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Tuesday, Aug 9, 2022
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Out-of-State CPAs Hung Up on Registering Online

The accounting industry is promoting legislation to make it easier for out-of-state accountants to provide temporary services to California clients.

But opponents scored a victory last week when an industry-sponsored Assembly bill was left stranded in committee before legislators could vote on the measure.

The bill would have eliminated an existing rule that out-of-state certified public accountants must submit an online form to register with the California Board of Accountancy before practicing even temporarily in the state.

The online form, which must be submitted annually at a cost of $50 to $100, requires accountants to attest they are licensed elsewhere, have no criminal convictions and otherwise meet the same standards as California licensed accountants. The forms are subject to audit at anytime.

However, industry supporters argue that as business finance has become more complicated, accountants need fast access to specialists in order to resolve complex problems for clients. Since most CPAs are governed by the same testing, education and experience criteria, current law imposes an unnecessary barrier to specialists who practice in other states.

Ken Bishop, senior vice president of the National Association of State Boards of Accountancy, also contended that the online form does little to weed out unqualified accountants.

“If you are not a CPA or not eligible, you are not going to fill out the form anyway,” said Bishop.

Twenty states have already passed similar measures, while legislation has been introduced in 14 others, Bishop said.

But legislative opponents said removing the online form would expose California businesses and families to fraud and malpractice, arguing the industry is merely trying to eliminate regulatory oversight intended to protect state residents.

“It elevates the convenience of CPAs over the ability of states to protect citizens against a troubled profession that is not regulated nationally,” said Ed Howard, senior counsel of the Center for Public Interest Law in Sacramento.

Federal regulation would appear to offer an obvious remedy to the problem, but industry associations are opposed to federal oversight.

“We need regulation by states that is consistent, not national regulation,” said Dave Swartz, former president of the California Board of Accountancy and a partner with Los Angeles accounting firm Good Swartz Brown & Berns LLP.


Management Watch

Despite rapid growth in its loan portfolio, Promerica Bank ended its first full year of operations under regulators’ scrutiny and promising to tighten up its management oversight.

The Los Angeles bank expects to enter into a Memorandum of Understanding with the Federal Deposit Insurance Corp. and California Department of Financial Institutions. The MOU will address unanticipated management vacancies, revise its strategic plan, improve monitoring of loans and address certain “compliance deficiencies,” among other issues.

The bank’s chief credit officer has been sidelined by illness, while the chief executive has announced he will step down this year to spend more time with family.

“If a regulator issues a memorandum, it is not a public event, but we acted proactively to make the information available to the investor community and our clients,” said Promerica Chairwoman Maria Contreras Sweet.

Some details of the memorandum were announced March 28 when the bank released results for its first full year of operations. The bank is listed on the OTC Bulletin Board but is very thinly traded. As of April 9, shares last traded March 27, closing at $5.50.

Last year, total loans jumped to $37.3 million from $2.3 million as assets nearly doubled to $56.7 million from $28 million. The bank reported a net loss of $2.9 million, but reported no loan losses.

Launched in November 2006, Promerica Bank is one of the first Los Angeles banks in 35 years to be owned by and focus on Latinos. Contreras Sweet served as California secretary of business, transportation and housing, and oversaw the state Department of Financial Institutions before leaving office in 2003.


Bank Fusion

In the latest consolidation move in the local banking industry, U.S. Bancorp agreed in late March to acquire Mellon 1st Business Bank for undisclosed terms.

The all-cash deal is expected to close in June and will increase the L.A. market share of U.S. Bank, the operating subsidiary of U.S. Bancorp, to 1.5 percent. The bank’s local balance sheet will swell by $3.4 billion in assets and $2.7 billion in deposits.

“This acquisition complements U.S. Bank’s current middle-market lending efforts in Southern California and will more than double our market share in the Los Angeles market,” said Joseph Otting, vice chairman of commercial banking for U.S. Bank.

Although Mellon currently has a greater share of deposits in the L.A. market, U.S. Bank has a much larger retail footprint, with 50 branch locations compared with Mellon, which only has four offices in the county. The sixth largest commercial bank in the nation with $238 billion in assets, U.S. Bank has grown in Southern California primarily through acquisitions. Otting is relocating from U.S. Bancorp’s headquarters in Minneapolis to Los Angeles.


Staff reporter Mitch Deacon can be reached at

mdeacon@labusinessjournal.com

or at (323) 549-5225, ext. 225.

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