
   (GG)  ESTABLISH,  IMPLEMENT  AND  OVERSEE  THE RANDOM AUDIT COMPLIANCE
 PROGRAM DESCRIBED IN SECTION TWO HUNDRED TWELVE-A OF THIS ARTICLE.
   § 3. Section 97-t of the state finance law, as amended by chapter  103
 of  the laws of 1990 and subdivision 2 as separately amended by chapters
 103 and 190 of the laws of 1990, is amended to read as follows:
   § 97-t. Lawyers' fund for client protection of the state of New  York.
 1. There is hereby established in the custody of the state comptroller a
 special  fund  to  be  known  as the "lawyers' fund for [clients] CLIENT
 protection of the state of New York".
   2. The full amount of the allocable portion of the biennial  registra-
 tion  fee  collected  pursuant to the provisions of section four hundred
 sixty-eight-a of the judiciary law and such other monies as may be cred-
 ited or otherwise transferred from any other fund or source, pursuant to
 law, including  voluntary  contributions,  together  with  any  interest
 accrued  thereon,  shall be deposited to the credit of the lawyers' fund
 for client protection of the state of New York.  All  deposits  of  such
 revenues not otherwise required for the payment of claims as hereinafter
 prescribed  shall  be  secured by obligations of the United States or of
 the state having a market value equal at all times to the amount of such
 deposits and all banks and trust companies are authorized to give  secu-
 rity  for such deposits. Any such revenues in such fund, may be invested
 in obligations of the United States or of the state, or  in  obligations
 the  principal and interest on which are guaranteed by the United States
 or by the state.
   3. MONEYS IN THE FUND SHALL ALSO BE AVAILABLE TO THE TRUSTEES  OF  THE
 LAWYER'S  FUND  FOR  CLIENT  PROTECTION  FOR THE PURPOSES OF FUNDING THE
 RANDOM  AUDIT  COMPLIANCE  PROGRAM  DESCRIBED  IN  SECTION  TWO  HUNDRED
 TWELVE-A OF THE JUDICIARY LAW.
   §  4. Severability.   If any clause, sentence, paragraph, subdivision,
 section or part of this act shall be adjudged by any court of  competent
 jurisdiction  to  be invalid, such judgment shall not affect, impair, or
 invalidate the remainder thereof, but shall be confined in its operation
 to the clause, sentence, paragraph, subdivision, section or part thereof
 directly involved in the controversy in which  such judgment shall  have
 been rendered. It is hereby declared to be the intent of the legislature
 that  this  act  would have been enacted even if such invalid provisions
 had not been included herein.
   § 5. This act shall take effect on the one hundred eightieth day after
 it shall have become a law.  Effective immediately, the addition, amend-
 ment and/or repeal of any rule or regulation necessary for the implemen-
 tation of this act on its effective date are authorized to be  made  and
 completed on or before such effective date.

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Sponsored By

Siela A. Bynoe

Current Bill Status - In Senate Committee Judiciary Committee

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