“This is wonderful news and a win for both CPA practitioners and their clients. The disclosure statements are often confusing to clients and they are expensive and time-consuming for CPAs to prepare,” Barry C. Melancon, President and chief executive officer (CEO) of the American Institute of Certified Public Accountants (AICPA), said in a statement responding to news that President Bush had signed Senate Bill 2856. “Since the exemption is effective upon the President’s signature, all those CPAs who are now preparing this year’s privacy notices can stop. They won’t have to send Gramm-Leach-Bliley Act privacy notices out this year. They can instead put that time into serving their clients.”
On Friday, President Bush signed into law the Financial Services Regulatory Relief Act of 2006 (S. 2856) which includes a provision exempting certified public accountants (CPAs) from the Gramm-Leach-Bliley Act’s requirement to send clients an annual privacy notice. The exemption is effective immediately.
The House of Representatives passed the Financial Services Regulatory Relief Act of 2006 on September 27, 2006, by a vote of 417-0. The Senate unanimously passed it three days later, on September 30, 2006, as one of the final acts before recessing a week early to allow members to focus on the November elections.
The AICPA has worked with lawmakers to achieve the exemption since the Gramm-Leach-Bliley Act was enacted. The change was possible only because CPAs are certified or licensed by state boards of accountancy and are already subject to state laws and regulations prohibiting the disclosure of non-public personal information without the expressed consent of the client.
In March, Senator Mike Enzi(R-WY), who authored CPA exemption provision and worked to get it passed, issued a statement explaining, "State-licensed CPAs in all states are prohibited from disclosing personal information unless specifically allowed by the customer. Under Gramm-Leach-Bliley, institutions can share information unless prohibited by a customer. There is a significant difference here, and one that makes annual privacy disclosures for CPAs unnecessary."
The Financial Services Regulatory Relief Act of 2006 was also widely supported by the banking industry and banking regulators in the U.S. The law enacted Friday is a version of a bill first introduced in the House in 2001. It does not, however, contain some controversial provisions, such as a provision baring commercial companies from owning banks and a provision which would reduce the number of cash transaction reports banks must file under the Bank Secrecy Act.
Besides exempting CPAs from the GLB privacy notification, the Financial Services Regulatory Relief Act also:
- Extends the period between routine examinations of well-rated and well-capitalized banks having assets less than $500 million.
- Requires the Federal Deposit Insurance Corp. (FDIC) and other regulators to review banks' financial income statements every five years for items that can be revised or eliminated.
- Makes it easier to recruit and retain directors to serve on the boards of small banks.
The Act also calls on the Securities and Exchange Commission (SEC) and the U.S. Federal Reserve to jointly adopt a single set of rules for determining when specific banking services or products might be considered securities activities. Under the provision, the SEC and Federal Reserve have 180 days from Friday to propose final rules defining when a bank can engage in securities activities without registering as a securities broker. The Gramm-Leach-Bliley Act repealed the broker-dealer registration exception in the Securities Exchange Act of 1934, narrowing the tailored exceptions under which banks can engage in securities activities. The provision regarding banks' ability to engage in securities extends banks' exemption from the definition of "broker" until January 15, 2007.