How Lawyers Should Record Referral Fee Transactions in Ontario
Master the proper recording and documentation of referral fee transactions in compliance with Ontario law practice requirements.
Let's talk about how legal professionals should properly recording referral fee transactions in Ontario. Since the Law Society of Ontario's rules about referral fees have been around since 2017, most licensees already know that certain maximum limits apply to the amount of money that can be paid or received as a referral fee. That being said, there is much more to referral fee compliance than simply staying within these limits. That's why we created something called Referral Fee Matter pages, or RFMs for short.
When you open a new RFM, you are given all of the tools needed to comply with the regulatory framework that governs referrals between licensees in Ontario.
In this article, we'll focus on logging referral fee transactions, which is an essential part of staying compliant with By-Law 9. You may also be interested in the following related articles:
How Ontario lawyers should manage the "Referral Fee Checklist"
The "standard referral agreement" for Ontario lawyers
Section 19.1 outlines that every licensee who pays or receives a referral fee must maintain records of:
We have another article that talks about how that third requirement is done, so we'll focus on requirements one and two in this article.
Getting Started
Starting from your TrustReq dashboard, click on "Referral Fees" on the left-hand sidebar.
You will see a summary of your referral fee matters and transactions.
Find the relevant RFM in the table that appears. If the RFM doesn't yet exist, then click on the green "Create Referral Fee Matter" button, and fill out the popup that appears.
Once you've created or located the relevant RFM, click on "Details" on the far right-hand column.
On the following page, you'll see a sidebar with your various referral compliance topics, such as the mandatory checklist, the standard referral agreement, and transaction logging.
For the purposes of this tutorial, click on "Transactions".
Then, click on the button that says, "Record a referral fee transaction".
Recording the Transaction
At this point, TrustReq will ask you a few questions about the fee transaction.
By default, TrustReq will assume that the relevant client is the person you indicated when you created the RFM, so that part will already be filled.
Next, confirm the transaction date, the amount in Canadian dollars, and the payment method. You'll also be required to enter an identifier, such as a cheque number or confirmation number.
Next, confirm if your team is the payor or the payee.
Lastly, identify the licensee "from whom" the fee was received, or the licensee "to whom" the fee was paid, as the case may be.
When you're finished, click "Submit" at the end of the form.
Reviewing Transactions
After logging, you can review the transactions in the "Transactions" section of the RFM details page. You'll also be able to review a list of all referral fee transactions regarding all of your RFMs by visiting your primary dashboard.
For each referral that is paid or received, remember to upload a bank confirmation to ensure a proper audit trail.
If you accidentally upload the wrong document as the bank confirmation then you can click the edit icon to upload the correct document. You'll need to provide an explanation regarding why the correction is being made. Keep in mind that all previous uploads, along with the explanation you provided, will remain visible in a change log, for users and auditors to maintain transparency.
Conclusion
Accurately logging referral transactions helps maintain compliance with By-Law 9 and ensures transparency in your financial records. TrustReq makes it easy to track and manage these transactions with its intuitive interface and comprehensive tools.
TrustReq is a cloud based service that helps Ontario lawyers and paralegals comply with their regulatory obligations. Start your 14-day free trial today!