PCPS Update.

In place of our usual update of PCPS activities, Bill Balhoff, chair of the PCPS Executive Committee, suggested that we point out the significance of the Gramm-Leach-Bliley Financial Services Modernization Act of 1999 for our members in delivering services to their clients and alerting members to potential new service lines.

The Gramm-Leach-Bliley Act

Many of us have heard about this new federal law, but do we really know what it is or what it is all about? When it goes into effect on July 1, 2001, the GLB, as it is affectionately known, will overturn the Glass-Steagall Act, a Depression-era law that prevented financial institutions from cross-selling. In other words, banks will be able to sell insurance and insurance companies will be allowed to offer banking services.

How does this affect the accounting industry? The most important part of this act for our purposes is Title V, Privacy. This privacy provision outlines the requirements that the GLB imposes on "financial institutions."

As set forth in the privacy guidelines of the new law, financial institutions are--

1. Prohibited from disclosing nonpublic information without authorization.

2. Required to furnish a financial disclosure policy to prospective and current customers.

3. Forbidden to obtain nonpublic information under false premises.

In the second--and most important--point mentioned above, financial institutions must provide all current and prospective clients with a personal disclosure policy. As you have undoubtedly guessed, for the purpose of this law, the term financial institutions includes accountants, other tax-planning services, and investment advisers. The term also appears broad enough to cover an accountant who performs accounting services that result in providing client information to a bank.

If your firm falls under the financial institutions category, you should provide a prospective client with a "clear and conspicuous" nondisclosure policy either at the time the prospect signs an application for service or when the prospect otherwise signs an agreement for services. You must also provide a copy of the disclosure policy to your existing clients once a year. Keep in mind that you will not need to provide...