BILL ANALYSIS
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|Hearing Date:April 17, 2006 |Bill No:SB |
| |1550 |
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SENATE COMMITTEE ON BUSINESS, PROFESSIONS AND ECONOMIC
DEVELOPMENT
Senator Liz Figueroa, Chair
Bill No: SB 1550Author: Figueroa
As Introduced: February 23, 2006 Fiscal:Yes
SUBJECT: Professional Fiduciaries Act.
SUMMARY: Establishes the licensing and regulation of
"professional fiduciaries," as defined, and creates the
seven-member Board of Professional Fiduciaries within the
Department of Consumer Affairs.
Existing law:
1)Provides for the licensing and regulation of various
professions and vocations by various state agencies
including the Department of Consumer Affairs (DCA) and by
various boards and bureaus within the DCA.
2)Provides for the appointment of conservators, guardians,
trustees, personal representatives, and agents with
durable powers of attorney for finances by civil courts
pursuant to various provisions of law, including the
California Probate Code.
3)Requires private professional conservators and private
professional guardians to register annually with the
court clerk of each county in which the conservator or
guardian provides services. The registration requires
the person to submit specified information including
education and background information.
4)Establishes, under the Department of Justice (DOJ) a
Statewide Registry for the purpose of overseeing
conservators, guardians and trustees, and the
coordination of complaint information among courts.
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Specified conservators, guardians or trustees must
register with the Registry and re-register every three
years thereafter and provide specified information
regarding educational background and professional
experience.
5)Requires the Judicial Council to develop qualifications
and educational requirements for private professional
conservators and guardians, and requires private
professional conservators and guardians to meet the
educational requirements established by the Judicial
Council prior to any appointment or registering.
6)Does not provide for the licensing or regulation of
"professional fiduciaries."
This bill:
1)Makes various legislative findings regarding the
inadequate regulation of professional fiduciaries.
2)Establishes the Professional Fiduciaries Act (Act) to
license and regulate "professional fiduciaries."
3)Defines a "professional fiduciary" as (a) a person who
acts as a conservator, guardian, trustee, personal
representative, agent under a durable power of attorney
for finances, for two or more persons not related to the
professional fiduciary or each other, as specified or (b)
a person employed by a public agency or financial
institution acting in one of those capacities who makes
substantive fiduciary decisions or supervises persons who
make those decisions.
4)Establishes a Board of Professional Fiduciaries (Board)
in the DCA.
Board Membership and Duties
5)Establishes a 7-member Board consisting of:
a) 3 licensee members (Governor appointees, approved
by the Senate)
b) 4 public members (2 Senate Rules, 2 Speaker
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appointees).
6)Provides that members are appointed to four year terms,
serve at the pleasure of the appointing authority, and
that no person shall serve for more than two consecutive
terms.
7)Repeals (sunsets) the Board's authorizing provisions on
July 1, 2011, and requires that upon its repeal the
responsibilities and jurisdiction of the Board shall be
transferred to DOJ.
8)Requires the Board to appoint an executive officer, and
employ other civil service employees as may be necessary
to carry out the Act, and provides that the duty of
administering and enforcing the Act is vested in the
Board.
9)Requires that protection of the public shall be the
highest priority for the Board in exercising its
regulatory functions.
10) Provides that the Board may adopt regulations pursuant
to the Administrative Procedures Act.
11) Establishes specific duties and
responsibilities for the Board including:
a) Administer the licensing and regulatory program
under the Act
b) Approve classes qualifying for prelicense education
and annual continuing education.
c) Arrange for the preparation and administration of
licensing examinations
d) Adopt a Professional Fiduciaries' Code of Ethics.
The Code of Ethics shall be provided to applicants,
licensees and the public, as specified, and may be
amended by the Board as necessary.
Licensing and Enforcement:
12) Prohibits any person, except a person
licensed as an attorney, from acting or holding himself
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or herself out as a professional fiduciary unless he or
she is licensed under the Act.
13) Requires applicants for a professional fiduciary
license to meet specified requirements, including:
a) Submit to a criminal background check
b) Complete 30 hours of specified prelicensing
education
c) Pass the Board's licensing examination. However
persons registered with DOJ's Statewide Registry on
January 1, 2007, are not required to pass the
examination, but must complete 30 hours of
prelicensing education courses, by July 1, 2007
d) Meet any of the following: (1) hold a
baccalaureate degree; (2) hold an associate degree and
have five years of fiduciary experience, as specified;
(3) have been registered with the Statewide Registry
prior to January 1, 2007; (4) have three years
experience, prior to January 1, 2007, with substantive
fiduciary responsibilities working for a public agency
or financial institution, as specified
e) Agree to adhere to the Professional Fiduciaries'
Code of Ethics
f) Consent to a credit check by the Board
g) File a $100,000 bond with the Board, as specified.
14) Requires licensees to annually file
specified information with the Board, and requires the
Board to maintain the information in the licensee's file,
and make the information available to the court. The
information includes:
a) Names of conservatees or wards and the trusts
administered by the licensee.
b) Dollar value of all assets currently under the
licensee's supervision.
c) Addresses and telephone numbers for the licensee's
place of business and place of residence.
d) Whether the licensee has ever been removed for
cause or resigned as conservator, guardian, or
trustee, and the circumstances, case names, court
locations, and case numbers associated with the
removal or resignation.
e) Case names, court locations, and case numbers of
all closed cases for which the licensee served as
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conservator, guardian, or trustee.
f) Whether the licensee has ever filed for bankruptcy
or held a financial interest in a business that filed
for bankruptcy.
15) Provides that the information in 14,
above, shall be confidential, except that the information
in paragraphs b, d and f shall be available to the public
and available on the Board's Internet site.
16) Requires the Board to review all
license applications, authorizes the Board to investigate
an applicant's qualifications, and establishes criteria
for license denial.
17) Authorizes individuals or entities
that propose to offer prelicensing education or
continuing education programs to apply for approval from
the Board.
18) Provides that a license may be renewed by paying the
renewal fee and submitting proof of completing 30 hours
of annual continuing education, as specified.
19) Requires, as a condition prior to issuing, reinstating,
reactivating, renewing, or maintenance of a license that,
the licensee shall file a $100,000 bond with the Board.
a) The bond shall be for the benefit of any person
damaged by any fraud, misstatement, misrepresentation,
unlawful act or omission, or failure to provide the
licensed services, by the licensee or any employee,
agent or representative, as specified.
b) A licensee is prohibited from any licensed activity
without a valid bond, and when a bond is cancelled or
reduced the licensee shall cease to act as a
professional fiduciary until the bond has been
reinstated, as specified.
c) Specifies that payment from the bond shall not be
considered the sole remedy for action taken against
the licensee.
20) Requires the Board to investigate complaints, and
authorizes the Board to take disciplinary action against
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violations, including: citation and fines, license
suspension, probation or revocation.
21) Establishes the Professional Fiduciary Fund (Fund) in
the State Treasury, provides that revenue collected by
the Board shall be deposited into the Fund, and provides
that the Fund shall be the successor to the funds
deposited under the Statewide Registry.
22) Provides for license fees and renewal fees to be set by
the Board, and provides that the examination and
reexamination fee shall be set by the Board at the amount
necessary to recover the actual cost to develop and
administer the examination.
23)Prohibits a superior court from appointing a person to
carry out the duties of a professional fiduciary unless
that person is licensed by the Board.
24)Requires each private professional conservator, guardian
or trustee who annually files specified information with
a court clerk to also file evidence that he or she is a
professional fiduciary licensed by the Board.
FISCAL EFFECT: Unknown. This bill has been keyed "fiscal"
by Legislative Counsel.
COMMENTS:
1.Purpose. This bill is sponsored by the Professional
Fiduciary Association of California (PFAC) in response to
recent allegations of serious abuses in California's
system of conservators, guardians, and trustees. In
order to better address the apparent abuses, the bill
proposes to establish state licensing and regulation of
persons acting as professional fiduciaries. PFAC
believes that the bill addresses a current lack of needed
regulation by mandating prelicensing education and
examination in the functions and duties of a fiduciary
and relevant continuing education as a condition of
license renewal.
2.Background. Conservators serve one of the most
vulnerable and rapidly growing segments of the state's
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population; the elderly. Professional fiduciaries must
make a broad range of complex decisions that seriously
affect conservatees, including where he or she lives,
home care arrangements, major medical decisions, and
control of all of the conservatee's financial matters
from bank accounts to investment and tax decisions. The
conservatee or their family or friends may be unable to
evaluate the competency or honesty of the conservator,
the quality of the care received, or articulate concerns
regarding his or her care.
The legal process for establishing a conservatorship is
begun by submitting a petition to the county probate
court to appoint a conservator. An unscrupulous
conservator may go as far as to falsely tell the judge
that the elder has dementia or other mental illnesses in
order to gain control.
Probate courts face enormous backlogs of cases and are
hard pressed to resolve the caseload issues. This,
coupled with the shortage of trained staff to carry out
oversight and investigative requirements, can lead judges
to rubber stamp petitions without adequate review and
input from the individual who is about to lose control of
their life.
Courts also may grant emergency appointments on the same
day a professional conservator makes the request.
Originally, emergency appointments were meant to assist
elders who are in imminent danger. However, emergency
appointments are now a common method of gaining control
over an elder. Based on a conservator's statement that
the elder is unable to attend the probate court hearing,
judges are bypassing assessments and safeguards while
waiving requirements that the elder be present during the
court hearing.
Once a conservatorship has been placed over an
individual, the court is supposed to monitor a
conservator's conduct, scrutinize their financial reports
and ensure that the elder is receiving proper care,
including disciplining or removing a conservator who
misuses their authority. Yet, due to resource
limitations, court oversight may be minimal and
superficial. As a result, courts may be unable to
identify incompetence, neglect, fraud and outright theft.
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While remedies to some of the problems outlined above are
being addressed by other proposals before the
Legislature, SB 1550 is intended to bring greater
accountability and oversight by licensing and regulating
professional fiduciaries who act as conservators,
guardians and trustees.
3.Los Angeles Times Articles
A November 2005 series of articles in the Los Angeles
Times raised serious issues regarding inequities and
abuses in conservatorships and deficiencies in the
oversight of conservators in California. The articles
raised issues with private professional conservators,
public conservators, and with court oversight of
conservatorships.
The Los Angeles Times found that in Southern California
between 1997 and 2003 there were 1,160 emergency
appointments. Of those, 56 percent were granted without
notice to the elder; 64 percent were granted before the
elder received legal counsel; and, 92 percent were
granted before the court's own investigation had been
completed.
4.Sunrise Issue - Joint Committee Recommendations
In December of 2005, the Joint Committee on Boards
Commissions and Consumer Protection (Joint Committee)
held sunrise hearings regarding licensing and regulating
conservators. That hearing sought input from government
agencies, professional organizations, consumer groups,
individual consumers, family members and other affected
parties about problems which exist within California's
conservatorship system and solutions to protect those
vulnerable citizens under conservatorship.
In recent years, legislation has been enacted in response
to reports of widespread financial fraud and abuse of
elderly and dependent adults by their conservators or
guardians. However, problems with conservators and
guardians continue to persist. In the hearing, testimony
revealed numerous deficiencies and shortcomings in the
current oversight and approach to conservatorships.
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While it was noted that a number of the issues and
solutions are outside the purview of the Joint Committee,
clear evidence was presented to demonstrate the need for
greater regulation of professional conservators. As a
result of that hearing, SB 1550 (Figueroa) was drafted.
On April 5, 2006, the Joint Committee unanimously
approved the recommendation to proceed with the licensing
proposal in SB 1550, stating:
It appears that there is sufficient consumer
protection justification for this proposal and
that this proposal meets the threshold for
licensure (the potential for serious injury or
death, or severe financial harm). While the
issues extend well beyond licensing professional
conservators, to include Probate Court oversight,
and a myriad of conservatorship practices, a
significant part is establishing a licensing and
regulatory system for professional conservators.
Ultimate solutions for California's conservatorship
system will, in addition to SB 1550, likely include
Probate Court oversight and resources, restrictions,
transparency and consistency in the operations of
conservators, and appropriate limitations on granting
emergency conservatorships. These issues are the focus
of other proposals during the current legislative
Session.
5.Joint Hearing of the Assembly and Senate Judiciary
Committees.
In December 2005, the Assembly and Senate Judiciary
Committees held a joint informational hearing in response
issues raised by the Los Angeles Times articles. All
participants at that joint hearing, without exception,
agreed that the system for conservatorships in California
is significantly underperforming and, as a result,
harming conservatees and their loved ones. It is
believed that these systemic deficiencies are only likely
to increase substantially as baby boomers age.
6.Judicial Council Probate Conservatorship Task Force.
In January of this year, the California Judicial Council
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established a 16-member Probate Conservatorship Task
Force (Task Force), to make recommendations to improve
the management of probate conservatorship cases in
California courts.
The Task Force is intended to review the laws governing
conservatorships; evaluate the educational and training
programs for probate conservatorships; assess the levels
of court staffing and resources; make recommendations to
the Judicial Council for reforms and improvements to the
overall system of conservatorship administration; and
establish model guidelines for probate court practices
and procedures in the handling of conservatorship cases.
In March, the Task Force initiated its review by holding
public hearings in Los Angeles and San Francisco.
7.Related Legislation.
Current Legislation:
SB 1116 (Scott) requires in conservatorship cases a
presumption that the least restrictive appropriate
setting for the conservatee is the personal residence of
that conservatee; and establishes specific requirements
in order for a conservator to sell any real property of
the conservatee. The bill is awaiting hearing in the
Senate Judiciary Committee.
SB 1716 (Bowen) requires a court to review each
conservatorship within one year after the appointment of
the conservator and at least biennially thereafter;
requires the court investigator's evaluation to include
the appropriateness of the placement, quality of care,
and financial condition of the conservatee. The bill is
awaiting hearing in the Senate Judiciary Committee.
AB 1363 (Jones) also licenses and regulates conservators
and guardians under DCA; provides for greater court
oversight over conservatorships; establishes statewide
standards for conservators; requires education and
training for those involved in the conservatorship
process; and establishes an ombudsman office in the
Department of Aging, That bill passed the Assembly and
has been referred to this Committee.
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Previous Legislation:
AB 4015 (Connelly, 1988) sought to establish a licensing
and regulatory scheme for private professional
conservators under the DCA. Vetoed by Governor
Deukmejian.
SB 1823 (Marks, 1996), as introduced, sought to establish
new regulations governing court-appointed conservators;
as amended, sought to establish certain professional
standards for conservators. Vetoed by Governor Wilson.
AB 2020 (Burton, 1996), as introduced, sought to a
establish Statewide Registry for professional guardians
and conservators (similar to AB 925 below); as amended,
sought to revise existing local registration
requirements. Died on Assembly floor.
AB 925 (Hertzberg, Chapter 409, Statutes of 1999),
sponsored by PFAC, established the current Statewide
Registry of Private Conservators, Guardians and Trustees,
maintained by the Department of Justice.
SB 1881 (O'Connell, 2000), also sponsored by PFAC, as
introduced, would have licensed and regulated
professional fiduciaries, including conservators,
guardians and trustees. As amended, it sought to require
DCA to conduct a study of the potential licensing and
regulation of professional fiduciaries. Vetoed by
Governor Davis.
AB 2612 (Liu, 2004) stated Legislative intent to create
certification and education requirements for professional
conservators, as defined. Died in Assembly without
hearing.
8.Arguments in Support.
Proponents state that some of the most serious abuses in
the current conservatorship system include the
squandering of a conservatee's assets by secretly
activating a power of attorney and selling the home and
other assets without court approval. Proponents believe
that the bill will increase the accountability of those
who are charged with the care of California's most
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vulnerable residents.
9.Support if Amended.
The Judicial Council of California (Council) has taken a
support if amended position on the bill, and would be in
support if the bill were amended to delete the provisions
of existing law governing the local registration system
and the Statewide Registry, once the new licensure scheme
becomes fully operational. The Council believes that the
new licensure system would obviate the need to maintain
the current dual registration system, which could then be
repealed since those functions would be duplicative and
no longer necessary.
The Council does however state that it supports the bill
because more stringent regulation and oversight of
professional fiduciaries will help assure the courts that
those licensees who are eligible for appointment as
guardians and conservators meet minimum educational,
qualification and ethical standards.
The California Bankers Association (CBA) has also taken a
support if amended position, requesting that the bill be
amended to exempt financial institutions. CBA argues
that this exemption would be consistent with existing law
exemptions for financial institutions from the current
Statewide Registry, and other provisions under the
Probate Code. State and federally-chartered financial
institutions that are approved to carry out trust and
fiduciary operations are licensed, regulated and
routinely examined in relation to their fiduciary
activities by governmental authorities as well as
internal auditors. CBA states that without this
exemption, the bill would impose a burdensome dual
licensing arrangement that would create significant
conflict between state and federal regulatory agencies.
10. Oppose Unless Amended.
The Trusts and Estates Law Section of the State Bar of
California has taken an oppose unless amended position,
arguing that a fiduciary's license may be forfeited in
the event a fiduciary is ever removed by the court as a
result of a mistake or negligent act. The Trust and
Estates Law Section argues that, unless amended, the bill
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unnecessarily intrudes into the area of trusts and
estates which are private in nature. They further argue
that the bill should be strictly limited to conservators
and guardians, stating that conservatorships and
guardianships are subject to court supervision, but
expanding the "Professional Fiduciary" definition to
trustee, agents under a durable power of attorney for
health care, or agents under a durable power of attorney
for finances will result in an unnecessary intrusion into
the trusts and estates area which are traditionally
private in nature. It is further argued that SB 1550 is
too broad in its definition of a private fiduciary and
should be limited in scope to issues regarding
conservatorships and guardianships only, and not public
agencies or financial institutions.
11. Arguments in Opposition.
The California State Association of Public Administrators,
Public Guardians, and Public Conservators believes the
bill places redundant and unnecessary requirements on
public conservators and public guardians. They argue
that while they do not object to the overall intent of SB
1550, they oppose the definition of "professional
fiduciary" which includes persons employed by a public
agency. The Public Conservators and Public Guardians
argue that most of the policies in the bill intended to
protect the public already apply to public conservators
and public guardians because they are county government
employees working as public servants. They argue that
they work under the direct oversight of a county
department, which creates a system of checks and balances
where multiple people are ultimately responsible for
overseeing a person's care and finances.
12. Proposed Author's Amendments.
The Author is proposing amendments which seek to address
some of the concerns above. The Author's amendments
will, among other things, (1) remove the public
conservators and guardians from the licensure
requirement; (2) conform the requirement for trustees to
become licensed to those trustees currently required to
register with DOJ's Statewide Registry; and (3) add
co-authors.
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NOTE: Double-referral to Judiciary Committee
SUPPORT AND OPPOSITION:
Support :
Professional Fiduciary Association of California (PFAC)
California Association of Homes and Services for the Aging
Support if Amended :
Judicial Council of California
California Bankers Association
Oppose Unless Amended :
Trusts and Estates Law Section of the State Bar of
California
Opposition :
California State Association of Public Administrators,
Public Guardians, and Public Conservators
Consultant: G. V. Ayers