Home - For Advisers - Code of Conduct Toolkit - Professional practice

Professional practice

Client funds

Understanding what money is client funds, and how to deal with it properly is an essential professional obligation.

If an adviser never receives fees or disbursements from a client in advance of having provided a service they do notneed to have a separate client account. If an adviser receives fees or disbursements in advance of having provided a service theymust establish a separate client account.

A separate client account is a bank account established for holding client funds paid in advance and should be easily identifiable as a client account. More than one client account is not needed.

If an adviser takes money in advance, the Authority may ask to see the client account bank statements for the last three months and a related ledger on inspection.

A client account ledger may take the form of an accounting system, an electronic ledger or a hard copy ledger.

It is helpful for your client account ledger to include:

The following pages show some examples of the steps that could be taken if an adviser chooses to take money in advance, and the steps that could be taken if an adviser chooses to take money after the services have been provided. These are not the only steps that could be taken and are intended as guidance only.

Choosing to have the client pay up front for services.

Click image for larger copy

Choosing to have the client pay after completion of services.

Click image for larger copy

Funds remain property of client

Clause 25(a):

A licensed immigration adviser must, if taking payment for fees and/or disbursements in advance of being payable and invoiced:

  1. recognise that these client funds remain the property of the client until payable and invoiced

The Immigration Advisers Complaints and Disciplinary Tribunal has expressed the view that client funds are held on trust and an adviser in this situation is seen as a trustee. If a trustee takes property they know to be trust property, and use it as their own, they will be regarded as having dealt with the money dishonestly.

When any money held in the client account is due to be paid to the adviser, an invoice must be issued to the client before the money is transferred to the adviser.

Establishing and maintaining a client account

Clause 25(b):

A licensed immigration adviser must, if taking payment for fees and/or disbursements in advance of being payable and invoiced:

  1. establish and maintain a separate client account for receiving and holding all client funds paid in advance

If taking payment for fees and/or disbursements in advance of being payable an adviser will need to set up a client account. To do this they will need to:

Requirements for offshore advisers

Advisers working offshore mustcomply with the Code requirements in relation to the client account. If an offshore adviser cannot operate a separate client account, he or she may not receive payments in advance for disbursements or services.

Mixed funds

Clause 25(c):

A licensed immigration adviser must, if taking payment for fees and/or disbursements in advance of being payable and invoiced:

  1. deposit any mixed funds (funds including payable payments and advance payments) into the client account at the outset and then as soon as practical withdraw from the client account the portion of the funds that were payable and for which an invoice has been issued

The following table sets out the definitions of the different types of funds that may be received from clients and the different bank account requirements that are attached to each of these.

 

Client funds

Mixed funds

Practice funds

Definition

Advance payments received for fees and all money received for disbursements not yet paid.

Funds that include both client funds, and also disbursements paid and/or fees incurred which are due.

Funds that are due to the adviser.

Bank account requirements

Must be held in a separate client account.

All must be deposited into the client account at the outset. The portion of the funds which is due should be withdrawn from the client account as soon as practical.

Deposited into a practice account.

If an adviser receives mixed payments from a client, i.e. payments in advance and payments for services already supplied, these mixed funds must all be deposited into the client account at the outset. The portion of the funds which is due should then be withdrawn from the client account as soon as practical.

If there are no client funds received in advance those funds should be deposited directly into the practice account.

Administrative costs of client account

Clause 25(d):

A licensed immigration adviser must, if taking payment for fees and/or disbursements in advance of being payable and invoiced:

  1. cover any administrative costs of maintaining the client account

Clause 25(d) requires the adviser to meet any administrative costs of the client account.

An adviser may comply with this clause by:

Withdrawing funds only when payable and invoiced

Clause 25(e):

A licensed immigration adviser must, if taking payment for fees and/or disbursements in advance of being payable and invoiced:

  1. withdraw client funds only when payments for fees and/or disbursements are payable and invoiced

The money held in a client account is being held on behalf of the client and remains their property until they receive an invoice telling them that the money is now payable to the adviser.

See the flow charts above for examples of the difference between invoicing a client when they have paid up front and the money is in the client account and invoicing a client after the completion of services.

Purpose of client funds

Clause 25(f):

A licensed immigration adviser must, if taking payment for fees and/or disbursements in advance of being payable and invoiced:

  1. use client funds only for the purpose for which they were paid to the adviser

Client accounts should not be used to hold money simply for the purpose of service fee refunds or to earn interest. Money should be transferred out of the client account when it is due to be paid to the adviser and an invoice for the agreed services and/or disbursement(s) has been issued to the client.

Audits of business accounts

Clause 25(g):

A licensed immigration adviser must, if taking payment for fees and/or disbursements in advance of being payable and invoiced:

  1. when requested by the Registrar of Immigration Advisers, have business accounts audited by a Chartered Accountant to show that any client funds taken in advance are held in a separate client account and only withdrawn when payments for fees and/or disbursements are payable and invoiced

The Authority recognises that having business accounts audited by a Chartered Accountant may come at a significant cost to advisers. The Registrar would not invoke this clause lightly. The results of such an audit may be used as evidence in an own motion complaint in which case the Tribunal would make a determination as to whether the adviser was in breach of the Code.

Here are some decisions from the Immigration Advisers Complaints and Disciplinary Tribunal that refer to client funds:

J v Khetarpal

Decision: [2015] NZIACDT 95 (5 November 2015) (PDF, 224KB)

Penalty Decision: [2016] NZIACDT 7 (22 January 2016) (PDF, 243 KB)

IAA v UKFE

Decision: [2012] NZIACDT 30 (28 June 2012) (PDF, 130 KB)

Chaiyapoom v Hu

Decision: [2014] NZIACDT 78 (9 September 2014) (PDF, 144KB)

Penalty Decision: [2015] NZIACDT 11 (26 February 2015) (PDF, 131KB)

Yerbury-Wilson v Standing

Decision: [2012] NZIACDT 51 (30 August 2012) (PDF, 137 KB)

Penalty Decision: [2012] NZIACDT 73 (28 September 2012) (PDF, 101 KB)

Chen v Loh

Decision: [2013] NZIACDT 15 (19 March 2013) (PDF, 217 KB)

Penalty Decision: [2013] NZIACDT 55 (30 August 2013) (PDF, 151 KB)

Chen v Gu-Chang

Decision: [2013] NZIACDT 16 (19 March 2013) (PDF, 221 KB)

Penalty Decision: [2013] NZIACDT 56 (30 August 2013) (PDF, 149 KB)

LG v Hakaoro

Decision: [2013] NZIACDT 23 (3 April 2013) (PDF, 167 KB)

Penalty Decision: [2013] NZIACDT 32 (27 May 2013) (PDF, 93.9 KB)

 

What has changed compared to the 2010 Code?

2010 Code – required advisers to:

  • establish and maintain a separate clients’ bank account for holding all clients’ funds paid in advance for fees and/or disbursements
  • withdraw funds held on behalf of clients only when payments for fees and/or disbursements fell due
  • use funds held on behalf of clients only for the purpose for which they were paid to the adviser

2014 Code – requires advisers, if taking payment for fees and/or disbursements in advance of being payable and invoiced, to:

  1. recognise that these client funds remain the property of the client until payable and invoiced
  2. establish and maintain a separate client account for receiving and holding all client funds paid in advance
  3. deposit any mixed funds (funds including payable payments and advance payments) into the client account at the outset and then as soon as practical withdraw from the client account the portion of the funds that were payable and for which an invoice has been issued
  4. cover any administrative costs of maintaining the client account
  5. withdraw client funds only when payments for fees and/or disbursements are payable and invoiced
  6. use client funds only for the purpose for which they were paid to the adviser, and
  7. when requested by the Registrar of Immigration Advisers, have business accounts audited by a Chartered Accountant to show that any client funds taken in advance are held in a separate client account and only withdrawn when payments for fees and/or disbursements are payable and invoiced.