Are there any legal issues that would prevent a CPA who owns his business from also serving as a stockbroker?

Question

I am not sure if there are any CPA's in business for themselves who also practice as CFP's by offering investment plans and life insurance. I am sure that people hold both certifications.

Does the SEC have any issues with having the same person who does your taxes sell you bonds as well? I do not see any conflict for the small business owner as far as I can tell.

Answer 1

There is no law against it.  You must make sure that you have obtained the necessary licenses, and disclose that you work as a CPA on the U-4.

The U-4 discloses any outside business activities, other than financial planning.  Keep in mind that it is also subject to approval dependent on which broker firm you are licensed with.

It is very common that CPA's also provide this type of service.  However, I disagree that this is a "good practice", mainly because I look at CPA's as historians, and Financial Planners as visionaries.

This could quite possibly open the door for potential litigation, because even though you are aware of someones tax information, this should not be a reason as to why you are recommending a specific investment.  It should be because of risk tolerance, Time value of money, and other financial reasons.  Not solely based upon tax benefits.

I've seen CPA's offering annuities within IRA's and what not.  Which is totally retarded, IMO.

Again, this is just based on my opinion.

Answer 2

With Sarbanes-Oxley, there are things a CPA can't do for a client if his firm is going to be the outside auditor, and the client is a publicly traded-firm subject to SEC regulation. But lawyers do tax returns and financial planning for the same client as well, and I've never never heard of anyone getting in trouble without their being more to the story - some fraud, etc. A good lawyer can see things from separate perspectives, and so can a good CPA. Whether CPAs are doing tax returns or financial planning, if they are looking out for their clients' best interests, and they know what they're doing, why not? They probably know their clients' financial picture better than anyone else.

Times are much leaner today than they were in the 1980s. Both law firms and CPA firms have had to branch out into other activities just to keep afloat. Today, tax returns are delegated to staff accountants. That isn't where the big money is.

A non-CPA tax firm preparer just starting out in a tax-return-preparation company makes about $8 an hour (I think they also get a small commission, but it's nothing to write home about). Later on the partner (hopefully) reviews his work, but the partner would be losing money if he prepared the returns himself.