BILL ANALYSIS Ó
SB 543
Page 1
Date of Hearing: July 5, 2011
ASSEMBLY COMMITTEE ON BUSINESS, PROFESSIONS AND CONSUMER
PROTECTION
Mary Hayashi, Chair
SB 543 (Price) - As Amended: June 23, 2011
SENATE VOTE : 37-1
SUBJECT : Business and professions: regulatory boards.
SUMMARY : Extends the sunset date of a number of boards,
committees and commissions within the Department of Consumer
Affairs (DCA) and makes programmatic and administrative changes
to some of these entities. Specifically, this bill :
1)Adds the Board for Professional Engineers, Land Surveyors, and
Geologists (BPELSG) to the list of specified boards whose
licensing applicants must submit a full set of fingerprints
for the purposes of conducting criminal history record checks.
2)Extends the operation of the California Board of Accountancy
(CBA) and related provisions until January 1, 2016, and
subjects CBA to review by the appropriate policy committees of
the Legislature.
3)Provides that any restatement of a financial statement that is
included in any report filed with the United States Securities
and Exchange Commission (SEC) shall be exempt from existing
law requiring an accountant licensee to report to CBA any
restatement of a financial statement and related disclosures
by a client audited by the licensee.
4)Extends the operation of CBA's peer review program and the
peer review oversight committee to January 1, 2016.
5)Extends to January 1, 2015, the date by which CBA must submit
a report to the Legislature and the Governor regarding peer
review requirements, and adds the following components to the
report:
a) The number of peer review reports completed and the
number of reports submitted to CBA as required by existing
law;
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b) The number of enforcement actions that were initiated as
a result of an investigation conducted pursuant to existing
law;
c) The number of firms that were recommended to take
corrective actions to improve their practice through the
mandatory peer review process, and the number of firms that
took such corrective actions following these
recommendations;
d) The extent to which mandatory peer review of accounting
firms enhances consumer protection;
e) The cost impact on firms undergoing mandatory peer
review and the cost impact of mandatory peer review on the
firm's clients;
f) A recommendation as to whether the mandatory peer review
program should continue; and,
g) A recommendation as to whether the preparation of
nondisclosure compiled financial statements on another
comprehensive basis of accounting should continue to be a
part of the mandatory peer review program.
6)Extends the operation of the California Architects Board (CAB)
and related provisions until January 1, 2016, and removes the
July 1, 2012, sunset date of CAB's authority to implement an
intern development program, granting CAB permanent authority
to do so.
7)Extends the operation of the Landscape Architects Technical
Committee (LATC) and related provisions until January 1, 2016.
8)Extends the operation of the Professional Fiduciaries Bureau
(PFB), until January 1, 2015, and subjects PFB to review by
the appropriate policy committees of the Legislature.
9)Provides that existing law requiring licensure as a
professional fiduciary does not apply to an enrolled agent 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 who is soliciting clients for fiduciary
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services or holding himself or herself out as a professional
fiduciary must a hold a professional fiduciary license.
10)Authorizes the PFB to enter into a settlement agreement with
a licensee or applicant instead of issuing an accusation or
statement of issues against the licensee or applicant. The
settlement must identify the factual basis for the action
taken and the statutes or regulations violated. Any
settlement executed pursuant to this provision shall be
considered discipline and a public record and shall be posted
on the PFB's internet website.
11)Extends the operation of BPELSG and related provisions until
January 1, 2016, and subjects BPELSG to review by the
appropriate policy committees of the Legislature.
12)Deletes a requirement that an applicant to use the title
"structural engineer" pass a California-specific exam.
13)Changes references to the "Professional Engineer's and Land
Surveyor's Fund" to the "Professional Engineer's, Land
Surveyor's, Geologist's, and Geophysicist's Fund."
14)Extends the operation of the Contractors' State License Board
(CSLB) and related provisions until January 1, 2016, and
subjects CSLB to review by the appropriate policy committees
of the Legislature.
15)Extends the operation of the State Board of Guide Dogs for
the Blind (BGDB) and related provisions, including a pilot
project to resolve disputes between guide dog users and guide
dog schools, until January 1, 2014, and subjects BGDB to
review by the appropriate policy committees of the
Legislature.
16)Deletes the $450 cap on the examination fee for registration
as a geologist, maintaining the BPELSG's authority to set the
fee at an amount equal to the actual cost of administering the
examination.
17)Extends the operation of the State Athletic Commission
(Commission) and related provisions until January 1, 2014, and
subjects the Commission to review by the appropriate policy
committees of the Legislature.
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18)Extends to July 30, 2012, the date by which the Commission
must provide a report to the Governor and the Legislature on
the condition of the Neurological Examination Account and the
Boxers' Pension Fund.
EXISTING LAW
1)Provides for the licensing and regulation of various
professions and businesses by numerous boards, committees,
bureaus, and a commission within DCA under various Business
and Professions Code (BPC) licensing acts.
2)Requires licensing applicants of specified boards to submit a
full set of fingerprints for the purposes of conducting
criminal history record checks, and authorizes the licensing
boards to obtain and receive, at their discretion, criminal
history information from the Department of Justice (DOJ) and
the Federal Bureau of Investigation (FBI).
3)Establishes the CBA and its authority to appoint an executive
officer until January 1, 2012.
4)Requires an accountant licensee to report to the CBA the
occurrence of certain events taking place after January 1,
2003, including any restatement of a financial statement and
related disclosures by a client audited by the licensee.
5)Establishes peer review requirements that an accountancy firm
must meet every three years to renew its registration, as
specified, until January 1, 2014.
6)Requires the CBA, by January 1, 2013, to provide the
Legislature and the Governor with a report regarding the peer
review program, with specified components.
7)Establishes CAB and its authority to appoint an executive
officer until January 1, 2012, and authorizes CAB to implement
an intern development program until July 1, 2012.
8)Establishes LATC under CAB until January 1, 2012.
9)Establishes the PFB until January 1, 2012.
10)Provides that no person shall act or hold himself or herself
out as a professional fiduciary unless that person is licensed
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as a professional fiduciary in accordance with the
Professional Fiduciaries Act (Act), or are exempt from the
Act. Those exempt from the Act include: attorneys, CPAs
acting within their scope of practice, and enrolled agents
acting within their scope of practice.
11)Authorizes the PFB to impose disciplinary action, including
license denial, suspension, probation, or revocation, and
requires the PFB to provide on the internet information
regarding any enforcement action.
12)Establishes BPELSG and its authority to appoint an executive
officer until January 1, 2012.
13)Prohibits use of the title "structural engineer" by any
person unless he or she is a licensed civil engineer in
California and has been deemed qualified as a structural
engineer according to rules and regulations established by
BPELSG.
14)Specifies that an applicant to use the title "structural
engineer" must pass a written exam that incorporates a
national exam by a nationally recognized entity approved by
BPELSG and must pass a supplemental California specific exam
that tests the applicant's knowledge of state laws, rules and
regulations, and seismicity and structural engineering unique
to this state.
15)Creates the Professional Engineer's and Land Surveyor's Fund.
16)Establishes CSLB and its authority to appoint an executive
officer until January 1, 2012, and subjects CSLB to review by
DCA, limited only to unresolved issues identified by the Joint
Committee on Boards, Commissions and Consumer Protection.
17)Establishes the BGDB and a pilot project for arbitration of
disputes between dog users and dog schools over continued
custody and use of dogs until January 1, 2012.
18)Establishes the Geologists and Geophysics Fund.
19)Requires applicants for registration as a geologist to pay an
exam fee set by the BPELSG, not to exceed $450.
20)Establishes the Commission until January 1, 2012, and
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requires the Commission to provide a report to the Legislature
by July 30, 2010, on the condition of the Neurological
Examination Account and the Boxers' Pension Fund.
FISCAL EFFECT : Unknown
COMMENTS :
Purpose of this bill . According to the author's office, "Under
current law, each of the boards, committees and commissions (in
this bill) will expire on January 1, 2012. SB 543 makes
necessary statutory changes to the Business and Professions Code
to extend the sunset date of (these entities and) will ensure
that consumers continue to be protected by oversight of the
professionals licensed by (these entities) while also
implementing changes to better promote the protection of the
public."
Background . This bill extends the operations of several
entities within DCA that have shown to be effective and
efficient regulatory bodies, protecting both the professions
they oversee and California consumers. The entities whose
operations have been extended include: CBA, CAB, LATC, PFB,
BPELSG, CSLB, BGDB, and the Commission.
This bill also makes a number of changes to some of these
regulatory entities and the programs they administer. According
to background information provided by the author's office, these
changes are necessary for several reasons.
BPELSG indicates that its applications for in-training
certificates and for professional licensure require all
applicants to state whether or not they have been convicted of a
crime, because current law allows BPELSG to deny certification
or licensure if the applicant has been convicted of a crime
substantially related to the qualifications, functions, and
duties of the professional practice. However, BPELSG does not
have the legal authority to obtain criminal history information
to verify if the information provided on the applications is
correct. Since BPELSG has no legal authority to independently
verify the truthfulness of an applicant's response, it must rely
solely on the information provided by the applicant on the
applications. This current process does not adequately protect
consumers. Additionally, BPELSG can take disciplinary action
against a licensee if the licensee has been convicted of a crime
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substantially related to the qualifications, functions, and
duties of the professional practice. However, BPELSG is not
able to proactively monitor whether its licensees have been
convicted of crimes because it is not able to obtain criminal
history information directly. BPELSG must wait for someone to
submit a complaint and provide the conviction information.
Again, this current process does not adequately protect
consumers. This bill clarifies that BPELSG is one of the
boards, bureaus, divisions, and programs under DCA that may
obtain both state and federal criminal history information.
AB 270 (Correa) Chapter 231, Statutes of 2002, required all
restatements to be reported to the CBA. A restatement is a
revision to one or more of a company's financial statements and
can be made for many reasons. CBA licensees currently submit
restatements related to non-profit organizations, governmental
entities, and SEC registrants. Since that time, more than 2,300
restatements have been reported to the CBA. Of those,
approximately 1,300 have also gone to the SEC. Not a single
restatement received by the CBA has resulted in an enforcement
action.
Through exchange agreements, the SEC and the Public Company
Accounting Oversight Board (PCAOB) shares with CBA enforcement
actions they have taken against licensees, including those
resulting from restatements. The Accountancy Act allows CBA to
take action against any licensee sanctioned by the SEC or PCAOB.
Approximately 20% of CBA's disciplinary actions result from
information received through the SEC or PCAOB.
This bill exempts from the CBA's reporting requirement a
restatement or related disclosures that are already submitted to
the SEC. The CBA would continue to receive restatements from
non-profit and governmental audits that stem from errors in
audits or financial statements of these entities, as these
restatements are not filed with the SEC. These restatements
will continue to be reviewed by CBA's Enforcement Program as
they could potentially contain evidence of wrong-doing.
AB 138 (Hayashi), Chapter 312, Statutes of 2009, established a
comprehensive mandatory peer review program for CPAs in
California. AB 138 required firms providing audit, attest, or
compilation (accounting and auditing) services to undergo a
systematic review (peer review) to ensure that work performed
conforms to professional standards. Peer review is required for
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these firms every three years as a condition for license
renewal.
To ensure the effectiveness of mandatory peer review, AB 138
required the CBA to establish a Peer Review Oversight Committee
(PROC), the purpose of which is to engender confidence in the
peer review program from consumers and the profession. The PROC
is authorized to request any information and materials deemed
necessary to ensure that peer reviews are administered in
accordance with the standards established by the CBA in
regulation. The PROC will use these materials when performing
peer review program provider site visits and participating in
peer review program provider's peer review report acceptance
meetings.
AB 138 also required the CBA to submit a report to the
Legislature and Governor by January 1, 2013, detailing the
impact of peer review on small business and the benefit to
consumers that utilize those small business services. Both the
peer review program and the PROC will sunset on January 1, 2014.
This bill extends the sunset of the peer review program and the
PROC to January 1, 2016. It also extends the due date for the
report until January 1, 2015, so it can be considered along with
the next proposed sunset extension for the CBA, and expands the
report to require a more comprehensive study on the progress and
the performance of the peer review program.
In 2004, CAB adopted a structured internship requirement as a
prerequisite for licensure as a means of exposing interns to a
full range of the necessary areas of practice. The program,
which sunsets July 1, 2012, is working well. This bill grants
CAB permanent authority to implement the intern development
program.
When the Legislature enacted SB 1550 (Figueroa), Chapter 491,
Statutes of 2006, establishing the Professional Fiduciaries Act,
the law created a limited exemption for a person who is enrolled
as an agent to practice before the Internal Revenue Service
acting within the scope of practice as an enrolled agent, as
specified.
In 2009, the PFB issued a licensing advisory that any activities
of an enrolled agent that are not within the scope of practice
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pursuant to the federal regulations would fall outside the
exemption. The California Society of Enrolled Agents (CSEA) has
expressed great concern with the PFB's interpretation of the
exemption. Last year, CSEA sponsored AB 276 (Hayashi) to amend
the law to clarify the exemption. That bill was held in the
Assembly Appropriations Committee.
CSEA indicates that most enrolled agents offer fiduciary
services only rarely, when they have been asked by long-term
clients to act as trustees. Relationships have been built and
private and confidential materials have already been shared.
This bill reflects a narrowly-crafted clarification to the
existing exemption in the Professional Fiduciaries Act for an
enrolled agent, 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 who is soliciting
clients for fiduciary services or holding himself or herself out
as a professional fiduciary must be licensed as a professional
fiduciary.
The Administrative Procedures Act (APA) requires an agency to
file an accusation or statement of issues against a licensee
before the regulatory agency can reach a stipulated settlement
with the licensee. While many licensees will not agree to a
stipulated settlement without the pressure of a filed formal
accusation, it is the experience of a number of regulatory
boards that there are instances in which a licensee is willing
to agree to a stipulated settlement earlier on in the
investigation stage of the enforcement process in order to
minimize the cost of an administrative hearing, or in order to
expedite the resolution of a disciplinary matter. This bill
authorizes the PFB to enter into a stipulated settlement
agreement with a licensee or applicant prior to the PFB's
issuance of an accusation or statement of issues against the
licensee.
The BPELSG Structural Engineers Technical Advisory Committee
recommended to the BPELSG in April of 2009 that a new 16-hour
National Council of Examiners for Engineering and Surveying
(NCEES) Structural examination be administered in California for
structural licensing beginning in April 2011, and that the
legislative requirement for a California specific structural
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examination be eliminated. The requirement for a California
specific examination for structural engineering is unnecessary
since the 16-hour NCEES Structural Examination has been
considered as testing for all the material previously provided
in the state specific examination. Reliance on the national
exam can also greatly facilitate comity licensing, as all other
states will be using this new examination as the only
requirement for structural licensing. This bill eliminates the
requirement for a state specific structural engineering
examination, so that BPELSG no longer has to create a
"take-home" multiple choice examination to meet the current
statutory requirement.
BPELSG indicates that the Geologist and Geophysicist Program can
increase its revenue by increasing the exam fee for the
Professional Geologist's exam. Raising the examination fees to
match the amount the Program spends on purchasing the
examination will not only increase its revenue, it will bring
the Program into compliance with current statute. This bill
removes the $450 cap on fees charged for exam fees.
Staff comments . This bill extends the sunset dates on the CBA
as well as the CBA's peer review program. Given that the sunset
review process allows the Legislature to review all operations
of the CBA, including its peer review program, it appears to be
redundant to also maintain a separate sunset on the peer review
provisions. The Committee may wish to consider deleting the
sunset dates in Business and Professions Code Sections 5076 and
5076.1 to eliminate this redundancy.
Support . CSEA writes, "The PFB was established to protect
vulnerable Californians from financial abuse by unlicensed,
unregulated fiduciaries. It was recognized that three
categories of professionals who sometimes provide fiduciary
services to their clients already have strict licensing
requirements and codes of ethics. Consequently, exemptions were
extended to Attorneys, CPAs and Enrolled Agents from having to
be additionally licensed as Professional Fiduciaries when
providing incidental fiduciary services to their clients. The
exemption language used for Enrolled Agents was vague and caused
some confusion. On this basis, clarifying the limited exemption
for EA's is appropriate."
Opposition . The American Council of Engineering Companies
(ACEC) of California states, "The list of licensees that require
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fingerprinting is unique in that the overwhelming number of
those professions that require the check are those that either
interact directly with consumers or patients in vulnerable or at
risk settings or have access to highly confidential personal
information (nurses, doctors, psychiatrists, other medical
professionals), have a fiduciary interaction with consumers
(accountants, fiduciaries), or a law enforcement type
interaction with consumers (investigative services). Engineers,
geologists, and land surveyors fall into none of these
categories. In fact, the vast majority of professional time for
these disciplines is spent in the office or in the field on
construction sites such as development and infrastructure
settings. There is very little personal interaction with
consumers, no access to consumer personal information , no
access to consumer financial information, and certainly no law
enforcement role being played by licensees of BPELSG." ACEC
also expresses concerns with the cost impact for BPELSG in
complying with this licensure requirement.
Related Legislation . SB 538 (Price) makes a number of changes
to the Nursing Practice Act. This bill is pending in Assembly
Business, Professions and Consumer Protection Committee.
SB 539 (Price) extends the sunset date of the Board of
Vocational Nursing and Psychiatric Technicians (BVNPT), expands
requirements for employers of licensed vocation nurses (LVNs)
and psychiatric technicians (PTs) to report specified
information to the BVNPT, and makes other changes. This bill is
pending in Assembly Appropriations Committee.
SB 540 (Price) extends the sunset date of the Dental Board of
California and makes a number of other programmatic changes.
This bill is pending in Assembly Business, Professions and
Consumer Protection Committee.
SB 541 (Price) authorizes the boards and bureaus within the
Department of Consumer Affairs, as well as the State Board of
Chiropractic Examiners and the Osteopathic Medical Board, to
continue to utilize expert consultants without having to go
through the formal contracting process. This bill is pending in
Assembly Appropriations Committee.
SB 706 (Price) makes numerous enforcement enhancements to the
Department of Real Estate and the Office of Real Estate
Appraisers. This bill is pending in Assembly Business,
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Professions and Consumer Protection Committee.
REGISTERED SUPPORT / OPPOSITION :
Support
California Society of Enrolled Agents
California Landscape Contractors Association
Contractors State License Board
Engineering and Utility Contractors Association
Golden State Builders Exchange
Professional Fiduciary Association of California
State Board of Guide Dogs for the Blind
Opposition
American Council of Engineering Companies
Analysis Prepared by : Angela Mapp / B.,P. & C.P. / (916)
319-3301