CPAs in Congress came to the rescue of their profession with the passage of a bill that eliminated the need to send privacy notices to clients."The Financial Services Relief Act of 2006 is a common-sense bill that will give CPAs more time to serve their clients," said Rep. Colin C. Peterson, D-Minn. "As a CPA myself, I can tell you that it's more important to spend time working with clients than it is to be filling out redundant paperwork."
Though at press time President George W. Bush had not yet signed the bill, American Institute of CPAs president and chief executive officer Barry Melancon said in early October that CPAs who were preparing privacy notices could stop, and that their time would be better spent serving their clients.
The provision exempting CPAs is part of the Financial Services Regulatory Relief Act of 2006, which passed on Sept. 30. The requirement originated in the Gramm-Leach-Bliley Act of 1999, which prohibited financial institutions from selling client information to third parties. In a definition dating back to the Glass-Steagall Banking Act of 1933, CPAs were considered financial institutions because they were involved in tax and financial planning services.
Since 2000, the AICPA had been petitioning the Federal Trade Commission that CPA licensure laws and regulation in all states and territories already prohibit CPAs from disclosing client information without express consent. Privacy notices were therefore a redundant burden on practitioners.
AICPA director of congressional and political affairs Peter Kravitz said that the FTC eventually agreed with that position, but lacked the authority to grant an exemption. "At that point, we went to the Capitol to ask for an exemption," Kravitz said. "The big problem with getting a legislative exemption was not in finding support for our exemption, but a vehicle that it could be attached to that would actually move."
Rep. Peterson and fellow CPA Mark Kennedy, R-Minn., subsequently took the lead by co-sponsoring a provision that would be attached to the Financial Services Regulation Relief Act. Meanwhile, in the Senate, Mike Enzi, R-Wyo., who is an accountant though not a CPA, joined Debbie Stabenow, D-Mich., who had been approached by the Michigan CPA Society about the problem, and teamed up to introduce a similar provision. The Senate language was adopted for the final bill, which passed unanimously in both the House and the Senate.
The exemption for CPAs is being met with gratitude by accounting firms.
William Lazor, a partner with Kronick Kalada Berdy & Co. PC, in Kingston, Pa., said that it would make a real difference for his firm. "This is a release from an administrative requirement that really wasn't necessary," he said. "I liken it to having both a federal and state speed limit. If there are already rules in place, there's no need for a second set of rules."
Lazor said that the privacy notices cost his firm $2,000 to $3,000 each year - money that he said the firm would rather spend on providing services. Besides being a needless expense, he said, the notices caused confusion among clients. "When clients receive these notices and are told their information is private," he said, "it raises the question of whether the information was ever public."
Kravitz said that the privacy notices were a substantial burden on CPAs, especially small audit firms. Legal counsel is necessary to draft the notices - there is no simple form that can be used - and clerical work can consume a disproportionate amount of time in a small office.
"This was an unnecessary regulatory burden," said the AICPA's Kravitz. "It's gone. We're thrilled."
Register or login for access to this item and much more
All Accounting Today content is archived after seven days.
Community members receive:
- All recent and archived articles
- Conference offers and updates
- A full menu of enewsletter options
- Web seminars, white papers, ebooks
Already have an account? Log In
Don't have an account? Register for Free Unlimited Access