BILL ANALYSIS                                                                                                                                                                                                    



                                                                  SB 543
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          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