BILL ANALYSIS �
AB 1859
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Date of Hearing: April 22, 2014
ASSEMBLY COMMITTEE ON BUSINESS, PROFESSIONS AND CONSUMER
PROTECTION
Susan A. Bonilla, Chair
AB 1859 (Maienschein) - As Amended: April 1, 2014
As Proposed to be Amended
SUBJECT : Professional fiduciaries: professional corporations.
SUMMARY : Authorizes the creation of licensed professional
fiduciary corporations (LPFC). Specifically, this bill :
1)States that an LPFC is a corporation that is authorized to
render professional services in conformance with the
Moscone-Knox Professional Corporation Act, as specified.
2)Declares that any person licensed as a professional fiduciary
(LPF) who violates, attempts to violate, directly or
indirectly, or assist in or abet the violation of, or conspire
to violate any provision or term of this bill, the
Moscone-Knox Professional Corporation Act, or any regulations
adopted under those provisions, is guilty of unprofessional
conduct.
3)Prohibits a LPFC from committing or omitting any act that, if
committed or omitted, would constitute unprofessional conduct
under any statute or regulation. Requires an LPFC to observe
and be bound by the same statutes and regulations to the same
extent as an LPF.
4)Requires the name of an LPFC to contain the words
"professional fiduciary" and wording or abbreviations denoting
its corporate existence.
5)Requires each director, shareholder, and officer of a LPFC to
be an LPF.
6)Prohibits any shareholder who becomes disqualified as an LPF
to receive income from the LPFC that is attributable to his or
her professional services rendered while he or she was
disqualified, as specified.
7)Requires the bylaws of an LPFC to include a provision that
requires the capital stock of the corporation owned by a
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disqualified LPF or a deceased LPF, to be sold to the
corporation or to the remaining shareholders of the
corporation within 60 days.
8)Requires an LPFC to maintain liability insurance of at least
one million dollars for claims against the LPFC by its
customers arising out of the rendering of professional
services.
9)States that if an LPF, exercising the powers and duties
granted to an LPFC acting as an appointed guardian,
conservator, personal representative or trustee, violates
those powers and duties authorized by the court, the LPFC will
maintain liability for those actions.
10)States that the LPFC's liability shall not be interpreted to
prevent the Professional Fiduciaries Bureau (PFB) from
individual enforcement and disciplinary action against a LPF.
11)States that if a LPFC is appointed as a guardian,
conservator, personal representative, or trustee, each
shareholder, officer, director, or employee of the corporation
who is a LPF may individually exercise the powers and duties
of the guardian, conservator, personal representative, or
trustee.
12)Adds LPFC to the list of professional corporations exempt
from obtaining a certificate of registration.
13)Makes clarifying and conforming changes.
EXISTING LAW :
1)Establishes PFB to administer and enforce the Professional
Fiduciaries Act. (Business and Professions Code (BPC) Section
6500 et seq.)
2)Exempts California licensed attorneys and certified public
accountants and enrolled agents acting within the scope of
their respective practices. (BPC 6530)
3)Permits certain professions to incorporate under the
Moscone-Knox Professional Corporation Act to render
professional services. (Corporations Code (CC) Section 13400
et seq.)
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4)Defines "professional services" as those that may be lawfully
rendered only pursuant to a license, certification, or
registration authorized by the BPC, the Chiropractic Act, or
the Osteopathic Act. (CC 13401)
5)Exempts professional corporations rendering professional
services by persons duly licensed by the Medical Board of
California or any examining committee under the jurisdiction
of the board, the Osteopathic Medical Board of California, the
Dental Board of California, the California State Board of
Pharmacy, the Veterinary Medical Board, the California
Architects Board, the Court Reporters Board of California, the
Board of Behavioral Sciences, the Speech-Language Pathology
and Audiology Board, the Board of Registered Nursing, or the
State Board of Optometry from the requirement to obtain a
certificate of registration in order to render those
professional services. (CC 13401)
6)Requires that shares of capital stock in a professional
corporation be issued only to a licensed person or to a person
who is licensed to render the same professional services in
the jurisdiction or jurisdictions in which the person
practices, as specified. (CC 13406)
7)Requires shares in a professional corporation to be
transferred only to a licensed person, to a shareholder of the
same corporation, to a person licensed to practice the same
profession in the jurisdiction or jurisdictions in which the
person practices, or to a professional corporation, as
specified. (CC 13407)
FISCAL EFFECT : Unknown
COMMENTS :
1)Purpose of this bill . This bill allows LPFs to organize as an
LPFC in order to provide better client service by housing LPFs
with different specialties within one firm while protecting
the LPFs against personal liability. This bill is sponsored
by the Professional Fiduciary Association of California.
2)Author's statement . According to the author's office,
"Authorizing professional fiduciaries to be organized as
professional corporations will enable these businesses to
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better serve the needs of the individuals they serve including
those who are elderly, disabled or impaired."
3)Regulation of Professional Fiduciaries . The Professional
Fiduciaries Act (Act) was created in 2006 (SB 1550 Figueroa),
Chapter 491, Statutes of 2006. PFB was established to license
and regulate non-family member professional fiduciaries,
including conservators, guardians, trustees, and agents under
durable power of attorney. The Bureau currently licenses 638
PFs.
PFs provide critical services to seniors, disabled persons,
and minors. They manage matters for clients including daily
care, housing and medical needs, and also offer financial
management services ranging from basic bill paying to estate
and investment management.
In order to qualify for licensure, an applicant must be at
least 21 years old, be a US citizen or be legally admitted to
the United States, submit fingerprints and pass a background
check, pass an examination that includes national and state
components, and have either a baccalaureate degree, an
associate degree and three years' relevant work experience, or
at least five years' relevant work experience prior to 2012.
Requirements for licensure also include completing 30 hours of
approved pre-licensure education courses and earning 15 hours
of continuing education (CE) credit each year for renewal.
Licensees must comply with reporting requirements and abide by
the Professional Fiduciaries Code of Ethics.
Licensed attorneys are not required to obtain a fiduciary
license because that license authorizes the holder to provide
the full scope of fiduciary duties. Certified public
accountants and enrolled agents are also exempt, as long as
they only provide services within their respective scopes of
practice.
4)Professional corporations . Existing law authorizes certain
professions to organize as corporations to render a specific
kind of professional service, such as the practice of
optometry or medicine. According to the sponsors, organizing
as a corporation will permit greater continuity of care for
clients by providing an array of LPFs with specialized skills
under a single corporate license, and provide personal
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liability protection for individual LPFs. This bill would
counterbalance the individual limits on liability with a
requirement that an LPFC hold a minimum liability insurance
policy of one million dollars. It also clarifies that the bill
does not prevent PFB from disciplining individual LPFs
operating within an LPFC.
This bill restricts ownership in an LPFC to only LPFs,
although current law broadly authorizes any person rendering
the same professional services to hold stock (such as
attorneys and CPAs) - not just individuals licensed in the
direct practice of the professional corporation (LPFs).
However, the sponsors restricted ownership to LPFs only
because they feel that non-LPFs "do not receive the training
and education specific to perform fiduciary responsibilities,"
and feel that LPFs "would best serve the clients within a
professional corporation and be better prepared to meet their
needs."
The Committee members may wish to consider whether or not
LPFCs should be restricted to LPFs only, or if LPFCs should be
open to other professions permitted under law to practice as
professional fiduciaries.
5)Arguments in support . The bill's sponsor, Professional
Fiduciary Association of California, writes, "Many clients of
licensed professional fiduciaries live for an extended period
of time, and the organization of the business of the
fiduciaries as professional corporations would enable a
continuity of care for the clients as the entities would then
be able to have several licensed individuals who can care for
a client.
"The professional corporation structure would allow for
numerous skill sets to serve the clients. For example, one
fiduciary could have skill regarding medical needs, the other
fiduciary could have the skill of financial and tax needs,
another could be knowledgeable in property management.
"If formed as professional corporations, several licensed
fiduciaries would be able to work together and to ensure that
a knowledgeable, licensed fiduciary is available to meet the
needs of the individual.
"Licensed fiduciaries organized as professional corporations
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would obtain certain benefits of the corporate form of doing
business, such as protection of assets from liability for
claims not involving malpractice, favorable tax benefits for
the payment of health insurance premiums, and possible
protection of assets for qualified retirement plans belonging
to a corporation."
6)Related legislation . AB 2024 (Bonilla) of 2014 revises the
Professional Fiduciaries Act to permit PFB to establish a
"retired" and "inactive" status for licensees, provided that
licenses may not be renewed, restored or reinstated after
three years expiration, and clarifies the ability of PFB to
investigate the actions of any PF, even if that person has a
retired, inactive, canceled, or suspended license. That bill
will be heard in the Assembly Business, Professions and
Consumer Protection Committee on April 22, 2014.
AB 2741 (Bonilla) of 2014 extends the sunset date on PFB until
January 1, 2019. That bill will be heard in the Assembly
Business, Professions and Consumer Protection Committee on
April 22, 2014.
REGISTERED SUPPORT / OPPOSITION :
Support
Professional Fiduciary Association of California (sponsor)
Opposition
None on file
Analysis Prepared by : Sarah Huchel / B.,P. & C.P. / (916)
319-3301