Investing a Clients’ Funds

You must not invest a client’s funds or advise a client to invest in anything in which you have, or anyone in your firm has, a personal interest if that interest would reasonably be expected to affect your professional judgment.

Transactions with Clients
3.4-28 A lawyer must not enter into a transaction with a client unless the transaction with the client is fair and reasonable to the client.

3.4-29 Subject to Rules 3.4-30 to 3.4-36, where a transaction involves: lending or borrowing money, buying or selling property or services having other than nominal value, giving or acquiring ownership, security or other pecuniary interest in a company or other entity, recommending an investment, or entering into a common business venture, a lawyer must, in sequence:

(a) disclose the nature of any conflicting interest or how a conflict might develop later;
(b) consider whether the circumstances reasonably require that the client receive independent legal advice with respect to the transaction; and
(c) obtain the client’s consent to the transaction after the client receives such disclosure and legal advice.

3.4-30 Rule 3.4-29 does not apply where:

(a) a client intends to enter into a transaction with a corporation or other entity whose securities are publicly traded in which the lawyer has an interest; or
(b) a lawyer borrows money from a client that is a bank, trust company, insurance company, credit union or finance company that lends money in the ordinary course of business.

Example:
Your spouse has started a small business and you have taken out a second mortgage on your home to help finance their start-up. Your spouse is actively soliciting investors and discusses the business with a client of your firm who then comes to you seeking your advice on the propriety of the investment. In this situation, it is reasonable to expect that your professional judgment would be compromised because of your personal interest resulting from the fact that:

(a) It is your spouse’s business; and
(b) Your home has been mortgaged to finance the business.