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House votes not to increase administrative liability of accountants when client is an insured financial institution.

With strong support from the AICPA, the House of Representatives voted to delete a section in H.R. 1375 which was passed by the House Financial Services Committee that would have authorized the federal banking agencies to take administrative action, including imposing civil money penalties, on third-party providers of services (including accountants, attorneys and appraisers) to insured financial institutions for negligent action by the provider. The current administrative standard for third parties is knowing or reckless action. If enacted, this change would have placed third-party independent contractors on the same footing as financial institution insiders with respect to the banking agencies' administrative authority. While the banking agencies' extraordinary administrative powers over insured financial institutions, with their lessened due process rights, are justified by the need to safeguard the deposit insurance fund, subjecting non-insured entities to that administrative authority was recognized as counterproductive and unfair by Congress in 1989 when it established the current administrative liability standards.

The amendment to delete the section was offered by Rep. Spencer Bachus (R-Ala.) after Wray Pearce, CPA, explained the impact that the section would have on third-party providers.
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Title Annotation:legislation
Publication:CPA Letter
Article Type:Brief Article
Geographic Code:1USA
Date:May 1, 2004
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