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socrateaser, Attorney
Category: Business Law
Satisfied Customers: 39164
Experience:  Retired (mostly)
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Hello, I am a CPA offering bank reconciliation services to

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Hello, I am a CPA offering bank reconciliation services to real estate attorneys who use IOLTA accounts. I would like to offer my services at a base fee of $100 per month. However, in addition, I would like to offer my client a $10 discount for each client they successfully refer to me. So if one lawyer refers me 10 other clients, that lawyer will get his services for free. Do you see any problems with this structure - especially considering the fact I am a CPA bound by additional regulation? Thanks!
Submitted: 6 years ago.
Category: Business Law
Expert:  socrateaser replied 6 years ago.

I don't see any problem with the RI attorney rules of professional conduct, because you are offering referral fees for something other than legal services. However, the RI CPA ethics rules may preclude you from this activity, based upon the theory that you are sharing certified public accountant professional fees with a non-CPA attorney.

I can't find the CPA ethics rules online, so the best I can do here is to call the possibility to your attention, since I don't have the rules to review.

Hope this helps.

Customer: replied 6 years ago.

can you give me something that will support a more definitive answer?

Expert:  socrateaser replied 6 years ago.
Under R.G.L § 5-3.1-16(l)(3):

  • Any licensee, practice unit, or affiliated entity who accepts a referral fee for recommending or referring any service of a licensee to any person or entity or who pays a referral fee to obtain a client shall disclose the acceptance or payment to the client. The disclosure must be made, in writing, contemporaneously with or prior to the referral or recommendation.

The purpose of the statute is to ensure that the CPA practitioner affirmatively discloses to a client in unmistakable terms the nature and existence of any payment by the practitioner to any another person, which resulted in the client's referral to the practitioner.

Your proposed transaction would require that you provide any client who is referred by any lawyer a written disclosure of the fact that you paid or will pay a referral fee and its amount to the prospective client, at the time that client is referred to you. As a practical matter, this would require that the referring lawyer contact you at the time of the recommendation so that you can immediately make the written disclosure to the prospective client.

This may be a clumsy business model -- but, that's what you would have to do to satisfy your obligation under Rhode Island law.

Re the lawyer's responsibilities, R.G.L § 5-3.1-16(b) prohibits any unlicensed practitioner from providing "...attest or compilation services...." It is arguable that by providing referrals to a CPA in exchange for valuable consideration, the attorney thereby becomes the CPA's agent and thus an unlicensed practitioner who violates the statute.

This could pose a significant impediment, since your clients are lawyers, because some of them may come to the conclusion that the risk of being prosecuted is not worth the benefit. There is no bright-line answer here, for accountancy purposes. However, were the same transaction being performed by a nonlawyer for a lawyer, that would be deemed "running" or "capping," which is a prohibited activity. So, as I said, there are good reasons why your attorney-clients may balk at the potential risk in this proposed transaction.

Hope this helps.

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Customer: replied 6 years ago.