Investing trust money on a client's instruction
What applies when a client tells a law practice to invest trust money under section 86(4), who gets the interest, and how to keep the instruction.
By Achekam · · 4 min read · For Legal businesses in South Africa
A client selling a property expects the proceeds to sit in your trust account for some weeks while a dispute over the purchase price is resolved. They ask whether the money can earn interest for them in the meantime. Another client, administering a deceased relative's estate, asks the same about a sum that will be held for months. Both are reasonable requests, and the Legal Practice Act provides for them, but only in a particular way, and the instruction itself needs to be beyond argument.
This piece explains the difference between investments a practice makes on its own and those it makes on a client's instruction, who receives the interest, what is not trust money at all, and how to get the client's written instruction signed and kept.
Investing of the practice's own accord, or on instruction
The Legal Practice Act draws a line between two kinds of investment of trust money.
- Section 86(3) allows a trust account practice, of its own accord, to invest trust money that is not immediately required in a separate trust savings account or other interest-bearing account.
- Section 86(4) allows a trust account practice, on a person's instructions, to open a separate trust savings or other interest-bearing account to invest money held on that person's behalf.
The client's request falls under section 86(4). The investment is made because the client asked for it, for that client's money, in an account of its own. That is why the instruction matters: it is the authority for the investment, and the record of what was agreed.
Interest to the client, less the Fund's share
The Legal Practitioners Fidelity Fund says interest on section 86(4) investments made on a client's instruction goes to the client, except that 5% of it must be paid to the Fund within five working days after the end of the month.
Explain that to the client before they sign, in the instruction itself, so there is no surprise when the interest is paid out. Diarise the Fund payment for each month the investment earns interest. A practice with several section 86(4) investments open at once should keep a short schedule of them: the client, the matter, the account, the date opened, and each month's interest and Fund share.
Rule 55 investments are not trust money
The Fidelity Fund says investments made under LPC Rule 55 without an underlying transaction are not trust money and are not protected by the Fund. Practices running such investment practices must be licensed with the FSCA and must tell clients the investment is unprotected.
The distinction is the underlying transaction. A client's sale proceeds held pending transfer, or an estate's funds held during administration, arise from legal work the practice is doing. Money handed over purely so the practice can invest it, with no legal matter behind it, is a different thing, with different rules and no Fund protection. If a client's request looks like the second kind, stop and take advice before accepting the money.
Which banks, and consent for any other
Section 86(6) prohibits depositing or investing trust money at a bank that is not party to an arrangement with the Fund unless the Fund's prior written consent has been obtained.
Clients sometimes ask for their money to be invested at their own bank, or wherever the rate is best. Unless that bank has an arrangement with the Fund, the answer is no without the Fund's written consent in advance. Put that in the instruction too, so the client understands why the choice of bank is limited.
Getting the written instruction signed electronically
The instruction should say, at least:
- the client's full name and the matter;
- that the client instructs the practice to invest the money under section 86(4);
- the amount, or how it will be determined;
- the bank, which must have an arrangement with the Fund;
- that interest goes to the client, less the share payable to the Fund;
- when and how the investment will be closed and paid out.
In Achekam, any document can be sent for electronic signature, with signature and initials fields placed where they are needed, signers in order or all at once, an expiry and reminders. An uploaded PDF, a document composed from text blocks with merge fields, or a saved template can be sent, so a practice that uses this instruction often can keep it as a template. An envelope with a signer from outside the business must be linked to a client or a CRM lead before it is sent, which keeps the signed instruction attached to the right client. Signing mandates electronically covers the same process for mandates.
What the completion certificate proves
When everyone has signed, Achekam produces the signed PDF with a completion certificate listing each signer's e-mail address, the times, the IP address and browser, and the document's fingerprint, and files it in the client's "Signed documents" folder. The signed PDF and certificate are filed back into Documents, where Document Centre keeps earlier versions whenever a new one is added.
Together these show who signed, from which e-mail address, when, from what device details, and that the document is the one that was signed. They do not, on their own, prove who was at the keyboard, so for a large sum it is sensible to confirm the instruction by phone on a number already on file and note that call on the matter. Keeping matter files in Document Centre explains where the rest of the matter's papers belong.
The Legal Practitioners Fidelity Fund's page on trust accounts sets out the duty to keep a trust account, the rules on section 86(4) investments and the Fund's share of interest.
Turn the six points above into a standard instruction template, send it for signature before any money moves, and diarise the Fund's share for every month the investment runs.
General guidance only, not advice on your own circumstances. Tax and payroll rules change: check the current position with the authority or your adviser.
