BILL NUMBER: SB 542AMENDED BILL TEXT AMENDED IN SENATE MAY 5, 2011 AMENDED IN SENATE APRIL 14, 2011 INTRODUCED BY Senator Price FEBRUARY 17, 2011 An act to amend Sections 5000, 5015.6, 5076, 5076.1, 6510, and 6530 of, and to add Section 6582.2 to, the Business and Professions Code, relating to professions and vocations. LEGISLATIVE COUNSEL'S DIGEST SB 542, as amended, Price. Professions and vocations: regulatory boards. Existing law provides for the licensure and regulation of various professions and vocations by boards within the Department of Consumer Affairs, including the California Board of Accountancy and the Professional Fiduciaries Bureau. Existing law authorizes the board to appoint an executive officer and authorizes the Governor to appoint the chief of the bureau. Under existing law, these provisions are repealed on January 1, 2012. Under existing law, boards scheduled for repeal are required to be evaluated by the Joint Sunset Review Committee. This bill would extend the operation of these provisions until January 1, 2016,andexcept that the bill would extend the operation of provisions establishing the Professional Fiduciaries Bureau until January 1, 2015. The bill would specify that these boards would be subject to review by the appropriate policy committees of the Legislature. With respect to accounting firms, existing law, until January 1, 2014, requires a firm, in order to renew its registration, to have a specified peer review report accepted by a board-recognized peer review group. Existing law, until January 1, 2014, requires the board to appoint a peer review oversight committee of certified public accountants to provide recommendations to the board relating to the effectiveness of mandatory peer review. Existing law also requires the board, by January 1, 2013, to provide the Legislature and the Governor with a report regarding specified peer review requirements. This bill would extend the operation of the peer review report requirement and the peer review oversight committee to January 1, 2016, and would require the report to the Legislature and the Governor to be submitted by January 1, 2015. With respect to professional fiduciaries, existing law prohibits a person from holding himself or herself out as a professional fiduciary without a license issued by the bureau. Existing law exempts from the license requirement a person enrolled as an agent to practice before the Internal Revenue Service, as specified. Under existing law, a license may be suspended, revoked, denied, or other disciplinary action may be imposed for various reasons. This bill would revise the exemption requirement by additionally requiring that the enrolled agent provide only fiduciary services that are ancillary to the primary services of an enrolled agent and that those services be provided at the request of a client with which the enrolled agent has an existing professional relationship. The bill would authorize the bureau, instead of issuing an accusation or statement of issues against a licensee or applicant, to enter into a specified settlement with a licensee or applicant. Vote: majority. Appropriation: no. Fiscal committee: yes. State-mandated local program: no. THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS: SECTION 1. Section 5000 of the Business and Professions Code is amended to read: 5000. There is in the Department of Consumer Affairs the California Board of Accountancy, which consists of 15 members, seven of whom shall be licensees, and eight of whom shall be public members who shall not be licentiates of the board or registered by the board. The board has the powers and duties conferred by this chapter. The Governor shall appoint four of the public members, and the seven licensee members as provided in this section. The Senate Rules Committee and the Speaker of the Assembly shall each appoint two public members. In appointing the seven licensee members, the Governor shall appoint members representing a cross section of the accounting profession with at least two members representing a small public accounting firm. For the purposes of this chapter, a small public accounting firm shall be defined as a professional firm that employs a total of no more than four licensees as partners, owners, or full-time employees in the practice of public accountancy within the State of California. This section shall remain in effect only until January 1, 2016, and as of that date is repealed, unless a later enacted statute, that is enacted before January 1, 2016, deletes or extends that date. Notwithstanding any other provision of law, the repeal of this section renders the board subject to review by the appropriate policy committees of the Legislature. However, the review of the board shall be limited to reports or studies specified in this chapter and those issues identified by the appropriate policy committees of the Legislature and the board regarding the implementation of new licensing requirements. SEC. 2. Section 5015.6 of the Business and Professions Code is amended to read: 5015.6. The board may appoint a person exempt from civil service who shall be designated as an executive officer and who shall exercise the powers and perform the duties delegated by the board and vested in him or her by this chapter. This section shall remain in effect only until January 1, 2016, and as of that date is repealed, unless a later enacted statute, that is enacted before January 1, 2016, deletes or extends that date. SEC. 3. Section 5076 of the Business and Professions Code is amended to read: 5076. (a) In order to renew its registration, a firm, as defined in Section 5035.1, shall have a peer review report of its accounting and auditing practice accepted by a board-recognized peer review program no less frequently than every three years. (b) For purposes of this article, the following definitions apply: (1) "Peer review" means a study, appraisal, or review conducted in accordance with professional standards of the professional work of a firm, and may include an evaluation of other factors in accordance with the requirements specified by the board in regulations. The peer review report shall be issued by an individual who has a valid and current license, certificate, or permit to practice public accountancy from this state or another state and is unaffiliated with the firm being reviewed. (2) "Accounting and auditing practice" includes any services that are performed using professional standards defined by the board in regulations. (c) The board shall adopt regulations as necessary to implement, interpret, and make specific the peer review requirements in this section, including, but not limited to, regulations specifying the requirements for board recognition of a peer review program, standards for administering a peer review, extensions of time for fulfilling the peer review requirement, exclusions from the peer review program, and document submission. (d) The board shall adopt emergency regulations in accordance with the Administrative Procedure Act (Chapter 3.5 (commencing with Section 11340) of Part 1 of Division 3 of Title 2 of the Government Code) to establish policies, guidelines, and procedures as outlined in subdivision (c). The adoption of the regulations shall be considered by the Office of Administrative Law to be necessary for the immediate preservation of the public peace, health and safety, or general welfare. The emergency regulations shall be submitted to the Office of Administrative Law for filing with the Secretary of State and publication in the California Code of Regulations, and shall be replaced in accordance with the Administrative Procedure Act. (e) Nothing in this section shall prohibit the board from initiating an investigation and imposing discipline against a firm or licensee, either as the result of a complaint that alleges violations of statutes, rules, or regulations, or from information contained in a peer review report received by the board. (f) A firm issued a substandard peer review report, as defined by the board in regulation, shall submit a copy of that report to the board. The board shall establish in regulation the time period that a firm must submit the report to the board. This period shall not exceed 60 days from the time the report is accepted by a board-recognized peer review program provider to the date the report is submitted to the board. (g) (1) A board-recognized peer review program provider shall file a copy with the board of all substandard peer review reports issued to California-licensed firms. The board shall establish in regulation the time period that a board-recognized peer review program provider shall file the report with the board. This period shall not exceed 60 days from the time the report is accepted by a board-recognized peer review program provider to the date the report is filed with the board. These reports may be filed with the board electronically. (2) Nothing in this subdivision shall require a board-recognized peer review program provider, when administering peer reviews in another state, to violate the laws of that state. (h) The board shall, by January 1, 2010, define a substandard peer review report in regulation. (i) Any requirements imposed by a board-recognized peer review program on a firm in conjunction with the completion of a peer review shall be separate from, and in addition to, any action by the board pursuant to this section. (j) Any report of a substandard peer review submitted to the board in conjunction with this section shall be collected for investigatory purposes. (k) Nothing in this section affects the discovery or admissibility of evidence in a civil or criminal action. (l) Nothing in this section requires any firm to become a member of any professional organization. (m) A peer reviewer shall not disclose information concerning licensees or their clients obtained during a peer review, unless specifically authorized pursuant to this section, Section 5076.1, or regulations prescribed by the board. (n) (1) By January 1, 2015, the board shall provide the Legislature and Governor with a report regarding the peer review requirements of this section that includes, without limitation: (A) The extent to which mandatory peer review of small firms or sole practitioners that prepare nondisclosure compiled financial statements on an other comprehensive basis of accounting enhances consumer protection. (B) The impact of peer review required by this section on small firms and sole practitioners that prepare nondisclosure compiled financial statements on an other comprehensive basis of accounting. (C) The impact of peer review required by this section on small businesses, nonprofit corporations, and other entities that utilize small firms or sole practitioners for the purposes of nondisclosure compiled financial statements prepared on an other comprehensive basis of accounting. (2) A report to the Legislature pursuant to this section shall be submitted in compliance with Section 9795 of the Government Code. (o) This section shall remain in effect only until January 1, 2016, and as of that date is repealed, unless a later enacted statute, that is enacted before January 1, 2016, deletes or extends that date. SEC. 4. Section 5076.1 of the Business and Professions Code is amended to read: 5076.1. (a) The board shall appoint a peer review oversight committee of certified public accountants of this state who maintain a license in good standing and who are authorized to practice public accountancy to provide recommendations to the board on any matter upon which it is authorized to act to ensure the effectiveness of mandatory peer review. (b) The committee may request any information from a board-recognized peer review program provider deemed necessary to ensure the provider is administering peer reviews in accordance with the standards adopted by the board in regulations. Failure of a board-recognized peer review program provider to respond to the committee shall result in referral by the committee of the provider to the board for further action. Any information obtained by the board, its representatives, or the peer review oversight committee in conjunction with its review of peer review program providers shall not be a public record, and shall be exempt from public disclosure, provided, however, this information may be disclosed under any of the following circumstances: (1) In connection with disciplinary proceedings of the board. (2) In connection with legal proceedings in which the board is a party. (3) In response to an official inquiry by a federal or state governmental regulatory agency. (4) In compliance with a subpoena or summons enforceable by court order. (5) As otherwise specifically required by law. (c) The members of the committee shall be appointed to two-year terms and may serve a maximum of four consecutive terms. (d) The board may adopt, as necessary, regulations further defining the minimum qualifications for appointment as a committee member and additional administrative elements designed to ensure the effectiveness of mandatory peer review. (e) This section shall remain in effect only until January 1, 2016, and as of that date is repealed, unless a later enacted statute, that is enacted before January 1, 2016, deletes or extends that date. SEC. 5. Section 6510 of the Business and Professions Code is amended to read: 6510. (a) There is within the jurisdiction of the department the Professional Fiduciaries Bureau. The bureau is under the supervision and control of the director. The duty of enforcing and administering this chapter is vested in the chief of the bureau, who is responsible to the director. Every power granted or duty imposed upon the director under this chapter may be exercised or performed in the name of the director by a deputy director or by the chief, subject to conditions and limitations as the director may prescribe. (b) The Governor shall appoint, subject to confirmation by the Senate, the chief of the bureau, at a salary to be fixed and determined by the director with the approval of the Director of Finance. The chief shall serve under the direction and supervision of the director and at the pleasure of the Governor. (c) This section shall remain in effect only until January 1,20162015 , and as of that date is repealed, unless a later enacted statute, that is enacted before January 1,20162015 , deletes or extends that date. Notwithstanding any other provision of law, the repeal of this section renders the board subject to review by the appropriate policy committees of the Legislature. Notwithstanding any other provision of law, upon the repeal of this section, the responsibilities and jurisdiction of the bureau shall be transferred to the Professional Fiduciaries Advisory Committee, as provided by Section 6511. SEC. 6. Section 6530 of the Business and Professions Code is amended to read: 6530. (a) On and after January 1, 2009, no person shall act or hold himself or herself out to the public as a professional fiduciary unless that person is licensed as a professional fiduciary in accordance with the provisions of this chapter. (b) This section does not apply to a person licensed as an attorney under the State Bar Act (Chapter 4 (commencing with Section 6000)). (c) This section does not apply to a person licensed as, and acting within the scope of practice of, a certified public accountant pursuant to Chapter 1 (commencing with Section 5000) of Division 3. (d) This section does not apply to a person enrolled as an agent to practice before the Internal Revenue Service pursuant to Part 10 of Title 31 of the Code of Federal Regulations, who is providing fiduciary services that are ancillary to the primary services of an enrolled agent, and those services are provided at the request of a client with which the enrolled agent has an existing professional relationship. However, an enrolled agent whois solicitingsolicits clients for fiduciary services orholdingholds himself or herself out as a professional fiduciaryis required to obtainshall hold a license in accordance with this chapter. SEC. 7. Section 6582.2 is added to the Business and Professions Code, to read: 6582.2. (a) Notwithstanding Section 6582 and Section 11415.60 of the Government Code, the bureau may enter into a settlement with a licensee or applicant instead of the issuance of an accusation or statement of issues against that licensee or applicant. (b) The settlement shall identify the factual basis for the action being taken and the statutes or regulations violated. (c) A person who enters a settlement pursuant to this section is not precluded from filing a petition, in the timeframe permitted by Section 11522 of the Government Code, to modify the terms of the settlement or a petition for early termination of probation, if probation is part of the settlement. (d) Any settlement with a licensee executed pursuant to this section shall be considered discipline and a public record and shall be posted on the bureau's Internet Web site. Any settlement with an applicant executed pursuant to this section shall be considered a public record and shall be posted on the bureau's Internet Web site.