January 2000

Regulatory and Professional Groups Examine Multidisciplinary Practices

Society, Bar, ISB Studies Under Way

By Ann E. Spaulding

Multidisciplinary practices (MDPs)--where CPAs and lawyers partner or share fees--continue to attract attention from both professions, and related studies by the NYSSCPA, American Bar Association (ABA), and Independence Standards Board (ISB) are now under way.

Currently, CPAs and attorneys in the United States cannot partner or share fees with anyone not licensed in their respective professions because of various state laws and bar association rules. In many other countries, however, the rules differ, and in recent years international audit firms have developed large networks of affiliated law firms in Europe, South America, Australia, and other parts of the world.

Bar Commission Provides Update

On December 15, the ABA's Commission on Multidisciplinary Practice issued Updated Background and Informational Report and Request for Comments. The ABA formed the commission in August 1998 to assess the implications of MDPs and evaluate whether the current ABA Model Code ban on fee sharing between lawyers and nonlawyers should be retained. In June 1999, the commission recommended that lawyers be permitted to share legal fees with nonlawyers and deliver legal services through MDPs, but at the ABA's annual meeting last August, its house of delegates approved a resolution barring MDPs unless further study shows they can be accomplished without harming clients or compromising lawyers' independence.

The December report responds to criticism of the commission's original findings, analyzes the different types of MDP affiliations, and requests input from interested parties. It also provides an overview of developments since the August resolution. For example, in August, KPMG LLP announced a strategic alliance with certain law firms that are members of a network of state and local tax lawyers. In October, a law firm merged its money management practice with an investment firm, creating the first partnership between a law firm and an asset management firm in the United States. In November, Ernst & Young LLP launched a law firm bearing its name--McKee Nelson Ernst & Young, a Washington, D.C., firm with five attorneys from Atlanta's King & Spalding.

ISB Poses Questions

Last month, the Independence Standards Board issued a discussion memorandum (DM 99-4 Legal Services) that poses the question, "Under what circumstances, if any, can an audit firm or its affiliates provide legal services for SEC audit clients without impairing independence?"

The discussion memorandum describes legal services as "those services that can only be provided by someone licensed to practice law." The proposal groups legal services in three categories: representing clients before courts and other adjudicatory bodies; preparing legal documents such as contracts, wills, and trust instruments; and providing legal advice to clients on the application of laws and regulations to particular facts.

The discussion memorandum contains eight questions and describes the threats and safeguards to independence and transition issues. See http://www.isb@cpaindependence.org for a copy. Comments are due February 29.

Society Team Explores State Issues

Last November, NYSSCPA President Alan E. Weiner appointed a team of CPAs and attorneys to study MDPs and provide a recommendation to Society leadership as to whether or not to the NYSSCPA should support allowing MDPs in New York state. The team has met four times, studied volumes of material, consulted outside specialists on the subject, and deliberated many hours. The team invited AICPA Counsel Richard Miller and the Society's outside legal counsel Dan Goldwasser of Vedder, Price, Kaufman & Kammolz to share their insights on the issue at the group's January 4 meeting.

Responding to a team member's comment that MDPs appear inevitable, Miller said, "I would hate to see MDPs permitted solely because relationships like MDPs are happening and, therefore, should be legitimized. I would like to see a more studied and informed reason to allow them, such as they help in the delivery of services, they provide another service option, and they serve the public interest while maintaining ethics."

The Society team is in the process of preparing a report to present to the NYSSCPA Executive Committee in February. Team members are Marshall C. Asche, Arthur Hoffman, Thomas C. Moore, Avery E. Neumark, Francis T. Nusspickel, Jeffrey L. Saltzer, and Frank V. Trotti.

Watch http://www.nysscpa.org and The Trusted Professional for updates on multidisciplinary practices and the related activities of the ABA, ISB, NYSSCPA, and other groups studying the issue. *