CABAR 1999

When a California lawyer also offers non-legal services like investment advising, when do the Rules of Professional Conduct apply, can the lawyer market with 'Esq.' and tax credentials, and is a referral commission from a portfolio manager a Rule 1-320 fee-share?

Short answer: Per California Formal Opinion 1999-154, when the same lawyer is providing legal and non-legal services to a client, all of the services are subject to the Rules; Rule 1-400 applies to non-legal marketing that uses lawyer credentials (Esq., LL.M. in tax) where a recipient could reasonably believe legal services are being offered; a referral commission paid by a non-lawyer portfolio manager is not an impermissible Rule 1-320 fee-share because no legal fee is being divided, but to the extent the engagement involves legal services the arrangement creates a financial interest requiring written disclosure under Rule 3-310(B)(4) and is a business transaction requiring Rule 3-300 compliance.

Disclaimer: Advisory only. Not binding precedent.

About this page: The plain-English summary, reader guidance, and Q&A below were written by Ezel based on the official ethics opinion. The original opinion (linked at the bottom of this page) is the authoritative source for any reliance.

State Bar of California COPRAC Formal Opinion 1999-154: Dual Practitioner Offering Legal and Non-Legal Investment Advisory Services

Short answer: The opinion concludes that when a lawyer renders both legal and non-legal professional services to a client, all of the services are subject to the California Rules of Professional Conduct; former Rule 1-400 applies to a lawyer's use of legal credentials in marketing non-legal services where a recipient could reasonably infer the offering of legal services or services involving legal judgment, with no firm cure other than an effective disclaimer that fits the underlying facts; a referral arrangement under which a non-lawyer portfolio manager pays the lawyer a percentage of the manager's compensation is not an impermissible former Rule 1-320 division of a legal fee, but to the extent any service the lawyer renders is a legal service, the arrangement creates a financial interest requiring written disclosure under former Rule 3-310(B)(4) and a business transaction with a client subject to former Rule 3-300.

Currency note

This opinion was issued in 1999, before the State Bar of California's adoption of the November 1, 2018 revisions to the Rules of Professional Conduct. The opinion interprets former Rules 1-310, 1-320, 1-400, 3-300, and 3-310, together with Business and Professions Code section 6068(e). Current Rules 5.7, 7.1, 7.2, 1.8, and 1.7 now address law-related services, advertising, fee-sharing, business transactions with clients, and concurrent conflicts; the analysis below is rooted in the framework as it stood in 1999. Treat this page as historical context, not current guidance. Verify against current rules before relying on any specific rule reference.

Disclaimer: This is an advisory ethics opinion. Advisory opinions are not binding; they interpret the State Bar of California's rules of professional conduct and are persuasive authority. This summary is for research purposes only and is not legal advice. Verify current rules before acting on any specific guidance.

About this page: The plain-English summary and Q&A below were written by Ezel based on the official opinion. The opinion text is reproduced at the bottom; the official source (linked) controls.

View original opinion

Plain-English summary

The hypothetical: Attorney A planned to form A & Company to offer investment advisory services (needs assessment, portfolio-manager retention and oversight, and in some cases direct portfolio management). A intended to market by emphasizing NASD registration and state certification as an investment advisor, while also using "Esq.", listing an LL.M. in taxation on business cards, stationery, and brochures, and describing A's former tax and business law practice in marketing material. A's income would consist of an advisory fee (calculated as a percentage of the portfolio, paid by the portfolio manager) and direct-management fees in some cases. A anticipated giving incidental legal advice related to the investment process without separate charge, and referring document-drafting work to outside counsel whom the client would retain directly.

On the applicability of the Rules, the committee held that where the same lawyer provides both legal and non-legal services to a client, all services count as legal services for the lawyer's professional-conduct obligations. The committee adopted the functional test from California State Bar Formal Opinion 1995-141: a service is legal if performed as part of the practice of law or if it would constitute the practice of law if a non-lawyer performed it. The committee added that Layton v. State Bar (1990) requires a dual-capacity lawyer to conform all services to the Rules. So the duties of confidentiality under section 6068(e) (broader than privilege under Goldstein v. Lees (1975) and California State Bar Formal Opinion 1993-133), the duty of loyalty, former Rule 3-310, and former Rule 3-300 applied to A's representation. Because the information from legal and non-legal services in A's practice could not be meaningfully segregated, all information about the client fell within section 6068(e).

On marketing, the committee read former Rule 1-400(A) broadly to cover the use of "professional designation" and material describing the lawyer (rule 1-400(A)(1), (2)). The committee held that where A uses lawyer credentials in marketing law-related services such as investment advice, the use is a "communication" within Rule 1-400 if a recipient could reasonably believe A is offering legal services or services involving legal judgment. Using "Esq.", a tax-and-estate-planning experience reference, or a "Certified Tax Specialist" label on stationery for an investment advisory service could qualify. An express disclaimer (no legal services or advice being offered) might avoid that result, but no disclaimer would be effective if A in fact provides legal services or if the offered services are so law-related as to inevitably involve legal services. Once a marketing item was a communication, former Rule 1-400(D)(1)-(5)'s prohibitions on false/misleading/confusing/deceptive content, omissions, identifiability, and intrusive delivery applied. The committee also concluded that use of legal credentials in in-person or telephonic solicitation, or in solicitation directed to someone known to be represented, could fall within former Rule 1-400(B)'s solicitation rule, including the prohibition under former Rule 1-400(C) of solicitations to a person with whom the lawyer has no family or prior professional relationship.

On fees, the committee held that the commission paid by the portfolio manager to A was not an impermissible division of a legal fee under former Rule 1-320(A). A would not be sharing a legal fee paid by the client with the manager; A would be receiving a separate commission from the manager. The committee distinguished California State Bar Formal Opinion 1984-79 (forbidding a lawyer's legal fee from funding a non-lawyer consulting service). But to the extent A's engagement included legal services, the referral arrangement created a financial interest in the subject matter of the representation, requiring written disclosure under former Rule 3-310(B)(4), and constituted a business transaction with a client subject to the full disclosure-and-consent protocol of former Rule 3-300, analogizing to California State Bar Formal Opinion 1995-140 (lawyer commissions on insurance recommendations) and Rodgers v. State Bar (1989). If A also charged a separate legal fee for review and advice on portfolio documents and did not share that legal fee, the arrangement complied with Rule 1-320; but offering legal review through a partnership with non-lawyers would violate former Rule 1-310.

Common questions

Q: If a California lawyer also runs a non-legal advisory business, do the Rules cover the non-legal work?

A: Per the opinion, yes when both services are rendered to the same client. The committee held that all of those services count as legal services for purposes of the lawyer's professional-conduct obligations. The functional test asks whether the activity is performed as part of the practice of law or would constitute the practice of law if a non-lawyer did it.

Q: Can the lawyer put 'Esq.' and the LL.M. in tax on business cards advertising investment advice?

A: Per the opinion, only with care. Former Rule 1-400 applies where the marketing uses lawyer credentials and a recipient could reasonably believe legal services or services involving legal judgment are being offered. An express disclaimer (no legal services intended) may avoid the result, but the disclaimer is ineffective if legal services are actually being rendered or if the services are inevitably law-related.

Q: Is the commission from the portfolio manager a forbidden fee-share with a non-lawyer?

A: Per the opinion, no. The commission is not a division of a legal fee; A is receiving a separate commission from the manager. The committee distinguished California State Bar Formal Opinion 1984-79, which forbids using legal fees to fund a non-lawyer consulting service.

Q: What disclosure does the lawyer have to make to the client about the commission?

A: Per the opinion, to the extent A is rendering legal services, A must comply with former Rule 3-310(B)(4) (written disclosure of the lawyer's financial interest in the subject matter) and former Rule 3-300's business-transaction protocol (full written disclosure of all relevant circumstances, opportunity to consult independent counsel, and the client's written consent). The committee analogized to California State Bar Formal Opinion 1995-140's treatment of insurance commissions and to Rodgers v. State Bar (1989).

Q: Can the lawyer form a partnership with the portfolio manager?

A: Per the opinion, no, to the extent the partnership offers legal review and advice. Former Rule 1-310 prohibits forming a partnership with a non-lawyer where any of the activities consist of the practice of law.

Q: Does the duty of confidentiality cover information learned through the non-legal advisory work?

A: Per the opinion, yes when the services are not reasonably segregable. The committee held that information learned in the investment advisory engagement should be treated as within section 6068(e) because the legal and non-legal aspects of the engagement could not be reasonably separated. The committee cited California State Bar Formal Opinion 1993-133 and Goldstein v. Lees (1975) for section 6068(e)'s scope.

Background and rules framework

The opinion interprets former California Rules 1-310 (no partnership with a non-lawyer), 1-320 (no fee-sharing), 1-400 (advertising and solicitation), 3-300 (business transactions with client), and 3-310 (conflicts), together with Business and Professions Code section 6068(e). The opinion extends California State Bar Formal Opinion 1995-141, which addressed in general the ethical considerations for lawyers rendering non-legal services. Functionally these correspond, in current numbering, to Rules 5.7, 7.1, 7.2, 1.8, and 1.7.

Citations and references

Rules of Professional Conduct (former, in effect at time of opinion):

Former California Rule 1-310 (no partnership with non-lawyer)
Former California Rule 1-320, particularly 1-320(A) (no fee-sharing)
Former California Rule 1-400, particularly 1-400(A)(1), (A)(2), (B), (C), (D)(1)-(5)
Former California Rule 3-300 (business transactions with client)
Former California Rule 3-310, particularly 3-310(B)(4) (financial interest disclosure)

Statutes:

California Business and Professions Code sections 6068(e), 6125-6127

Cases:

Layton v. State Bar (1990) 50 Cal.3d 889, dual-capacity lawyer subject to Rules
Kelly v. State Bar (1991) 53 Cal.3d 509, non-legal business transaction subject to Rules
Goldstein v. Lees (1975) 46 Cal.App.3d 614, section 6068(e) scope
Rodgers v. State Bar (1989) 48 Cal.3d 300, lawyer financial interest adverse to client
Beery v. State Bar (1987) 43 Cal.3d 802, fiduciary standards apply to non-legal services
Sodikoff v. State Bar (1975) 14 Cal.3d 422, fiduciary discipline without attorney-client relationship
William H. Raley Co. v. Superior Court (1983) 149 Cal.App.3d 1042, non-legal fiduciary conflict
Allen v. Academic Games Leagues of America, Inc. (C.D. Cal. 1993) 831 F.Supp. 785, non-legal fiduciary
In the Matter of Bragg (Review Dept. 1997) 3 Cal. State Bar Ct. Rptr. 615, purpose of fee-share rule
Birbrower, Montalbano, Condon & Frank v. Superior Court (1998) 17 Cal.4th 119, practice of law
Farnham v. State Bar (1976) 17 Cal.3d 605, practice of law
Bluestein v. State Bar (1974) 13 Cal.3d 162, practice of law
Baron v. City of Los Angeles (1970) 2 Cal.3d 535, practice of law
Crawford v. State Bar (1960) 54 Cal.2d 659, practice of law
People v. Merchants Protective Corp. (1922) 189 Cal. 531, practice of law
Estate of Condon (1998) 65 Cal.App.4th 1138, practice of law
People v. Landlords Professional Services (1989) 215 Cal.App.3d 1599, practice of law
People v. Sipper (1943) 61 Cal.App.2d Supp. 844, practice of law

Other opinions cited:

California State Bar Formal Opinion 1995-141: lawyer rendering non-legal services
California State Bar Formal Opinion 1995-140: lawyer insurance commissions
California State Bar Formal Opinion 1993-133: section 6068(e) scope
California State Bar Formal Opinion 1984-79: legal fee can't fund non-lawyer consulting
California State Bar Formal Opinion 1982-69: brokerage fees as legal fees
California State Bar Formal Opinion 1981-63: fiduciary duties absent attorney-client relationship
ABA Formal Opinion 297 (1961); ABA Informal Opinions 1248 (1972) and C-431 (1961); Ohio State Bar Ethics Opinion 86-5 (1986): non-legal occupation as feeder
Los Angeles County Bar Formal Opinion 384: dual practitioner as broker
Los Angeles County Bar Formal Opinion 372 (1978): lay consulting firm
Los Angeles County Bar Formal Opinion 443: physician referral fees

Source

Landing page: https://www.calbar.ca.gov/legal-professionals/ethics-compliance-practice-resources/ethics/ethics-opinions
Original HTML: https://www.calbar.org/ethics/Opinions/1999-154.htm

Original opinion text

Reproduced from the official source for research purposes. The linked source is authoritative.

THE STATE BAR OF CALIFORNIA

STANDING COMMITTEE ON

PROFESSIONAL RESPONSIBILITY AND CONDUCT

(Funded, in part, by the Foundation of the State Bar.)

FORMAL OPINION NO. 1999-154

ISSUES:

To what extent do the California Rules of Professional Conduct apply to a member who is performing, or represents and markets herself as able to perform, both legal and non-legal professional services for a client at the same time?
Does rule 1-400 of the California Rules of Professional Conduct apply to a member's use of her qualifications as a lawyer in marketing a purely non-legal service?
What rules apply when, as part of a member's investment advisory services involving both legal and non-legal advice, the member refers clients to a portfolio manager, who then pays the member a percentage of the compensation received for managing the portfolio?

DIGEST:

When a member performs both legal and non-legal professional services for a client, the member is subject to the California Rules of Professional Conduct with respect to all of those services.
Rule 1-400 of the California Rules of Professional Conduct applies to a member's use of her credentials as a lawyer, such as the title "Esq." or reference to experience in tax and estate law on business cards, stationery, and other material promoting non-legal services where the services are difficult to distinguish from legal services and a reasonable prospective client would infer from the use of the member's credentials that the member is offering legal services or services involving legal advice.
Under the facts presented, the compensation arrangement is not an impermissible sharing of fees with a non-lawyer. However, to the extent that the member's service is subject to the California Rules of Professional Conduct, the referral and compensation arrangement creates for the member a financial interest in the subject matter of the representation, requiring written disclosure to the client under rule 3-310(B)(4), and constitutes a business transaction with a client, requiring the member to comply with rule 3-300.

AUTHORITIES INTERPRETED:

Rules 1-310, 1-320, 1-400, 3-300, and 3-310 of the California Rules of Professional Conduct.

Business and Professions Code section 6068 (e).

STATEMENT OF FACTS

Attorney A intends to form A & Company, through which A will offer investment advisory services, including (1) identifying the investment needs and objectives of clients, (2) assisting clients in retaining a suitable portfolio manager and monitoring portfolio management, and, (3) in appropriate cases, directly managing the client portfolio herself.

Advertising and Marketing.

Although A intends to market her services solely as an investment advisor (emphasizing, inter alia, her National Association of Securities Dealers (NASD) registration and state certification as investment advisor), she also intends to emphasize her legal background in the course of advertising, marketing, and soliciting clients. Attorney A intends to use the designation "Esq." with her name and to list her L.L.M. in taxation on her business cards, stationery, and brochures. Attorney A also intends to include a description of her former business and tax law practice in written marketing materials and oral solicitations for her investment advisory service.

Fees.

Attorney A's income will consist of an investment advisory fee, calculated as a percentage of the portfolio under management, which would be paid by the portfolio manager whom A assists the client in retaining. In those cases in which A provides direct portfolio management services, her fees for those services also will be based on a percentage of assets under management.

Legal Advice to Clients.

Attorney A anticipates that she may provide incidental legal advice to her clients directly relating to the investment advisory process. However, she does not intend to charge any additional fee for such advice beyond the customary investment advisory fee.

On occasion, in the course of giving investment advice, A anticipates that her clients will require the preparation of legal documents in connection with some of the investments. In those situations, she expects to refer the client to another attorney to prepare the documents; however, A will review and advise the client concerning the documents after they have been prepared. The outside attorney will be retained by A's investment advisory client, who will be directly responsible for the outside attorney's fees.

DISCUSSION

In California State Bar Formal Opinion Number 1995-141, the Committee addressed in general the ethical considerations which apply to lawyers or law firms that render non-legal services. The facts presented in this opinion involve three issues which the Committee did not address in that opinion: (1) the extent to which the California Rules of Professional Conduct (hereinafter "rule(s)") apply to a lawyer when her services include any activity that constitutes the practice of law; (2) whether and the extent to which rule 1-400 applies to the marketing of non-legal professional services by a lawyer that includes references to the lawyer's legal training, experience, or skills; and (3) whether there is an impermissible division of fees with a non-lawyer under the facts presented.

I. Applicability of the Rules

In general, when a lawyer is providing both legal and non-legal services to a client, all of the services are considered to be legal services for purposes of determining whether a lawyer must comply with the rules.

Whether a member is providing legal services and is thus subject to the rules does not depend upon whether the lawyer charges for the service or how the lawyer may characterize the service. The ultimate question is functional: Is the lawyer performing a service that is performed as part of the practice of law and would constitute the practice of law if performed by a non-lawyer? (See Cal. State Bar Formal Opn. No. 1995-141.)

Under the facts presented, A is performing tasks that are traditionally understood to constitute legal services, such as providing legal advice and reviewing legal documents. While A primarily intends to render non-legal investment advice, the rendition of legal services in connection with non-legal services requires A to conform her conduct to the duties imposed on lawyers under the California Rules of Professional Conduct and State Bar Act. (Layton v. State Bar, supra, 50 Cal.3d at p. 904.)

As a result, A must maintain the confidentiality of her clients' information under Business and Professions Code section 6068 (e), which requires an attorney "to maintain inviolate the confidence, and at every peril to himself or herself, preserve the secrets of a client." This duty protects client information more broadly than does the lawyer-client privilege. (Goldstein v. Lees (1975) 46 Cal.App.3d 614, 621, fn. 5.) Section 6068 (e) encompasses any information relating to the representation of a client, gained from any source, which a client has requested be held inviolate or the disclosure of which is likely to be embarrassing or detrimental to the client. (Cal. State Bar Formal Opn. No. 1993-133.) While engaged as a dual practitioner under the facts described, A cannot reasonably segregate the information she acquires in the provision of legal services and that which she acquires in the provision of non-legal services; all information concerning the client should be regarded as within the scope of Business and Professions Code section 6068 (e).

In addition, A owes a duty of loyalty to her clients, which, among other things, will require A to avoid the representation of adverse interests under rule 3-310, as well as comply with rule 3-300 with respect to any business transactions between A and her clients or A's acquisition of any ownership, possessory, security, or other pecuniary interest adverse to her clients.

II. Marketing of A's Services

A. Is A's communication of her professional designation as a lawyer and her legal credentials subject to rule 1-400?

Rule 1-400 governs certain aspects of a lawyer's marketing of services and consists of two types of regulation: (1) regulation of "communications" concerning a member's availability for professional employment and (2) regulation of, and prohibition of certain types of, "solicitations" concerning such availability.

In California State Bar Formal Opinion Number 1995-141, the Committee concluded that rule 1-400 applies to solicitations and communications concerning the availability of legal services. The Committee also concluded that the rule does not apply to solicitations and communications regarding the availability "of purely non-legal professional services." Under the standard articulated in that opinion and in light of the principles stated above, rule 1-400 will apply if the investment advisory services that A is marketing include the performance of a legal service. If A is promoting a purely non-legal service that does not involve the rendition of any legal service, rule 1-400 will not apply.

The facts in this opinion present an additional issue not before the Committee in California State Bar Formal Opinion Number 1995-141: Does rule 1-400 apply to A's use of her credentials as a lawyer to market any services that include an activity that constitutes the practice of law? It is the Committee's opinion under the facts presented that rule 1-400 does apply to any such marketing.

The Committee's conclusion is founded on the broad definition of a "communication." Rule 1-400(A) defines a "communication" as "any message or offer by or on behalf of a member concerning the availability for professional employment of a member or a law firm directed to any former, present, or prospective client." The rule specifically includes "[a]ny use of firm name, trade name, fictitious name, or other professional designation of the member or law firm." (Rule 1-400(A)(1).) Under rule 1-400, a "communication" also includes "[a]ny stationery, letterhead, business card, sign, brochure, or other comparable written material describing such member, law firm or lawyers." (Rule 1-400(A)(2).)

The Committee believes that where A lists her qualifications or experience as a lawyer in a communication for law-related professional services such as investment advice, such use of legal credentials is a "communication" within the meaning of rule 1-400 if a recipient of such materials could reasonably believe that A is offering legal services or investment advice that involves legal judgment or considerations. Thus, under the facts described, where A is seeking employment as an investment advisor, and even where she contemplates that she will not be providing legal services to prospective clients, the use in A's promotional material or on her stationery of the title "Esq.," reference to A's experience in tax and estate planning law or reference to A's being a "Certified Tax Specialist" are professional designations that could constitute communications under rule 1-400, if such use could reasonably lead prospective clients to misperceive the nature of the services being offered.

Such a result may be avoided if A's business cards and stationery contain an express disclaimer that A is not offering and does not intend to provide legal services or legal advice. Of course, no disclaimer will be effective if A is in fact performing legal services or offering legal advice. In addition, such a disclaimer may be ineffective where the services offered are clearly law-related and may inevitably and inextricably involve activities that are legal services. However, the Committee emphasizes that each situation will be fact specific with respect to whether a recipient could reasonably believe that a given use of legal credentials in advertising or marketing materials indicates that a member is offering to perform legal services.

B. How does rule 1-400 relate to attorney A's marketing activities?

Where A's use of legal credentials are "communications" within the meaning of rule 1-400, each of the requirements in paragraph (D) must be met. The communications cannot contain any untrue statements or any matter which is false or deceptive, or which tends to confuse, deceive or mislead the recipient (rule 1-400(D)(1), rule 1-400(D)(2)); they may not "[o]mit to state any fact necessary to render the statements made, in light of the circumstances under which they are made, not misleading to the public" (rule 1-400(D)(3)); they cannot fail to clearly indicate that they are communications (rule 1-400(D)(4)); and they cannot be communicated in a "manner which involves intrusion, coercion, duress, compulsion, intimidation, threats, or vexatious or harassing conduct" (rule 1-400(D)(5)). To the extent that A uses her professional designations as a lawyer on business cards, stationery, or promotional materials for investment advisory services, and when such use is a "communication", she must comply with these requirements.

For the same reasons, the Committee believes that A's promotional use of her professional designation as a lawyer may subject her activities to the rule 1-400 prohibition on certain "solicitations." Rule 1-400(B) defines a "solicitation" as a "communication" concerning the availability for professional employment of a member or a law firm in which a significant motive is pecuniary gain and which is either transmitted in person or by telephone or by any means to a person known to the sender to be represented by counsel in the matter which is a subject of the communication. The definition specifically includes the term "communication," which, in turn, encompasses any use of a lawyer's professional designation.

Rule 1-400(C) prohibits "solicitations" made by or on behalf of a member or law firm to a prospective client with whom the member does not have a family or prior professional relationship. Under the facts presented, the prohibition will apply if A seeks to solicit business in person or telephonically by referencing her credentials as a lawyer.

The Committee believes that applying rule 1-400 in this manner makes sense under the circumstances. A is a dual practitioner whose non-legal profession is nevertheless law-related. When she seeks to attract clients by reference to her legal training and expertise, prospective clients could reasonably be led to believe that they will receive legal as well as non-legal services, or at a minimum, advice based upon legal considerations.

III. Fee Arrangements

A. Is A's fee arrangement with the portfolio manager an impermissible division of fees with a non-lawyer under rule 1-320?

The hypothetical proposes that A would be paid a fee by the non-lawyer portfolio manager to whom A refers her investment advisory clients (to be calculated as a percentage of the portfolio manager's fee); the portfolio manager would not be otherwise affiliated with A & Company. Thus, A would be receiving a commission-like fee for introducing her clients to the primary investment manager. This commission may be the exclusive source of A's income or could be in addition to a separate fee that A would charge her client directly for services and advice prior to referral to a primary portfolio manager.

Rule 1-320(A) prohibits a member from "directly or indirectly shar[ing] legal fees with a person who is not a lawyer," except under certain conditions not relevant to this discussion. To the extent that A's company performs legal services or offers legal advice, rule 1-320(A) prohibits A from sharing with a non-lawyer any fee received as compensation for those services or advice. If A is not performing such services, A is not prohibited from sharing fees with a non-lawyer. (See In the Matter of Bragg (Review Dept. 1997) 3 Cal. State Bar Ct. Rptr. 615 [fundamental concern addressed by prohibition against fee-splitting with non-lawyer is "the risk posed by the possibility of control by non-lawyers more interested in personal profit than the client's welfare"].)

Under the facts presented, A is not "sharing a legal fee" within the meaning of rule 1-320(A). This is not a case in which A is compensated by the client for professional services including legal services and shares that compensation with a non-lawyer investment advisor (see Cal. State Bar Formal Opn. No. 1984-79 [where lawyer refers clients to litigation support consulting service that is owned by non-lawyers, fees to consulting service may not come in whole or part from the lawyer's own fee]); nor is it a situation in which A and the portfolio manager are partners in a single practice that offers both legal and non-legal services to its clients.

B. Is the arrangement with the portfolio manager subject to attorney conflict of interest rules 3-310(B)(4) or 3-300?

The referral and compensation arrangement described is structurally similar to a situation in which a lawyer advises his estate planning client to purchase insurance, refers the client to an insurance agent and then accepts compensation from the agent to whom the client was referred. The Committee has concluded that such an arrangement creates in the lawyer a financial interest in the subject matter of the representation, to which rule 3-310(B)(4) applies, and constitutes a business transaction with a client, subject to rule 3-300. In California State Bar Formal Opinion Number 1995-140, the Committee found that in such a case, the attorney must: (1) make full disclosure in writing of all relevant circumstances surrounding the insurance referral arrangement and all actual and reasonably foreseeable consequences to the client from that arrangement under rule 3-310(B)(4); (2) comply with all requirements of rule 3-300, including obtaining the client's written consent to the arrangement; and (3) ensure that the attorney is able to competently advise the client under the circumstances. (Cal. State Bar Formal Opn. No. 1995-140.)

To the extent that A's services involve legal services, under the facts presented, the same rules apply. As a result, A will be required to satisfy the disclosure obligations of rule 3-310(B)(4) and the rigorous disclosure and consent protocol in rule 3-300 with respect to her referral of clients to an investment portfolio manager from whom she will receive compensation. The referral arrangement gives A a financial and business stake in the representation, since A will be paid a commission directly as a consequence of A's referral to a recommended portfolio manager. (See Cal. State Bar Formal Opn. No. 1995-140 at fn. 3; see also Rodgers v. State Bar (1989) 48 Cal.3d 300, 314 [lawyer who induced client to obtain loan from third party, where loan proceeds were used to pay fees owed to the lawyer, violated rule against acquiring interest adverse to client without full disclosure of fair terms].)

Finally, if A receives compensation from the portfolio manager but also charges a separate legal fee for review and legal advice concerning the portfolio and does not share that legal fee, such an allocation would comply with the requirement of rule 1-320. However, to the extent that A offers such review and advice as an activity of a partnership with non-lawyer partners, rule 1-310 would prohibit such a partnership.

CONCLUSION

Dual practitioners who offer their services in areas such as real estate brokerage or investment advising, in which the nature of the practice and the advice sought have significant overlap with legal practice and advice, must be aware of the requirements under the rules, including those governing lawyer advertising, solicitation and fee arrangements, even where they believe that they are providing non-legal services. When a member's status as a lawyer is known to the client, applicable rules might be found to govern all of the member's activities in both professions.

This opinion is issued by the Standing Committee on Professional Responsibility and Conduct of the State Bar of California. It is advisory only. It is not binding on the courts, the State Bar of California, its Board of Governors, any persons or tribunals charged with regulatory responsibilities, or any member of the State Bar.