August 2000

The NYSSCPA offers assistance with members’ questions on ethics and regulation. Inquiries address a variety of topics such as:

Alliance with Brokerage Firm

A well-known brokerage firm has asked my firm to enter into an arrangement whereby we would refer our clients to the firm and receive a percentage of the commission its brokers receive from our clients’ business. The clients would not pay a higher commission fee than they would if we were not involved. Can we do this?

Your firm may enter into this arrangement provided that

1) the clients involved are not attest clients,
2) the clients are notified of your commission in writing, and
3) you have determined that the referral is appropriate for the clients.

Participation in a Health and Welfare Plan of Client

A member participates in or receives benefits from a health and welfare plan sponsored by a client. Would the independence of the member or member’s firm be considered to be impaired with respect to the client sponsor of the plan?

Participation of the member in a plan sponsored by a client would impair the independence of the member or member’s firm with respect to the client sponsor and the plan. However, if the member’s participation in the plan, or benefits received thereunder, arises as a result of the permitted employment of the member’s spouse or cohabitant in accordance with Interpretation 101-9, independence would not be impaired provided that the plan is normally offered to all employees in equivalent employment positions.

Participation of Member or Spouse in Retirement, Savings, or Similar Plan Sponsored by or Investing in a Client

A member participates in a retirement, savings, or similar plan (Benefit Plan) that is either sponsored by a client (Sponsor Client) or invests in the Sponsor Client or in another client of the member (Other Client). Would the independence of the member or member’s firm be considered to be impaired with respect to the Sponsor Client, the Other Client, or the Benefit Plan?

Participation of the member in a Benefit Plan that is sponsored by a client or that invests in a client would impair independence with respect to the Sponsor Client, the Other Client, and the Benefit Plan. However, if the member’s participation in the Benefit Plan arises as the result of the permitted employment of the member’s spouse or cohabitant in accordance with Interpretation 101-9, independence would not be impaired if all of the following conditions are met:

1. The Benefit Plan is normally offered to all employees in equivalent employment positions.
2. If the Benefit Plan provides for an investment option by the spouse, the investment option selected by the spouse is not in the Sponsor Client or the Other Client.
3. If no other investment option is available and the right of possession exists, the investment is promptly withdrawn and disposed of. The right of possession is not considered to exist if a penalty significant to the investment is imposed upon withdrawal.
4. If the right of possession does not exist, the spouse’s investment through the Benefit Plan in the Sponsor Client or the Other Client is considered an indirect financial interest and is not material to the member’s net worth.