Chapter 19
Ethical Responsibilities
Ethics, Law, and Code of Ethics
 Ethics
 Law
 Code of ethics
18-2
CFP Board
 CFP Board’s Disciplinary and Ethics Commission
 CFP Board’s Board of Directors
18-3
Standards of Professional Conduct
 Code of Ethics and Professional
Responsibility
 Rules of Conduct
 Financial Planning Practice Standards
 Disciplinary Rules and Procedures
 Candidate Fitness Standards
18-4
Application
CFP® certificant
 Individual who is currently certified by CFP
Board.
CFP® registrant
 Individual who is not currently certified but
who was certified by CFP Board in the
past and has an entitlement to potentially
use the CFP® marks.
18-5
Note on Civil Liability
Standards of Professional Conduct do
not define standards of professional
conduct of CFP® certificants for purposes
of civil liability.
 A violation could likely result in civil liability
for malpractice or professional negligence
if the client sustains damages resulting
from the CFP® certificant’s action or
inaction.
18-6
Principle 1: Integrity
 Provide professional services with integrity
• Integrity demands honesty and candor
which must not be subordinated to
personal gain and advantage.
18-7
Principle 2: Objectivity
 Provide professional services objectively
• Requires honesty and impartiality.
 Certificants should protect the integrity of
their work, maintain objectivity, and avoid
subordination of their judgment.
18-8
Principle 3: Competence
 Maintain the knowledge and skill
necessary to provide professional services
competently
 Means attaining and maintaining an
adequate level of knowledge and skill, and
application of that knowledge and skill in
providing services to clients
18-9
Principle 4: Fairness
 Be fair and reasonable in all professional
relationships.
 Disclose conflicts of interest.
18-10
Principle 5: Confidentiality
 Protect the confidentiality of all client
information
 Ensure information is accessible only to
those authorized to have access
18-11
Principle 6: Professionalism
 Act in a manner that demonstrates
exemplary professional conduct.
 Behave with dignity and courtesy to
clients, fellow professionals, and others in
business-related activities
18-12
Principle 7: Diligence
 Provide professional services diligently
 Provide services in a reasonably prompt
and thorough manner, including the proper
planning for, and supervision of, the
rendering of professional services
18-13
Rules of Conduct—Rule 1
 Defining the relationship with the client
• The obligations and responsibilities of each
party under the agreement
• The compensation any party may receive
under the agreement
• Terms under which the certificant may offer
proprietary products
• Terms under which the certificant will use other
entities to meet any of the obligations under
the agreement
18-14
Rules of Conduct—Rule 1
(cont)
 Financial planning services agreement
• Must specify the services to be provided, the
duration of the agreement, and procedures for
terminating the agreement.
 Owes client the duty of care of a fiduciary
• CFP Board defines a fiduciary as someone
who acts in utmost good faith, in a manner he
believes is in the best interest of the client.
18-15
Rules of Conduct—Rule 2
 Information disclosure
• Certificants must disclose the following
information to clients and prospective clients:
 An accurate and understandable
description of the compensation
arrangements being offered
 A general summary of likely conflicts of
interest between the client and the
certificant, the certificant’s employer, or any
affiliates or third parties
 Contact information for the certificant and
the certificant’s employer
18-16
Rules of Conduct—Rule 2
(cont)
 For financial services, disclosures must be
in writing
 Timely disclosure of material changes to
information
 Disclose potential conflicts of interest
18-17
Rules of Conduct—Rule 3
Client information and property
 Certificants must treat client information as
confidential
 Exceptions:
 As required in response to proper legal process
 As required by obligations to a certificant’s employer’s or
partners,
 To defend against charges of wrongdoing, in connection
with a civil dispute, or
 as needed to perform the services.
 A certificant must take steps to secure any client
information or property that is within the
certificant’s control.
18-18
Rules of Conduct—Rule 3
(cont)
 Certificant must clearly identify and keep complete records
any assets over which the certificant will take custody,
exercise investment discretion, or exercise supervision.
 Restrictions on financial transactions between certificants
and their clients
 Certificant may not commingle a client’s property with the
certificant’s property unless doing so is permitted by law or
is explicitly authorized in a written agreement between the
parties
 Certificant must return a client’s property upon request or as
soon as practicable or consistent with a time frame specified
in the client agreement.
18-19
Rules of Conduct—Rule 4
Obligations to prospective and current clients
 Must offer advice only in areas in which they are
competent to do so
 Must maintain competence in any areas in which
they are engaged to provide professional services
 Must be in compliance with any applicable
regulatory requirements governing the
professional services they provide to clients
18-20
Rules of Conduct—Rule 5
Obligations to employers
 Certificant who is an employee or agent
must perform professional services with
dedication to the lawful objectives of the
employer or principal and in accordance
with the Code of Ethics
 Must also advise their current employers
of any renovation or suspension of their
CFP® certification.
18-21
Rules of Conduct—Rule 6
Obligations to CFP Board
 Certificant must meet all CFP® requirements,
including continuing education requirements, to
retain the right to use the CFP® marks
 CFP Board requires 30 hours of continuing
education biannually; of these 30 hours, at least 2
hours must cover ethics
 Certificant must notify CFP Board of any changes
in contact information, including e-mail address,
telephone number, and physical address, within
45 days.
18-22
Rules of Conduct—Rule 6
(cont)
 Certificant must also notify CFP Board in
writing of any conviction of a crime, other than
certain misdemeanors and traffic violations, or
of any professional suspension or bar within 10
calendar days
 Certificant must not engage in any conduct that
adversely reflects on:
 His integrity or fitness as a certificant
 Upon the CFP® marks
 Upon the profession.
18-23
The Practice Standards
 The 100 series—establishing and defining the relationship
with the client
 The 200 series—gathering client data
 The 300 series—analyzing and evaluating the client’s
financial status
 The 400 series—developing and presenting the financial
planning recommendation(s); identifying and evaluating
financial planning alternatives
 The 500 series—implementing the financial planning
recommendation(s)
 The 600 series—monitoring
18-24
Candidate Fitness Standards
 Types of unacceptable conduct
• Will always bar an individual from becoming
certified
• Individual may petition CFP Board for
reconsideration
 Process for reviews
18-25
Disciplinary Rules and Procedures
 The procedures are the rules and regulations for
disciplinary proceedings against a CFP Board
designee
 The standard of proof, or burden of proof, is the
requirement of proving facts to a certain degree of
probability
18-26
Burdens of Proof
 Preponderance of the evidence
 Clear and convincing evidence
 Beyond a reasonable doubt
18-27
Grounds and Forms of Discipline
 Grounds for discipline—any act which violates the code;
fails to comply with the practice standards; violates any
criminal laws, whether the CFP Board designee is convicted
or acquitted; violates these procedures or an order of
discipline
 Failure to respond to a request from the CFP Board without
good cause or obstruction of the CFP Board or staff in the
performance of their duties
 Any false or misleading statement made to the CFP Board
 Other acts amounting to unprofessional conduct
18-28
Grounds and Forms of Discipline (cont.)
 Forms of discipline
•
•
•
•
Private censure
Public letter of admonition
Suspension
Revocation
18-29