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.