First the scenario:
Tom Martin is a single guy with a net worth of about 5 million. His CPA is Beth. Beth is familiar with Tom’s holdings and is aware of Tom’s net worth. Beth has a friend named Sue who is also single. Beth says to Sue “I have a client, Tom Martin, who you should really get to know. I think you two would hit it off. By the way, he is loaded (wink, wink).”
Now the questions:
Has Beth violated any sort of CPA/client privilege?
If so, could her license (if there is a license) be revoked?
Would it have made any difference if Beth had told Sue specifically how much money Tom had?
Although there are no real damages, would Tom have grounds for a lawsuit?
You do need a license to be a CPA. The license is (more or less) what makes you a Certified PA.
A little bit of looking around shows that many (most? all?) CPAs are required to regularly take ethics classes and many state associates require them to be bound by ethics codes. Amongst those codes are a handful about disclosure of information without client consent.
Now, I only read the title (of the code) and didn’t delve into it, but I’d assume that can be carried to the point of a CPA telling their friend about their loaded client.
This scenario would be an issue since the CPA specifically said he’s a client. Can’t do that. If she left that out, and didn’t mention he’s loaded, just (wink wink), it would be different. But even then, I’d imagine she would still get in trouble if anyone ever noticed a pattern of her setting friends up with wealthy clients.
As a licensed Real Estate Broker, I have similar ethical restraints, and I agree with the comments so far.
As to what repercussions there might be, that might be dependent on what can be proved and unless you videorecorded the twin winks, could come down to he said, she said.
As far as a lawsuit, a complaint of this sort (at least in my state) is initially handled in a non-judicial manner. If someone wanted to complain about my actions, they could go to the principal broker in my office or firm, then to the local Board of Realtors, then to the state department that issues licenses. Each layer has their own way of handling complaints – at the lowest levels, you get sent in front of a panel of your peers (other agents). The state has the power to discipline you by imposing a fine, suspension or revocation of license. It’s unlikely such a complaint would come up in a court; it’s just too risky and expensive for all parties.
In my 20 year career as a real estate broker, I have had two complaints. One resulted in my boss asking why this dude was so upset; we talked, and the matter was dropped. The other was a handwritten complaint to the state’s licensing department, which of course required a formal action. I filed a written response; my boss filed one, too; and the state’s examiner (not even a mediator or judge, just a glorified clerk) decided that the complainant was a nutcase and the complaint had no merit, so he went no further. I don’t think any of this was even made public.
1.700.001 Confidential Client Information Rule
.01 A member in public practice shall not disclose any confidential client information without the specific consent of the client.
The code goes on to clarify a few things, but none of them suggest that you can tell a friend how much a client is making.
This is from the American Institute of CPA’s Code of Professional Conduct.
I’m not familiar with how everything is codifed there, so I’m not sure where to go looking for what happens if you break one of their rules. Right off the bat, it at least appears to be different depending on what state you’re in.
In the hypothetical in the OP, it’s likely a violation of professional standards of ethics. It’s unlikely for a license revocation based on this individual matter. It’s more unfavorable for the license holder if they disclose more specific information. if the information is already publicly available, like the client is Warren Buffet and the license holder is hinting that he is financially well off - I’d say that’s not disclosing confidential info. But specific dollar amounts likely would be.
As for a lawsuit - it depends on the language of the engagement agreement that the license holder and the client have. Non disclosure is typical in engagement agreements and therefore the remedies could be along the lines of breach of contract, etc.
I’d say that even “he’s loaded” would be confidential information. It might be public knowledge that he drives a Porsche and lives in a large beachfront house, but those don’t necessarily indicate wealth: He might have gone deeply into debt to buy those, and only his accountant knows whether he’ll ever be able to pay off the debts.
It’s not the same, but it is a good story…I have a good friend of mine who was married for a few years, it didn’t work out for whatever reason…he already had a house, so when they married, he put her on the mortgage and she did help pay for the few years they were together…after the separation period (this was back in the archaic NY state divorce law days), he went to re-finance the house to pay her and get her off the mortgage - my buddy’s hobby is investment and savings, and he had figured it was easier to keep writing off mortgage interest than divesting some of his investments…the lady handling his mortgage refi went through his financial records, was impressed with his holdings and made some off-handed comment as in, “Geez, I’m divorced, too, I should ask YOU out”, he looked at her and said, “OK”. They’ve been married 20 years…maybe it was borderline unethical that she used her job to find husband number two, but frankly, it takes two to tango, and it’s not like she would have handled his refi any differently if he had laughed at the comment and ignored it…he was all for it, so no harm done…
I’m going to nitpick a little here. A license does not make you a CPA, a certificate, issued by a state board of accountancy does. A license allows you to practice as a CPA.
In many states, the two are issued together. Other states have a two tier system. As an example, Connecticut is such a state. I am certified (I have a nice certificate from the Connecticut State Board of Accountancy saying I am a CPA; it has no expiration date), but I am not currently licensed (although I have been in the past). Being merely certified means I can use the CPA designation in limited, generally non-work circumstances. I received the certificate upon applying for it after passing the CPA exam. In order to be licensed I would need to document a certain amount of accounting work experience, take and document the prescribed hours of CPE, and pay to the state a licensing fee.
Yes, in the US anyway, CPA stands for Certified Public Accountant. I believe the UK uses the same abbreviation, but the full title is Chartered Public Accountant.
And I am a “practicing accountant,” I just work as what could be termed private accounting, but is more usually called management accounting. I work for a particular business doing their accounting internally.
