A lawyer may provide mortgage/refinancing services separate from the lawyer’s law firm so long as the proper disclosures are made, including that the lawyer is not providing legal services and the customers do not have the protections of the lawyer-client relationship. Referrals of clients must meet the “heavy burden” of compliance with ERs 1.7 and 1.8(a). Lawyers from separate law firms may participate as loan officers in the separate mortgage/refinancing company without imputed conflicts of interests for their law firms’ clients. However, these lawyers must not only make proper disclosures, but each lawyer also must determine whether the lawyer’s personal interests materially limit the lawyer’s professional judgment and whether any information known by the lawyer from these professional and business relationships creates any conflict of interest such that the lawyer may not proceed in any particular circumstance. Confidentiality requirements for clients and former clients also must be strictly followed.
Under ER 5.7, adopted in December 2003, a lawyer who operates a separate investment advisory business may refer non-clients to an investment advisory firm that pays a referral fee to the lawyer, so long as the lawyer takes reasonable steps to assure that the non-clients understand they are not receiving legal services and they do not have the protections of a lawyer-client relationship. A lawyer who provides such services to former clients must also comply with the confidentiality requirements and other obligations under ER 1.9, and should take particular care to assure that the former clients understand they do not have a lawyer-client relationship with respect to the investment transactions. A lawyer may not refer a current client to such a program, however, unless the lawyer meets the "heavy burden" of showing compliance with ER 1.7 and 1.8(a). Also, a lawyer who provides investment advisory services must satisfy ERs 7.1 through 7.3 and maintain separation between the law practice and the lawyer's investment advisory business so that they do not appear to be related.
To the extent previous Arizona ethics opinion 98-09 is inconsistent with ER 5.7 and the analysis in this opinion, the earlier opinion is no longer effective.
A dissenting opinion issued contemporaneously by the committee, recommends a per se ban against lawyers accepting money from third-party professionals in exchange for referring law clients to those third-party payors. However, like the majority, we agree that a lawyer can accept a fee from a third-party professional for referring non-clients to the third-party's firm, provided that the lawyer complies with Rule 5.7.