I am Michael Herndon, manager of government relations for the Certified Financial Planner Board of Standards, also known as the CFP Board.

It pleases me to provide this testimony on behalf of the CFP Board to the New York Assembly Standing Committee on Higher Education. We appreciate the Opportunity to discuss before the Committee the impact of pending legislation that amends laws governing the profession of Public Accountancy.

Founded in 1985, the CFP Board is a non-profit professional regulatory organization whose mission it is to benefit the public by fostering, professional standards in personal financial planning. Financial planning is the process of meeting life goals through the proper management of personal finances. Life goals can include buying a home, funding a child's education, passing along a family business, or planning for the years after retirement.

The CFP Board owns the CFP certification mark and the marks CFP(R) and Certified Financial Planning. The CFP Board licenses over 34,000 individuals who meet its rigorous certification standards to use its marks, with 2,500 in New York alone. The CFP Board also serves as an educational resource to federal and state lawmakers and regulators on personal financial planning issues.

The bill before the Committee today updates New York's accountancy law in light of changes in the practice of Public accountancy. This is a needed action as it will help consumers and the accounting profession. However, this bill contains provisions that will negatively impact consumers' ability to secure objective financial planning advice and the firms providing those Services to the public.

Section 1, Paragraph F of Assembly Bill 8789 includes in its definitions of the practice of public accountancy, providing "financial advisory services or preparing personal financial or investment plans or providing to clients products or services of others in implementation of personal financial or investment plans." This activity covers those services found in most any financial planning practice.

In Section 3, this bill requires financial planning firms that are not licensed CPA firms and offer financial planning services through a licensed CPA to provide clients with a statement indicating these services are being provided by a firm that "is not licensed or otherwise authorized by the state of New York to provide such services." This would happen when a financial planning firm that is not in the business of providing attest services and therefore not licensed to practice public accountancy, employs a CPA to provide financial planning services. As people in financial planning firms come from various backgrounds (e.g. financial analysis, accounting, law, etc.) a firm's partners/employees may have a variety of degrees and designations.

Requiring those firms which employ an individual who maintains a CPA license to make such a disclosure is likely obliging them to make a statement that is not true. A financial planning firm's functional business activities are regulated by the appropriate regulatory authority. To conduct any insurance sales, a firm Must obtain the proper licenses from the state insurance commission. For investment advice, the firm must properly register and obtain licenses with the state and/or federal securities agencies. If a firm is offering these services and has the proper registrations and/or licenses, this disclosure statement would be false and confusing.

This disclosure requirement could also unnecessarily frighten consumers. This bill may lead consumers to believe their financial planning professionals are not trustworthy or competent. This kind of consumer reaction could force financial planning firms to refuse to lure CPA's, discontinue working with those currently in their employ, or forgo making public the CPA's designation to their clients. Another scenario is that financial planning firms might have to meet the CPA ownership and licensing requirements simply to avoid providing the disclaimer language.

This bill may also be inconsistent with the United States Supreme Court's decision in Ibanez v. Florida Department of Business and Professional Regulation. In the case, the Court held that under the Federal Constitution's First Amendment, commercial speech that is not false, deceptive, or misleading can be restricted only if the state shows the restriction directly and materially advances a substantial state interest in a manner no more extensive than necessary to serve that interest. While this act does not prohibit the use of a bonafide designation, as did the Florida statute, the practical effect of the act will be that properly licensed CPAs will be discouraged from using their designation. As a result, consumers will be less informed which is clearly not in the public's interest. Such an effect, we believe is not in the spirit of this finding.

The CFP Board believes this bill could avoid the above concerns if the Committee were to consider amending the bills to conform to the Uniform Accountancy Act, also known as the UAA, sponsored by the National Association of State Boards of Accountancy and tile American Institute of Certified Public Accountants. Under the new UAA, CPA's are not required to offer services to the public, other than traditional attest services, through a CPA firm. While Assembly Bill 8789 follows this principal, it goes further by requiring tile disclosure statement. The UAA refrains from requiring any disclosure statements or defining the act of public accountancy. It instead relies on the concept that a CPA providing any professional service and using the CPA title in that service is bound to tile oversight of the state Board of Accountancy.

The CFP Board, the Committee, and the New York Board of Public Accountancy all strive to ensure consumer protection. As the amendments to the state of New York's accountancy laws move forward, we are available to provide any assistance you desire to meet that goal.

Thank you for the opportunity to testify before you today. I am able to answer any questions you may have.