FINANCIAL PLANNER’S ETHICAL
DOMINANCE :
Achieving all you can through the understanding
and application of Ethical Excellence
Just Do It…..Right!
REVISED EDITION
Includes all new Learning Objectives & Other Important Info
EFFECTIVE DATE: January 1, 2014
PARTICIPANT HANDOUT
Jeffrey H. Rattiner, CPA, CFP ®, MBA, RFC
Mr. Rattiner is the only instructor for this program. He has over 25 years
experience and was part of the team that developed the initial Code of Ethics
Financial Planning Institute, LLC.
Program Sponsor #:2468
ARIZONA
10190 East Jenan Drive
Scottsdale, AZ 85260-5921
COLORADO
6410 South Quebec Street
Centennial, CO 80111-4628
Tel: (720) 529-1888
Fax: (720) 529-9888
Email: jeff@jrfinancialgroup.com
Web: www.jrfinancialgroup.com
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TABLE OF CONTENTS
Description
Section 1: Program Objectives
Purpose
Program Set Up
Requirements for Credit
Description of “Ethics”
Page Number
3
3
4
4
5
Section 2: Amendments and other CFP Board Newbies
6
Section 3: 2014 Learning Objectives (LO)
LO #1
LO #2
LO #3
LO #4
LO #5
2014 Instructor and Authority Eligibility Requirements
2013 Compensation Methods Update
Amendments
7
7
8
8
16
17
19
19
19
Section 4: Overview of the Code of Ethics and Professional Responsibility 26
Changes to the CFP Board’s Code of Ethics and
23
Terminology
27
Principles
28
Rules
29
Practice Standards and Rules
33
The Why, What and Who of Ethics
35
Section 5: Principles
Section 6: The Rules of Conduct
37
42
Section 7: Practice Standards
63
Section 8: Case Studies
83
Section 9: Disciplinary Rules and Procedures
89
Section 10: Anonymous Case Histories
110
Section 11: Sample Disclosure Forms
112
Section 12. Sanction Guidelines
119
Section 13. Appeal Rules and Procedures
140
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SECTION I.
PROGRAM OBJECTIVES
Script:
EXECUTIVE SUMMARY OF PROGRAM OBJECTIVE
Financial Planner’s Ethical Dominance ® is an approach to learning the Standards of
Professional Conduct which now includes the Code of Ethics and Professional
Responsibility in which we all must adhere to, is a practical, fun-filled way we can grasp
the true meaning of the CFP Board’s Learning Objectives, Code of Ethics and
Professional Responsibility, Rules of Conduct, Financial Planning Practice Standards,
Disciplinary Rules and Procedures, and Candidate Fitness Standards, which many of
you have not had any formal training in. This session incorporates all the new learning
objectives for CFP Board Ethics CE Program Sponsor requirements and Instructor and
Author Eligibility Requirements mandated by CFP Board effective January 1, 2014 and
incorporates everything prior to that date. These Learning Objectives, which we will go
into significant detail throughout this program, consist of five new venues that deal with
subject matter. The Learning Objectives include to:
1. Define elements of the fiduciary standard.
2. Determine when the fiduciary standard applies in a variety of financial planning
contexts and scenarios.
3. Determine if a CFP® professional is providing financial planning services or
material elements of financial planning services.
4. Explain CFP Board's compensation disclosure requirements to clients and
prospective clients recommendations to the client/prospective client.
5. Communicate any potential conflicts of interest to a client at the initiation of client
engagement.
These new learning objectives will be demonstrated and referred to throughout the entire
program. After this two-hour session, you will have a strong idea of the do’s and don’t of
working with your clients ethically.
PURPOSE
Financial Planner’s Ethical Dominance® is offered by the Financial Planning Institute,
LLC., for the purpose of satisfying CFP Board’s required biennial ethics education. This
workshop will cover CFP Board’s Learning Objectives pertaining to the Ethics CE
Program, Code of Ethics and Professional Responsibility, Rules of Conduct, Financial
Planning Practice Standards, Disciplinary Rules and Procedures, and Candidate Fitness
Standards and other elements of ethical behavior.
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The material in this course is designed to help CFP Board Certificants better understand
the Code of Ethics and how best to abide by its word and spirit. This course includes 14
sections as described on the Table of Contents on page 2.
Within each section, the course will consist of presented information by a narrator, an
interactive discussion on practical examples, and 56 mini-case study questions and three
in-depth case situations incorporated into a high energy, fast-paced and fun-filled game.
The new Learning Objectives will also be infiltrated throughout the contest questions of
the program. All portions are intended to provide practical application of the Code of
Ethics.
Each program attendee who meets the entire course requirements will earn two
continuing education credits that meet CFP Board’s Code of Ethics and Professional
Responsibility requirements.
CFP Board Disclaimer & Copyright notice.
• Disclaimer: “CFP Board’s Code of Ethics and Professional
Responsibility, Rules of Conduct, Financial Planning
Practice Standards, Fitness Standards for Candidates and
Registrants and Anonymous Case Histories are the
property of CFP Board and may not be resold, republished
or copied without the prior consent of CFP Board.”
o Copyright Notice: “Copyright © 2014 Certified Financial
Planner Board of Standards, Inc. All rights reserved.
Reproduced with permission.”
PROGRAM SET-UP
Script:
The program is set up as a review of the Code of Ethics and Professional Responsibility
for all players with mini-case study questions scattered throughout the Code intertwined
after each section of the rules and practice standards.
The Learning Objectives will be introduced to the group (beginning on page 6), then the
narrator will (exactly as per the script) discuss recent changes to the Code and
Terminology of the Code. Following will be the principles and then the rules. However,
during the rules, attendees will get ready to begin answering questions (explained below).
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The Financial Planning Practice Standards, Disciplinary Rules and Procedures, and
Candidate Fitness Standards sections will then be discussed, again, with attendees
gearing up to answer questions.
The questions will be set up in a game format called “Financial Planner’s Ethical
Dominance” whereby each attendee will be answering questions against his or her
peers. The three CFP® professionals who answer the most questions at the end of the
session will be hailed as the champs of Financial Planner’s Ethical Dominance!
The program has been timed to equal two hours.
REQUIREMENTS FOR CREDIT: NO EXCEPTIONS!
Script:
Attendance:
1. Full-time attendance is required. Attendance of each participant will be
recorded at the beginning and end of the program.
2. No Partial Credit. Anyone who finds it necessary to leave the program early,
or who misses the beginning of the program will not receive credit.
3. Attendance Sheets/Scans Will Be monitored.
4. Attendance sheets will only be available from 15 minutes before until 10
minutes after the presentation has begun. At that point they will be picked up
and no one else will be permitted to sign in.
5. Attendance sheets/scans will be available approximately five minutes before the
program is scheduled to end. Early sign-out will not be permitted. Sign-in and
sign-out will not be done at the same time.
6. Attendance sheets will be maintained by Financial Planning Institute, LLC. for
two years from the date of the workshop.
7. Credit will not be given for “seat time.” Any participant who shows
indifference to the program and who fails to participate will not receive credit.
This is at the discretion of the moderator.
DESCRIPTION OF “ETHICS” - The Basics:
To help you understand the concept of ethics, let’s define what the term is about.
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Ethic
NOUN: 1a. A set of principles of right conduct. b. A theory or a system of moral values:
“An ethic of service is at war with a craving for gain” (Gregg Easterbrook).
2. ethics (used with a sing. verb) The study of the general nature of morals and
of the specific moral choices to be made by a person; moral philosophy.
3. ethics (used with a sing. or pl. verb) The rules or standards governing the
conduct of a person or the members of a profession: medical ethics.
Ethical
ADJECTIVE: 1.
Of,
relating
to,
or
dealing
with
ethics.
2. Being in accordance with the accepted principles of right and wrong that
govern the conduct of a profession.
CFP Board certificants-current certificants, candidates and individuals who have been
certified in the past and retain the right to reinstate their certification without passing the
certification examination are required to adhere to the Code of Ethics.
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SECTION II: NEW AMENDMENTS AND OTHER
RECENT CFP BOARD UPDATES
In 2014, CFP Board re-set the stage for CFP® Certificants presenting a CFP Board
Ethics CE Program by introducing Learning Objectives for CFP Board Ethics CE
Programs, and Instructor and Author Eligibility Requirements for CFP Board Ethics CE
Programs.
CFP Board Update
Learning Objectives for CFP Board Ethics CE Programs
Instructor and Author Eligibility Requirements for
CFP Board Ethics CE Programs
Effective Date
1/1/14
1/1/14
In 2013, CFP Board addressed issues dealing with compensation and the definition of
fee-only through a notice to CFP® professionals regarding the importance of
compensation disclosure to clients. The Notice provides an important reminder that
CFP® professionals are required to disclose to clients and prospective clients information
concerning the CFP® professional’s compensation. The purpose of this Notice is to
remind CFP® professionals of both the scope of the term “compensation” and the
obligation to make accurate disclosures of compensation methods on all public websites,
including related-party websites, public search engines, and public disclosure forms,
including Form ADV. Disclosures of compensation methods must remain accurate
throughout each client relationship.
CFP Board Update
Compensation
Effective Date
9/23/13
In 2013, CFP Board issued an Advisory Opinion dealing with Conflicts of Interest
between CFP® Professionals and Clients. In their day-to-day business, it is not
uncommon for CFP® professionals to face decisions about whether a particular action or
circumstance constitutes a conflict of interest. In response to recent increases in the
number of conflict of interest cases reviewed by CFP Board, CFP Board presents this
Advisory Opinion to provide guidance to CFP® professionals concerning conflicts of
interest in order to help CFP® professionals address conflicts of interest in compliance
with CFP Board’s Standards of Professional Conduct.
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In 2012, CFP Board was very active in revising and updating many facets of the Code
and other important documents. A quick summary is produced below:
CFP Board Update
Amendments to Disciplinary Rules and Procedures
Amendments to Appeal Rules and Procedures
Amendments to Fitness Standards for Candidates & Registrants
Amendments to Experience Requirement
Sanction Guidelines
Bankruptcy Disclosure Procedure
Compliance Checklist - tool
Effective Date
1/1/13
1/1/13
9/14/12
9/1/12
8/27/12
7/1/12
2014 New Learning Objectives for CFP Board
Ethics CE Providers
Effective January 2014, CFP Board Ethics CE programs registered with CFP Board now
must be designed to accomplish the following required learning objectives (LO). CFP
Board will evaluate the learning objectives every two years to ensure relevance and
consistency with CFP Board’s ethical standards.
Let’s start out by defining each learning objective and provide practical examples and
application to each. These new Learning Objectives will also be discussed in an
interactive format during our “game” portion of the program. These learning objectives
will find their way into all the responses of the questions asked of the attendees.
LO #1: Define elements of the fiduciary standard.
Fiduciary, if nothing else, has become one of the most controversial terms in our
industry. Fiduciary is defined by CFP Board as follows:
“Fiduciary.” One who acts in utmost good faith, in a manner he or
she reasonably believes to be in the best interest of the client.
Care should be taken to determine whether a CFP® certificant should accept appointment
as a fiduciary. However, if the CFP® certificant accepts the position as a fiduciary, that
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individual must fulfill all of the obligations entailed in the appointment until that
individual resigns or is relieved from duties.
LO #2: Determine when the fiduciary standard applies in a
variety of financial planning contexts and scenarios.
CFP Board expects CFP® professionals to provide financial planning recommendations
involving services and/or products, that they reasonably believe to be the best possible
options available to their clients. That means that the CFP® professional should put the
client’s interests first and foremost in all situations.
The certificant should not stand to benefit at the expense of the client. As stated in Rule
1.4, when the certificant provides financial planning or material elements of the financial
planning process, the certificant owes to the client the duty of care of a fiduciary as
defined by CFP Board. A good rule of thumb is when in doubt, always error in favor of
the client.
As we go through the game questions discussed later on, we will incorporate these six
learning objectives into the contest answers.
LO #3: Determine if a CFP® professional is providing
financial planning services or material elements of financial
planning services.
The CFP® professional must know from the start of the relationship the type of
engagement being offered. Work-related activities must be determined in advance of any
services to be offered. Within that assessment, the CFP® professional should be aware
of activities that involve material elements of financial planning.
Professionals cannot perform any type of service without first understanding the
definitions of what they are expected to provide to clients. A CFP® professional
providing financial planning services should follow the definitions of financial planning,
the financial planning process, and financial planning subject areas spelled out in the
Terminology Section of the Code.
“Personal financial planning” or “financial planning” denotes the process of
determining whether and how an individual can meet life goals through the proper
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management of financial resources. Financial planning integrates the financial planning
process with the financial planning subject areas. In determining whether the certificant is
providing financial planning or material elements of the financial planning process, issues
that may be considered include but are not limited to:
- The client’s understanding and intent in engaging the certificant.
- The degree to which multiple financial planning subject areas are
involved.
- The comprehensiveness of the data gathering.
- The breadth and depth of the recommendations.
Financial planning may occur even if the elements are not provided to
a client simultaneously, are delivered over a period of time, or are
delivered as distinct subject areas. It is not necessary to provide a
written financial plan to engage in financial planning.
“Personal financial planning process” or “financial planning process” denotes the
process which typically includes, but is not limited to, some or all of these six elements:
- Establishing and defining the client-certificant relationship,
- Gathering client data including goals,
- Analyzing and evaluating the client’s current financial status,
- Developing and presenting recommendations and/or alternatives,
- Implementing the recommendations, and
- Monitoring the recommendations.
“Personal financial planning subject areas” or “financial planning subject areas”
denotes the basic subject fields covered in the financial planning process which typically
include, but are not limited to:
- Financial statement preparation and analysis (including cash flow analysis/planning and
budgeting),
- Investment planning (including portfolio design, i.e., asset allocation and portfolio
management),
- Income tax planning,
- Education planning,
- Risk management,
- Retirement planning, and
- Estate planning.
Among the subsets in evaluating this Learning Objective include the Definition of
Services and Activities Provided under Financial Planning; Specific Service or Activity;
Distinction between Financial Planning Services and Other Services; Needs Analysis and
Suitability Issues; Number of Elements Performed During a Client Engagement;
Financial Planning Service Performed by Broker or CFP® Professional; Minimum
Number of Financial Planning Subject Areas, and Third Party Implementation
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The CFP® professional must know from the start of the relationship the type of
engagement being offered. Work-related activities must be determined in advance of any
services to be offered. Within that assessment, the CFP® professional should be aware
of activities that involve material elements of financial planning.
CFP Board’s Disciplinary and Ethics Commission provides the following guidelines to
help CFP® professionals determine when their activities are considered financial
planning or material elements of financial planning. They provide a partial list. The best
way to ensure that errors in judgment are not made in this area is to discuss these matters
with senior firm personnel or peers. It is better to iron out any potential wrinkles before
they occur.
The primary factors on which CFP Board relies for determining whether "material
elements" exist are:
1. The client’s understanding and intent in engaging the CFP® professional
2. The degree to which multiple financial planning subject areas are involved
3. The comprehensiveness of data gathering
4. The breadth and depth of recommendations
One of the most important understandings that must exist between client and CFP®
professional is to ensure that expectations are met. This involves the client understanding
what is being received during the process of the engagement and what the recently hired
planner will provide. Is the engagement a full comprehensive one in which all subject
areas of financial planning will be covered or is it a modular engagement whereby one or
a few areas will be covered. These concepts should be covered in an engagement letter.
There are many subsets in evaluating this Learning Objective. We will break them down
into eight discussion items.
Discussion Item #1: Definition of Services and Activities Provided under Financial
Planning
Under CFP Board’s definition of “financial planning,” as found in the Standards, CFP®
professionals are able to determine when they are providing services using the material
elements of financial planning by considering, among other things, the degree to which
multiple financial planning subject areas are involved. While it is more likely for
financial planning to exist when multiple subject areas are involved, in some
circumstances a financial planning engagement may exist even when a single subject area
is involved.
CFP® professionals should consider whether the client’s understanding and intent in
engaging the CFP® professional would give the client reason to believe the services
provided are financial planning. CFP® professionals should also consider the
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comprehensiveness of their data gathering with a client and the breadth and depth of their
recommendations to a client.
Financial planning often does not occur in neat boxes but is a process that progresses and
evolves over the course of a financial planner’s relationship with a client. For example,
answering a question of a specific nature – such as “How much money do I need to set
aside each month to send my two-year-old to Notre Dame in sixteen years?” – would
probably not be considered financial planning. However, answering a broader question
that involves multiple aspects of a client’s situation – such as “How much do I need to
save so I’ll have a secure retirement?” – would likely rise to the level of financial
planning because of the expansiveness of the financial considerations involved.
Discussion Item #2: Specific Service or Activity
What happens if a CFP® professional is unsure as to whether a specific service or
activity rises to the level of financial planning? The CFP Board determines this on a caseby case basis. CFP Board encourages CFP® professionals who are unsure if a particular
service or client relationship rises to the level of financial planning to embrace CFP
Board’s fiduciary standard and provide services in ways they believe are in the best
interest of the client.
It is intentional that the terminology section of CFP Board’s Standards does not define
“material elements of financial planning.” In financial planning relationships, products,
services, solutions and strategies represent a means to an end – meeting life goals through
proper management of financial resources.
It would be impossible to provide guidelines for every possible situation related to
financial planning, but CFP Board wants to assist CFP® professionals in complying with
the Standards. To submit a particular situation for CFP Board to consider, or to submit
questions about specific aspects of the Standards and their application to specific
situations, please submit your question to standards@CFPBoard.org.
Discussion Item #3: Distinction between Financial Planning Services and Other
Services
Another common question evolves as to whether the Standards provide a distinction
between financial planning services and other services that don’t rise to the level of
financial planning? The Standards apply to all CFP® professionals, but certain sections
of the Rules of Conduct set forth additional requirements for CFP® professionals who
provide financial planning services to clients. When a CFP® professional provides
financial planning or material elements of financial planning, the Standards require:
1. A heightened duty of care to the client;
2. Additional disclosures to the client or prospective client, including some that must be
made in writing; and
3. A written agreement governing the financial planning services.
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The individual Rules (a full discussion of the rules follows) related only to client
engagements that rise to the level of financial planning or material elements of financial
planning are as follows:
Rule 1.4 sets the baseline duty of care CFP® professionals owe at all times to clients:
“place the interest of the client ahead of his or her own.” That same rule sets forth a
heightened duty of care for CFP® professionals who provide to clients financial
planning or material elements of financial planning: “the duty of care of a fiduciary as
defined by CFP Board.” CFP Board’s definition of fiduciary is: “One who acts in utmost
good faith, in a manner he or she reasonably believes to be in the best interest of the
client.”
Rule 1.2 describes information that must be disclosed by a CFP® professional to clients
and prospective clients if the services to be provided include financial planning or
material elements of financial planning.
Rule 2.2 identifies information that must be disclosed by a CFP® professional to all
clients and prospective clients, regardless of whether the services to be provided rise to
the level of financial planning. When the services do rise to the level of financial planning
or material elements of financial planning, section (e) of Rule 2.2 requires that the
disclosures be made in writing.
Rule 1.3 requires that if services to be provided include financial planning or material
elements of financial planning, the professional (or the professional’s employer) shall
enter into a written agreement with the client governing the financial planning services.
Discussion Item #4: Needs Analysis and Suitability Issues
Since many of us are engaged in the practice of conducting a needs analysis or suitability
review, a facts and circumstances approach should be used to reach the level of financial
planning or material elements of financial planning.
There are a wide variety of activities that are labeled “needs analysis,” and some of those
activities may reach the level of financial planning or material elements of financial
planning. If a “needs analysis” is focused on gathering detailed information about
multiple aspects of a client’s financial situation and analyzing that information in light of
the client’s stated future goals, or if the analysis is used to make wide-ranging
recommendations, that “needs analysis” is considered financial planning.
In contrast, if a “needs analysis” is focused on a limited component of the client’s
financial situation, and does not involve other services related to financial planning, that
analysis may not rise to the level of financial planning. For instance, if a client hires a
CFP® professional solely to purchase life insurance, the CFP® professional will by
necessity obtain information about the client sufficient to ensure that any policies
recommended meet the client’s needs. If the “needs analysis” is focused solely on factors
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related to the client’s life insurance needs, that analysis may not rise to the level of
financial planning.
A standard suitability review conducted in association with a transaction – a review that
takes into consideration such basic elements as the client’s age, net worth and risk
tolerance – does not typically reach the level of financial planning or material elements of
financial planning.
The facts and circumstances of each situation are a key factor in CFP Board’s
determination of whether a CFP® professional has engaged in financial planning or
material elements of financial planning.
Discussion Item #5: Number of Elements Performed During a Client Engagement
Another common practice question that arises is whether the number of elements that a
CFP® professional is involved which constitute “material elements of financial
planning”? A CFP® professional who integrates the financial planning process with two
or more subject areas will, in most cases, be providing financial planning or material
elements of financial planning.
Under the definition of “financial planning” (Learning Objective #1), the Standards
provide guidance CFP® professionals may use to determine whether they are providing
financial planning. The factors are:
1. The client’s understanding and intent in engaging the CFP® professional
2. The degree to which multiple financial planning subject areas are involved
3. The comprehensiveness of data gathering
4. The breadth and depth of recommendations
The criteria above focus on the integration of the six steps with two or more financial
planning subject areas.
Discussion Item #6: Financial Planning Service Performed by Broker or CFP®
Professional
A broker who is a CFP® professional and employs all six steps of the financial planning
process to recommend a brokerage transaction only would probably not be considered to
be providing financial planning services in view of the fact that a single subject area is
involved. However, a CFP® professional could inadvertently provide financial planning
services by acting in a way that the client reasonably believes that the CFP® professional
is providing financial planning. To avoid such situations, the Standards require a CFP®
professional to mutually agree upon the services to be provided with each client.
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Although a CFP® professional who is providing services other than financial planning is
not required to describe the scope of the engagement in writing, it is recommended as a
best practice to do so.
An activity that may be considered to involve material elements of financial planning
includes conducting detailed data-gathering regarding multiple aspects of a client’s
financial situation. This activity may rise to the level of material elements of financial
planning if the CFP® professional’s activities include one or more of the following:
1. Employing multiple financial planning subject areas to analyze a client’s financial
situation
2. Gathering information about a client’s entire financial situation, including goals
3. Recommending a broad financial plan requiring a depth of technical knowledge to
execute the plan
4. Mutually defining the scope of the engagement with a client where the client
understands and intends to engage the CFP® professional in financial planning
Given the in-depth process used in this example, CFP Board would likely consider the
CFP® professional in the above-mentioned activity to be providing financial planning or
material elements of financial planning.
Discussion Item #7: Minimum Number of Financial Planning Subject Areas
Another common question discussed is where there is a minimum number of financial
planning subject areas necessary in reaching the level of “material elements of financial
planning”? Applying the financial planning process to a single subject area is not likely
to be considered financial planning or material elements of financial planning. CFP®
professionals who integrate the financial planning process and two or more subject areas
may be providing financial planning or material elements of financial planning.
Under the definition of “financial planning,” the Standards note that one of the factors
CFP Board considers in determining whether a financial planning relationship exists is
the degree to which multiple financial planning subject areas are involved.
When a CFP® professional’s recommendations involve multiple subject areas and the
CFP® professional integrates those subject areas with the steps of the financial planning
process, the CFP® professional may be providing material elements of financial
planning. It does not matter if these recommendations occur during one meeting with the
client, or over several meetings over a period of time.
It is unacceptable for a CFP® professional to employ one product, service module, or
subject area at a time in an attempt to avoid having the client relationship be considered
financial planning or material elements of financial planning.
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Discussion Item #8: Third Party Implementation
Is implementation of financial planning recommendations prepared by a third party
considered financial planning or material elements of financial planning? The facts and
circumstances of each situation are a key factor in CFP Board’s determination of whether
the CFP® professional has engaged in financial planning or material elements of
financial planning. The most significant factor that CFP Board will consider in
determining whether activities such as implementation rise to the level of financial
planning is the client’s understanding and intent in engaging the CFP® professional. If a
CFP® professional implements recommendations made by a third party, the degree of
specificity in the recommendations is another factor that CFP Board will consider in
determining whether the implementation activities constitute financial planning.
If the recommendations are less specific and require the CFP® professional to provide
wider-ranging recommendations as part of the implementation process, the CFP®
professional’s implementation activities may rise to the level of financial planning. This
would be the case if, for example, a client’s tax advisor recommends additional taxdeferred savings and the CFP® professional assists the client to determine the type of
deferred savings, the amount to be saved, an investment approach and specific investment
vehicles. By contrast, if the client limits the engagement with the CFP® professional to
implementation activities only, the engagement may not rise to the level of financial
planning. This would be the case if, for example, the recommendations set out an
investment strategy with specific amounts allocated to specific asset classes and the
CFP® professional’s actions are limited to executing transactions based on the
recommendations identified in the financial plan.
To reduce the possibility of misunderstanding between a CFP® professional and his/her
client, CFP Board recommends that all CFP® professionals carefully describe to their
clients the services to be provided, particularly where the scope of the engagement is
limited. Documenting the scope of the engagement in an agreement or other document
can help prevent misunderstanding. (We will cover this in Learning Objective #4)
CFP Board encourages CFP® professionals who are unsure whether a particular service
or client relationship rises to the level of financial planning to embrace CFP Board’s
fiduciary standard and provide services in ways they believe are in the best interest of the
client.
With an understanding of the eight discussion items just covered in this Learning
Objective, examples of activities that CFP Board would likely consider to be material
elements of financial planning include:
1. Conducting detailed data-gathering regarding multiple aspects of a client's financial
situation
2. Analyzing a client's data and making recommendations across multiple financial
planning subject areas
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3. Providing investment advisory services as defined by the applicable State or Federal
regulators
Activities that CFP Board would not likely consider to be material elements of financial
planning include:
1. Opening an account or completing an application
2. Fact-finding to meet regulatory requirements for suitability such as the “Know Your
Customer” rules
3. Solely providing brokerage and/or insurance products or services
4. Engaging in activity solely related to the sale of a specific product
5. Acting as a mortgage broker without providing any other financial services
6. Completing tax returns without providing any other financial services
7. Teaching a financial class or continuing education program
The above are examples and should not be considered an all-inclusive list. These
guidelines are designed to be helpful to CFP® professionals in reviewing their activities
and determining whether they are providing material elements of financial planning. CFP
Board’s Disciplinary and Ethics Commission also relies on these guidelines when
reviewing allegations of misconduct by CFP® professionals.
LO #4: Explain CFP Board's compensation disclosure
requirements to clients and prospective clients
recommendations to the client/prospective client.
On August 7, 2013, CFP Board issued a notice to CFP® professionals regarding the
importance of compensation disclosure to clients. The Notice provides an important
reminder that CFP® professionals are required to disclose to clients and prospective
clients information concerning the CFP® professional’s compensation. The purpose
of the Notice is to remind CFP® professionals of both the scope of the term
compensation and the obligation to make accurate disclosures of compensation
methods on all public websites, including on related-party websites, public search
engines, and public disclosure forms, including Form ADV, Disclosure of
compensation methods must remain accurate throughout each client relationship.
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LO #5: Communicate any potential conflicts of interest to a
client at the initiation of client engagement.
Potential conflicts of interest require two disclosures. One is to be given at the beginning
of the client engagement providing a general description of the CFP® professional's
conflicts of interest; and a second disclosure provided if a new conflict arises.
CFP® certificants must provide adequate disclosure in their practices and for their
clients. This helps clients gain insight into the many hats the CFP® professional wears
and what it means to clients. It is especially true when material considerations could
compromise the relationship as well as for clients to ensure that their expectations are
being met.
Three forms where disclosures can be provided are:
Form OPS: This form may be used by any CFP® certificant to make required
disclosures to prospective clients and clients prior to formalizing a relationship with a
client that only involves executing transactions on behalf of or providing investment
advisory services to a client.
Form FPD: This form may be used by a CFP® certificant when engaged in financial
planning using the financial planning process or providing services using material
elements of the financial planning process integrating multiple financial planning subject
areas.
Form FPDA: This form may be used by a CFP® certificant when engaged in financial
planning using the financial planning process or providing services using material
elements of the financial planning process integrating multiple financial planning subject
areas. Form FPDA incorporates Form FPD with a sample financial planning client
agreement or engagement letter.
A sample of the CFP Board’s disclosure documents can be found at the end of this
presentation.
Be alert that this objective would require two disclosures: one at the beginning of the
client engagement providing a general description of how the client would pay for all of
the services of the CFP® professional; and one at the time the CFP® Professional makes
specific recommendations to the client/prospective client.
Conflicts of interest can be avoided with a written agreement when financial planning
services are provided.
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To determine the required elements of a written agreement, we first must define what a
financial planning engagement looks like.
A “financial planning engagement” exists when a certificants performs any type of
mutually agreed upon financial planning service for a client.
When determining whether a financial planning engagement exists, the entirety of a
client relationship should be examined. These questions may guide that determination:
1. Is the CFP® professional involving the steps of the financial planning process in the
services provided?
2. How many financial planning subject areas are involved to meet the client’s goals?
3. With respect to the services provided, what did the CFP® professional communicate to
the client?
Rule 1.1 states that the certificant and the prospective client or client shall mutually
agree upon the services to be provided by the certificant. To accomplish this successfully,
the certificant should provide an engagement letter to the client and discuss the items
included with the client. Among the items that this engagement letter will alert the client
to is what the engagement is all about (will it include financial planning or material
elements of the financial planning process), what the certificant will provide to the client,
how fees will be determined, the length of the engagement and other open ends that may
come up. It also will share what the client will provide to the certificant to help ensure
the success of the engagement. Examples would be all necessary documents, and answers
to open items. This written agreement will also minimize potential conflicts going
forward and allow for the managing of client expectations throughout the engagement.
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2014
Instructor
and
Author Eligibility
Requirements for CFP Board Ethics CE Programs
Effective January 2014, instructors of Ethics CE programs registered with CFP Board
must meet the following requirements.
The instructor and author of an Ethics CE program must:
• Hold current CFP® certification, with all CFP Board continuing education
requirements up-to-date and all CFP Board renewal and other fees paid in full.
• Have held CFP® certification for 5 years or more.
• Not be the subject of a pending investigation by CFP Board or any federal or state
regulator.
• Not have been the subject of a CFP Board discipline (i.e. private censure, public
letter of admonition, or suspension) received within the past five years.
• Complete CFP Board ethics instructor webinar.
Individuals who do not meet all of the above criteria may submit a Policy Exception
Request.
As the author and only instructor of this program, and having been involved in the
process of drafting the first major revision of Code of Ethics as a former employee of
CFP Board in the early 90s, the information you receive in this program is genuine,
current, and on target in the manner in which CFP® certificants must conduct
themselves to abide by this Code.
The following sections discuss recent CFP Board updates.
2013 Compensation Methods Update
In late 2013, CFP Board became aware of misrepresentations being made by CFP®
professionals regarding their compensation methods. Some CFP® professionals were
purporting to be “fee-only” when in fact some of their compensation was derived from
commissions. This misrepresentation was uncovered on CFP Board's search tool (“Find a
CFP® Professional”). To prevent any further misrepresentation to the public, CFP Board
temporarily disabled the ability to search on “fee-only” in their search tool. Additionally,
CFP Board made aware of the importance of accurate compensation disclosures,
encouraging certificants to carefully review their compensation methods and to
accurately reflect all of their compensation methods in their profiles.
A certificant may describe his or her practice as “fee-only” if, and only if, all of the
certificant's compensation from all of his or her client work comes exclusively from
the clients in the form of fixed, flat, hourly, percentage or performance-based fees.
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CFP Board's September 20, 2013, notice to certificants included further guidance on the
“fee-only” language as follows:
“The fee only” description is appropriate only when the CFP® professional and any
related parties receive, or are entitled to receive, only fees for providing professional
activities. As a general rule, if you are a registered representative of a broker/dealer, are
dually-registered, or are an employee of an insurance firm, your compensation may not
be described as “fee only.”
CFP® professionals are responsible for disclosing their compensation consistent with our
compensation disclosure rules and definitions. Should it come to our attention,
subsequent to the opportunity to fully understand and comply with our rules, that a CFP®
professional is misrepresenting their compensation, the matter will be referred to our
enforcement process.
In addition to the reminder of the importance of accurate compensation disclosures, CFP
Board's August 7, 2013, notice to certificants included further guidance on the
compensation disclosures as follows:
“In determining how to make compensation disclosures, a CFP® professional must
consider compensation to the CFP® professional and any related party. The CFP®
professional also must include as compensation any non-trivial economic benefit that the
CFP® professional or any related party receives or is entitled to receive.”
Please note that CFP Board does not audit a CFP® professional to verify the accuracy of
compensation disclosures. However, in the event that CFP Board is notified that a CFP®
professional has made an inaccurate compensation disclosure, CFP Board will initiate an
investigation of that professional's compensation disclosures.
2013 Amendments to Disciplinary Rules and
Procedures
The substantive amendments to the Disciplinary Rules include:
Article 2.5 – Disqualification – Add a provision requiring a Respondent to
identify in his/her Answer to the Complaint any potential conflict the
Respondent believes exists with regard to any of the hearing panelists.
Article 2.6 – CFP Board Counsel, CFP Board Designated Counsel and CFP
Board Advisory Counsel, and the Duties thereof – Clarify that CFP Board
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Counsel’s role is to serve as an advocate for CFP Board.
Article 6.2(b) – Procedures for Investigation – Define “adverse inference” as
“an inference, adverse to the concerned party, drawn from silence or absence
of requested evidence.”
Article 6.3 – Probable Cause Determination Procedures – Add a provision
allowing a Respondent to file a response to a Letter of Caution issued by CFP
Board. The Letter of Caution and the response letter would become part of
the Respondent’s disciplinary record and be available for the Disciplinary and
Ethics Commission’s (DEC) review in any subsequent proceeding involving
the Respondent.
Article 9 – Motions – Add a provision to specifically allow for the submission
of pre-hearing motions. Motions would be limited to procedural and
evidentiary matters and cannot be more than two single-spaced pages with
no more than 10 pages of attachments, which is consistent with the limitations
imposed on motions in the Appeal Rules and Procedures.
Article 10.3 – Procedure and Proof – Define “preponderance of the evidence”
as “a legal standard of review which generally means ‘more probable than
not’, i.e., evidence which shows that, as a whole, the fact sought to be proved
is more probable than not to have occurred.” This definition is consistent with
the definition that appears in the Appeal Rules and Procedures.
Article 11.2 – Power of the DEC – Clarify that the DEC is required to mail its
decision order to the Respondent within 45 calendar days of a hearing.
Additionally, clarify that if the DEC does not approve the hearing panel’s
recommendation, it must remand the matter to the hearing panel for further
consideration.
Article 14 – Settlement Procedure – Amend to allow CFP Board Counsel
more flexibility in negotiating a settlement agreement with Respondent.
Article 15 – Required Action After Revocation or Suspension – Add a
provision requiring a Respondent to submit proof of Respondent’s compliance
with an order of suspension or revocation. In the case of an order of
suspension, failure to submit proof of compliance with the DEC’s Order would
result in a revocation, as provided in the DEC Order.
Article 16.2 – Reinstatement After Suspension – Identify the criteria used by
the DEC to assess a Respondent’s rehabilitation and fitness to use the
marks. Additionally, “clear and convincing evidence” is defined.
Article 18.1 – Quorum – Increase the requirement for a quorum from a
majority to two-thirds of the DEC.
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Article 18.6 – Anonymous Case Histories and Sanction Guidelines – Add a
provision noting that the Anonymous Case Histories and Sanction Guidelines
serve as guidance for the DEC during hearings and deliberations, and are
available on CFP Board’s website.
Amendments to Appeal Rules and Procedures
These amendments streamline the appeal process, clarify the “clearly erroneous”
standard of review and ensure that CFP Board’s appeal process is fair and credible to all
participants.
The substantive amendments to the Appeal Rules include:
Article 2 – Appeal Panel – Transfer jurisdiction of hearing appeals from
Appeal Committee to Appeal Panel. The Appeal Panel will be made of up
former Appeal Committee members, former DEC members and former DEC
volunteers.
Article 4 – Right to Appeal and Representation – Add a provision allowing
CFP Board Counsel to appeal a decision of the DEC.
Article 5 – Appeal Procedures – Streamline the process by eliminating the
step of forwarding the record under separate cover. CFP Board will provide
the record with the DEC Order.
Article 10 – Decisions – Clarify the potential outcomes under the “clearly
erroneous” standard of review.
2
Article 11 – Review by the Appeal Committee of the Board of Directors of
CFP Board – Add provision allowing the Appeal Committee of the Board of
Directors to review the decisions of the Appeal Panel and “call” any decision
for its review. If the Appeal Committee determines that the Appeal Panel
committed “clear error,” the Appeal Committee can remand the matter back to
the Appeal Panel with instructions.
Amendments to Fitness Standards for Candidates & Registrants
CFP Board established specific character and fitness standards for candidates for CFP®
certification to ensure that an individual’s prior conduct would not reflect adversely upon the
profession or the CFP® certification marks. CFP Board determined that such standards would also
provide notice to individuals interested in attaining CFP® certification that certain conduct would
bar certification, or require an individual to petition the Disciplinary and Ethics Commission
(Commission) for consideration.
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Effective January 1, 2011, the Fitness Standards shall apply to Registrants, i.e., individuals who
are not currently certified but have been certified by CFP Board in the past and are eligible to
reinstate their certification without being required to pass the current CFP® Certification
Examination.
Amendments to Experience Requirement
The Board of Directors of Certified Financial Planner Board of Standards, Inc. (CFP
Board) recently approved several amendments to the Experience requirement for initial
CFP® certification. The purpose of CFP Board’s Experience requirement is to
demonstrate an individual’s ability to practice personal financial planning independently.
Combined with the other requirements for CFP® certification, the Experience
requirement helps ensure that individuals applying for CFP® certification are competent
to provide financial planning services to the public as a CFP® professional.
Following careful and thoughtful review of the comments received on the proposed
amendments, the Board of Directors approved the following amendments:
The options for meeting CFP Board’s Experience requirement will be expanded
with a very limited exception whereby individuals may meet CFP Board’s
Experience requirement solely through two years full-time, or the equivalent parttime
(2,000 equals one year full-time) of experience focused exclusively on
“personal delivery of all or part of the personal financial planning process to a
client,” with direct supervision by a CFP® professional, and documented
qualifying experience in all six primary elements of the personal financial
planning process.
CFP Board will no longer require that six months of experience must have been
gained within 12 months of an individual’s reporting of experience to CFP Board.
CFP Board will allow individuals to submit experience to CFP Board for review
prior to passing the CFP® exam. Credit will be granted only for experience
completed within 10 years before and five years after successful completion of
the CFP® exam.
Sanction Guidelines
The Board of Directors of Certified Financial Planner Board or Standards, Inc. (CFP Board)
recently approved the introduction of CFP Board’s Sanction Guidelines.
The Sanction Guidelines, the full text of which is available below and on CFP Board’s website at
www.CFP.net/downloads/CFPBoard_Sanction_Guidelines_2012-07.pdf (PDF, 163 KB) are
effective on August 27, 2012.
CFP Board developed the Sanction Guidelines to assist the Disciplinary and Ethics Commission
(DEC), the group charged with conducting disciplinary hearings in accordance with CFP Board’s
Disciplinary Rules and Procedures, in maintaining consistency regarding the imposition of
sanctions for similar offenses. The Sanction Guidelines identify specific conduct that is a
violation of CFP Board’s Standards of Professional Conduct, the sanction guideline for that
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conduct and policy notes for the DEC to consider when imposing the appropriate sanction. The
DEC is not bound by the Sanction Guidelines, which are intended, along with the Anonymous
Case Histories,
to guide the DEC in its decision making. When considering the appropriate sanction in a
particular case, the DEC may deviate from the sanction guideline if there are aggravating factors
that warrant a more severe sanction or mitigating factors that warrant a less severe sanction. The
Sanction Guidelines may also be used by the Appeals Committee of the Board of Directors,
which considers appeals of DEC decisions.
Bankruptcy Disclosure Procedure
The Board of Directors of Certified Financial Planner Board of Standards, Inc. (CFP
Board) recently approved the following changes to the way CFP Board addresses cases
involving a CFP® professional who has filed bankruptcy within the previous five years,
and who is not under investigation by CFP Board for any other conduct (“bankruptcy only
cases”).
Bankruptcy Disclosure Procedure
CFP Board will no longer investigate, and the Disciplinary and Ethics Commission will no
longer adjudicate, bankruptcy-only cases. Rather, CFP Board will verify the bankruptcy
filing by checking publicly available court records, then note the bankruptcy filing on the
CFP® professional’s public profile, which is available through the search functions on
CFP Board’s website www.CFP.net, including the “Find a CFP® Professional” and “Verify
an Individual’s CFP® Certification” search functions. CFP Board will also share with
consumers and other stakeholders who contact CFP Board regarding a CFP®
professional’s certification status the information in the CFP® professional’s public profile,
including identifying whether the CFP® professional has filed bankruptcy. The disclosure
of the bankruptcy in a CFP® professional’s public profile will continue for 10 years from
the date CFP Board is notified of the bankruptcy, whether resulting from disclosure by
the CFP® professional or discovery by CFP Board.
Additionally, CFP Board will issue a news release no less frequently than four times
each year to identify CFP® professionals who have filed bankruptcy within the previous
five years. A CFP® professional’s name will appear only one time on a news release.
As a result of issuing the news release, the public will be able to access the information
contained in the news release through commonly used internet search tools.
Retroactivity
The bankruptcy disclosure procedure will be applied retroactively to any CFP®
professional who, as a result of having a bankruptcy-only case, received a public
discipline from CFP Board. Public discipline includes revocation, suspension and public
letter of admonition. These individuals will have the option of retaining their public
discipline and the press release associated with that discipline or having the public
discipline rescinded and previous press release removed from CFP Board’s website and
replaced with the new bankruptcy procedure. Any CFP® professional who previously
received a private censure for having a bankruptcy-only case or whose bankruptcy-only
case was dismissed by CFP Board will not be affected by the new procedure.
The bankruptcy disclosure procedure will also be applied retroactively to any candidate
for CFP® certification who, as a result of having a bankruptcy-only case, was denied
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certification and offered the opportunity to re-apply on a date specified by the
Disciplinary and Ethics Commission. These individuals will have the option of waiting to
re-apply no sooner than the date specified by the Commission, or have their order of
denial rescinded and be granted CFP® certification on the condition that their bankruptcy
filing will be made public via the search function on CFP Board’s website and in a news
release. Any individuals who had a bankruptcy-only case and were granted CFP®
certification will not be affected by the new procedure.
Compliance Checklist
The compliance checklist is designed to help CFP® professionals document an initial client
consultation in accordance with CFP Board’s Standards. The questions contained in this
checklist reflect both the requirements of the Standards and established best practices for
complying with the Standards.
Except for Section A(2), all boxes should be completed for compliance purposes. This
checklist should be periodically reviewed throughout the course of your relationship with
your client.
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SECTION IV.
OVERVIEW
OF THE STANDARDS OF
PROFESSIONAL CONDUCT
(Including the CODE OF ETHICS AND PROFESSIONAL RESPONSIBILITY,
FINANCIAL PLANNING PRACTICE STANDARDS, DISCIPLINARY ACTIONS,
AND THE FITNESS STANDARDS).
CHANGES TO THE CFP BOARD’S CODE OF
ETHICS AND PROFESSIONAL RESPONSIBILITY
Effective July 1, 2009
Script:
The CFP Board continually updates its standards and procedures, and the revised
Standards of Professional Conduct, which includes the Code of Ethics and Professional
Responsibility, Rules of Conduct, and Financial Planning Practice Standards reflect the
most recent of such initiatives. The Fitness Standards (effective January 1, 2011) apply
towards candidates of CFP® certification to ensure that an individual’s conduct does not
reflect adversely upon the profession or the CFP® certification mark.
I wanted to make you aware of these changes before we begin our presentation to ensure
that all of you can begin working these revisions into your practice and to remind you to
update your Code when you return back into the office.
For your benefit, I have included a list of the changes to this Code as follows:
•
•
•
•
Terminology
Principles
Rules and
Practice Standards and Rules.
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TERMINOLOGY
The following is additional Terminology covered in the Code
“CFP Board” denotes Certified Financial Certificant Board of Standards,
Inc.
Candidate for CFP® Certification denotes a person who has applied
to CFP Board to take the CFP® Certification Examination, but who has
not yet met all of CFP Board’s certification requirements.
“Certificant” denotes individuals who are currently certified by CFP
Board.
“Client” denotes a person, persons, or entity who engages a
certificant and for whom professional services are rendered. Where
the services of the certificant are provided to an entity (corporation,
trust, partnership, estate, etc.), the client is the entity acting through its
legally authorized representative.
“Certificant’s Employer” denotes any person or entity that employs a
certificant or registrant to provide services to a third party on behalf of
the employer, including certificants and registrants who are retained as
independent contractors or agents.
“Commission” denotes the compensation generated from a transaction
involving a product or service and received by an agent or broker,
usually calculated as a percentage on the amount of his or her sales or
purchase transactions. This includes 12(b)1 fees, trailing commissions,
surrender charges and contingent deferred sales charges.
“Compensation” is any non-trivial economic benefit, whether
monetary or non-monetary, that a certificant or related party receives
or is entitled to receive for providing professional activities.
A “conflict of interest” exists when a certificant’s financial, business,
property and/or personal interests, relationships or circumstances
reasonably may impair his/her ability to offer objective advice,
recommendations or services.
“Fee-only.” A certificant may describe his or her practice as “feeonly”
if, and only if, all of the certificant’s compensation from all of
his or her client work comes exclusively from the clients in the form of
fixed, flat, hourly, percentage or performance-based fees.
A “financial planning practitioner” is a person who engages in
financial planning using the financial planning process in working with
clients.
“Registrant” denotes individuals who are not currently certified but
have been certified by CFP Board in the past and have an entitlement,
direct or indirect, to potentially use the CFP® marks. This includes
individuals who have relinquished their certification and who are
eligible for reinstatement without being required to pass the current
CFP® Certification Examination. The Rules of Conduct apply to
registrants when the conduct at issue occurred at a time when the
registrant was certified; CFP Board has jurisdiction to investigate such
conduct.
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PRINCIPLES
The following is the entire Principles section of the Code. Interpretations of each of the
principles will be discussed later on.
CFP Board adopted the Code of Ethics to establish the highest principals and standards. These principles and general statements
expressing the ethical and professional ideals certificants and registrants are expected to display in their professional activities. As
such, the principals are aspirational in character and provide a source of guidance for certificants and registrants. The principals form
the basis of CFP Board’s Rules of Conduct, Practice Standards and Disciplinary Rules, and these documents together reflect CFP
Board’s recognition of certificants’ and registrants responsibilities to the public, clients, colleagues and employers.
Principle 1 – Integrity
Provide professional services with integrity.
Integrity demands honesty and candor which must not be subordinated
to personal gain and advantage. Certificants are placed in positions of
trust by clients, and the ultimate source of that trust is the certificant’s
personal integrity. Allowance can be made for innocent error and
legitimate differences of opinion, but integrity cannot co-exist with
deceit or subordination of one’s principles.
Principle 2 – Objectivity
Provide professional services objectively.
Objectivity requires intellectual honesty and impartiality. Regardless
of the particular service rendered or the capacity in which a certificant
functions, certificants should protect the integrity of their work,
maintain objectivity and avoid subordination of their judgment.
Principle 3 – Competence
Maintain the knowledge and skill necessary to provide professional
services competently.
Competence means attaining and maintaining an adequate level of
knowledge and skill, and application of that knowledge and skill in
providing services to clients. Competence also includes the wisdom to
recognize the limitations of that knowledge and when consultation with
other professionals is appropriate or referral to other professionals
necessary. Certificants make a continuing commitment to learning and
professional improvement.
Principle 4 – Fairness
Be fair and reasonable in all professional relationships. Disclose
conflicts of interest.
Fairness requires impartiality, intellectual honesty and disclosure of
material conflicts of interest. It involves a subordination of one’s own
feelings, prejudices and desires so as to achieve a proper balance of
conflicting interests. Fairness is treating others in the same fashion
that you would want to be treated.
Principle 5 – Confidentiality
Protect the confidentiality of all client information.
Confidentiality means ensuring that information is accessible only to
those authorized to have access. A relationship of trust and confidence
with the client can only be built upon the understanding that the
client’s information will remain confidential.
Principle 6 – Professionalism
Act in a manner that demonstrates exemplary professional conduct.
Professionalism requires behaving with dignity and courtesy to clients,
fellow professionals, and others in business-related activities.
Certificants cooperate with fellow certificants to enhance and maintain
the profession’s public image and improve the quality of services.
Principle 7 – Diligence
Provide professional services diligently.
Diligence is the provision of services in a reasonably prompt and
thorough manner, including the proper planning for, and supervision
of, the rendering of professional services.
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RULES
The following is the entire Rules section of the Code. Interpretations of the rules will
be discussed later on.
The Rules of conduct establish the high standards expected of certificants and describe
the level of professionalism required of certificants. The Rules of Conduct are binding on
all certificants, regardless of their title, position, or type of employment or method of
compensation, and they govern all those who have the right to use the CFP® mark,
whether or not those marks are actually used. The universe of activities engaged in by a
certificants is diverse, and a certificants may perform all, some or none of the typical
services provided by financial planning professionals. Some Rules may not be applicable
to a certificant’s specific activity. As a result, when considering the Rules of Conduct, the
certificant must determine whether a specific Rule is applicable to those services. A
certificant will be deemed to be in compliance with these Rules if that certificants can
demonstrate that his or her employer completed the required action.
Violations of the Rules of Conduct may subject a certificant or registrant to discipline.
Because CFP Board is a certifying and standards setting body for those individuals who
have met and continue to meet CFP Board’s initial and ongoing certification
requirements, discipline extends to the rights of registrants and certificants to use the
CFP® marks. Thus, the rules are not designed to be a basis for legal liability to any third
party.
Rule 1.1
The certificant and the prospective client or client shall mutually agree upon the services
to be provided by the certificant.
Rule 1.2
If the certificant’s services include financial planning or material elements of the
financial planning process, prior to entering into an agreement, the certificant shall
provide written information and/or discuss with the prospective client or client the
following:
a. The obligations and responsibilities of each party under the agreement with respect to:
i Defining goals, needs and objectives,
ii Gathering and providing appropriate data,
iii Examining the result of the current course of action without changes,
iv The formulation of any recommended actions,
v Implementation responsibilities, and
vi Monitoring responsibilities.
b. Compensation that any party to the agreement or any legal affiliate to a party to the
agreement will or could receive under the terms of the agreement; and factors or terms
that determine costs, how decisions benefit the certificant and the relative benefit to the
certificant.
c. Terms under which the agreement permits the certificant to offer proprietary products.
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d. Terms under which the certificant will use other entities to meet any of the agreement’s
obligations. If the certificant provides the above information in writing, the certificant
shall encourage the prospective client or client to review the information and offer to
answer any questions that the prospective client or client may have.
Rule 1.3
If the services include financial planning or material elements of the financial planning
process, the certificant or the certificant’s employer shall enter into a written agreement
governing the financial planning services (“Agreement”). The Agreement shall specify:
a. The parties to the Agreement,
b. The date of the Agreement and its duration,
c. How and on what terms each party can terminate the Agreement, and
d. The services to be provided as part of the Agreement. The Agreement may consist of
multiple written documents. Written documentation that includes the elements above and
is used by a certificant or certificant’s employer in compliance with state and/or federal
law, or the rules or regulations of any applicable self-regulatory organization, such as a
Form ADV or other disclosure, shall satisfy the requirements of this Rule.
Rule 1.4
A certificant shall at all times place the interest of the client ahead of his or her own.
When the certificant provides financial planning or material elements of the financial
planning process, the certificant owes to the client the duty of care of a fiduciary as
defined by CFP Board.
Rule 2.1
A certificant shall not communicate, directly or indirectly, to clients or prospective clients
any false or misleading information directly or indirectly related to the certificant’s
professional qualifications or services. A certificant shall not mislead any parties about
the potential benefits of the certificant’s service. A certificant shall not fail to disclose or
otherwise omit facts where that disclosure is necessary to avoid misleading clients.
Rule 2.2
A certificant shall disclose to a prospective client or client the following information:
a. An accurate and understandable description of the compensation arrangements being
offered. This description must include:
i. Information related to costs and compensation to the certificant and/or the
certificant’s employer, and
ii. Terms under which the certificant and/or the certificant’s employer may
receive any other sources of compensation, and if so, what the sources of these
payments are and on what they are based.
b. A general summary of likely conflicts of interest between the client and the certificant,
the certificant’s employer or any affiliates or third parties, including, but not limited to,
information about any familial, contractual or agency relationship of the certificant or the
certificant’s employer that has a potential to materially affect the relationship.
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c. Any information about the certificant or the certificant’s employer that could
reasonably be expected to materially affect the client’s decision to engage the certificant
that the client might reasonably want to know in establishing the scope and nature of the
relationship, including but not limited to information about the certificant’s areas of
expertise.
d. Contact information for the certificant and, if applicable, the certificant’s employer.
e. If the services include financial planning or material elements of the financial planning
process, these disclosures must be in writing. The written disclosures may consist of
multiple written documents. Written disclosures used by a certificant or certificant’s
employer that includes the elements listed above, and are used in compliance with state
or federal laws, or the rules or requirements of any applicable self-regulatory
organization, such as a Form ADV or other disclosure documents, shall satisfy the
requirements of this Rule. The certificant shall timely disclose to the client any material
changes to the above information.
(Rule 1.3 requires financial planning engagements to be accompanied by a written
agreement specifying the services to be provided as part of the Agreement. Rule 2.2(e)
requires written disclosure of compensation arrangements, among other things. Changes
to services offered or compensation arrangements should be established definitively
through revision of these written agreements, thereby eliminating the need for periodic
updates.)
Rule 3.1
A certificant shall treat information as confidential except as required in response to
proper legal process; as necessitated by obligations to a certificant’s employer or
partners; to defend against charges of wrongdoing; in connection with a civil dispute; or
as needed to perform the services.
Rule 3.2
A certificant shall take prudent steps to protect the security of information and property,
including the security of stored information, whether physically or electronically, that is
within the certificant’s control.
Rule 3.3
A certificant shall obtain the information necessary to fulfill his or her obligations. If a
certificant cannot obtain the necessary information, the certificant shall inform the
prospective client or client of any and all material deficiencies.
Rule 3.4
A certificant shall clearly identify the assets, if any, over which the certificant will take
custody, or exercise investment discretion, or exercise supervision.
Rule 3.5
A certificant shall identify and keep complete records of all funds or other property of a
client in the custody, or under the discretionary authority, of the certificant.
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Rule 3.6
A certificant shall not borrow money from a client. Exceptions to this Rule include:
a. The client is a member of the certificant’s immediate family, or
b. The client is an institution in the business of lending money and the borrowing is
unrelated to the professional services performed by the certificant.
Rule 3.7
A certificant shall not lend money to a client. Exceptions to this Rule include:
a. The client is a member of the certificant’s immediate family, or
b. The certificant is an employee of an institution in the business of
lending money and the money lent is that of the institution, not the certificant.
Rule 3.8
A certificant shall not commingle a client’s property with the property of the certificant
or the certificant’s employer, unless the commingling is permitted by law or is explicitly
authorized and defined in a written agreement between the parties.
Rule 3.9
A certificant shall not commingle a client’s property with other clients’ property unless
the commingling is permitted by law or the certificant has both explicit written
authorization to do so from each client involved and without sufficient record-keeping to
track each client’s assets accurately.
Rule 3.10
A certificant shall return a client’s property to the client upon request as soon as
practicable or consistent with a time frame specified in an agreement with the client.
Rule 4.1
A certificant shall treat prospective clients and clients fairly and provide professional
services with integrity and objectivity.
Rule 4.3
A certificant shall be in compliance with applicable regulatory requirements governing
professional services provided to the client.
Rule 4.4
A certificant shall exercise reasonable and prudent professional judgment in providing
professional services to clients.
Rule 4.5
In addition to the requirements of Rule 1.4, a certificant shall make and/or implement
only recommendations that are suitable for the client.
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Rule 4.6
A certificant shall provide reasonable and prudent professional supervision or direction to
any subordinate or third party to whom the certificant assigns responsibility for any client
services.
A certificant shall advise his or her current clients of any certification suspension or
revocation he or she receives from CFP Board.
Rule 4.7
A certificant shall advise his or her current clients of any certification suspension or
revocation he or she receives from CFP Board.
Rule 5.1
A certificant who is an employee/agent shall perform professional services with
dedication to the lawful objectives of the employer/principal and in accordance with CFP
Board’s Code of Ethics.
Rule 5.2
A certificant who is an employee/agent shall advise his or her current employer/principal
of any certification suspension or revocation he or she receives from CFP Board.
Rule 6.1
A certificant shall abide by the terms of all agreements with CFP Board, including, but
not limited to, using the CFP® marks properly and cooperating fully with CFP Board’s
trademark and professional review operations and requirements.
Rule 6.2
A certificant shall meet all CFP Board requirements, including continuing education
requirements, to retain the right to use the CFP® marks.
Rule 6.5
A certificant shall not engage in conduct which reflects adversely on his or her integrity
or fitness as a certificant, upon the CFP® marks, or upon the profession. No equivalent
FINANCIAL PLANNING PRACTICE STANDARDS and RULES
The following is an update to the Practice Standards and Rules section of the Code
NOTE: CFP Board considers the Financial Planning Practice Standards as the best
practices for financial planning professionals, and CFP Board’s Disciplinary and Ethics
Commission and Appeals Committee use them in evaluating conduct to determine if the
Rules of Conduct have been violated. A few minor revisions to the introductory and
explanatory materials in the Financial Planning Practice Standards have been made to
ensure their consistency with the Rules of Conduct.
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Specific elements of the guidelines in the Financial Planning Practice Standards have
been restated as binding Rules within the proposed Rules of Conduct, as outlined below.
Financial Planning Practice Standards are developed and promulgated by Certified
Financial Certificant Board of Standards Inc. (CFP Board) for the ultimate benefit of
consumers of financial planning services.
These Practice Standards are intended to:
1. Assure that the practice of financial planning by CFP® professionals is based on
established norms of practice.
2. Advance professionalism in financial planning, and
3. Enhance the value of the financial planning process
CFP BOARD
CODE OF ETHICS
AND
PROFESSIONAL RESPONSIBILITY
Script:
Every profession that wants the respect of the public demands a high degree
of ethical behavior from its members. The CFP Board has developed the
Code of Ethics for the purpose of providing principles and rules to all CFP
Board certificants.
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CFP
BOARD
CODE
OF
ETHICS
PROFESSIONAL RESPONSIBILITY
AND
Script:
There are seven principles in the Code of Ethics. We will do a brief
summary of what they are about. But before that, let’s look at the Why,
What, and Who of the code.
Why: The Code of Ethics was adopted by the Board to provide ethical
guidance to an individual who is certified to use the CFP® mark when
working in any field where a special knowledge is used, or where, as a CFP®
certificant, that individual is expected to act in an ethical and professionally
responsible manner.
What: The Code of Ethics is made up of MULITPLE parts. Part I is the
Principles. Part II is the Rules of Conduct. Part III are the Practice
Standards and Part IV is the Disciplinary Rules and procedures.
Additionally, the Practice Standards are in integral part of the ethical
business practices of CFP Board certificants. The Principles apply to all
CFP Board certificants, all of the time. The Rules apply whenever they are
applicable to the individuals work. The Practice Standards apply to CFP
Board certificants performing personal financial planning. The Practice
Standards are separate from the Code of Ethics. They are not a sub-part of
the Code of Ethics.
Who: The CFP Board takes the position that the Code of Ethics and Practice
Standards apply to all who have earned the right to use the CFP® mark, but
anyone who is registered with the CFP Board as a candidate to earn the
CFP® mark.
All of this is presented just before the Principles of the code as the Preamble
and Applicability; Composition and Scope, and Compliance paragraphs.
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WHAT’S THE POINT OF HAVING A CODE OF ETHICS?
Script:
You may wonder: What’s the point of having a Code of Ethics? Why do we
need all of this stuff? Who cares?
Great questions. What’s the point of traffic laws? Why do professions go to
all this work to put into writing what everyone is doing anyway?
The reality is that everyone isn’t “doing it” as they should. The public wants
to be able to refer to some list of rules to see if you have any guidance in
how you operate your practice. And, if CFP Board is going to be
responsible for making the CFP® marks a positive image in the public eye, it
needs a way to measure if someone isn’t acting appropriately.
So next you’re thinking that this huge set of principles, rules and practice
standards is a giant trap and that the Board is just waiting to spring on you
and take away your hard earned CFP certification for the slightest infraction.
RELAX, it doesn’t work that way. No one is keeping score. It’s hard to
imagine anyone having a complaint about the principles. They are
obviously reasonable. The rules apply where they are appropriate, and the
practice standards, when you read them, are mostly common sense. All of it
is in place to protect you and your clients. And trust me, when it comes to
giving people advice about their finances, you want to be protected.
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SECTION V
THE PRINCIPALS
Script:
Now we’ll tackle the Principles. A way to remember the principles is
through the saying, “I Only Care for Cash Paid Daily”. The principles
correspond to the first letter of each word.
The seven principles are:
•
•
•
•
•
•
•
Integrity
Objectivity
Competence
Fairness
Confidentiality
Professionalism, and
Diligence
Now we’ll have a quiz on the details of the Principles. A score of 85% or
better will be required to get credit for the workshop.
JUST KIDDING!
First, let’s look at them individually and see what they mean.
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PRINCIPLE 1
INTEGRITY
Script:
The first principle reads: Provide professional services with integrity.
Sounds pretty straightforward. This does not mean that you must be perfect
in everything you do for a client. Just be as perfect as you can be. This
principle focuses on honesty and candor, and making sure that your actions
are for the best interest of the client, not you. Adhering to this principle
requires not just abiding by the written word of the Code of Ethics, but the
spirit as well.
PRINCIPLE 2
OBJECTIVITY
The second principle reads: Provide professional services objectively.
Hang your preconceived notions at the door. Those biases, prejudices, and
old wives tales about insurance, mutual funds, stocks, tax planning, estate
planning, employee benefits and the rest, have no place in the office of a
professional financial planner. In the words of the CFP Board, “Objectivity
requires intellectual honesty and impartiality.”
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PRINCIPLE 3
COMPETENCE
Principle three reads: Maintain the knowledge and skill necessary to
provide professional services competently.
This principle says that it’s great that you were awarded the right to use the
CERTIFIED FINANCIAL PLANNER™ mark. BUT, you now have the
obligation to keep up and to recognize what it is that you don’t know. Being
a competent CERTIFIED FINANCIAL PLANNER™ practitioner means
knowing what you know, knowing what you don’t know, the wisdom to be
able to tell the difference, and the courage to admit it.
PRINCIPLE 4
FAIRNESS
Principle number 4 reads: Be fair and reasonable in all professional
relationships. Disclose conflict(s) of interest(s) in providing such services.
Being awarded the right to use the CFP® mark is not the equivalent of being
anointed with sainthood. You didn’t suddenly become able to subsist on air
and have all negative, hurtful, biased thoughts purged from your mind. You
didn’t suddenly become separated from every financial transaction of your
life. You will still have your personal point of view. You will still have a
bias for or against certain financial products or industries. However, it is
incumbent on you to maintain impartiality and intellectual honesty and
disclose your position or beliefs whenever they MIGHT conflict with any
service you provide or advice you give.
For this principle, think of this modified golden rule. Do unto others what
you would have others, who may have differing points of view and beliefs,
do unto you.
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PRINCIPLE 5
CONFIDENTIALITY
Principle five reads: Protect the confidentiality of all client information.
When a client tells you all of his or her financial wants and desires,
combined with a full disclosure of their personal finances, you are expected
to keep it to yourself. Any financial planning engagement is based on trust
and confidence. If you betray that trust by sharing client information, your
clients won’t have any confidence that you are working in their best interest.
PRINCIPLE 6
PROFESSIONALISM
The sixth principle reads: Act in a manner that demonstrates exemplary
professional conduct.
As a member of the financial planning profession, you have an obligation to
promote and maintain the image of this profession. You are expected to
treat clients, other CFP Board’s certificants, and those in related professions
with courtesy and dignity. Conversely, you are not to do anything that
would bring discredit to the profession. CFP Board works very hard to
maintain the image of its certification, and you, as beneficiaries of that
effort, are expected to help.
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PRINCIPLE 7
DILIGENCE
And the seventh principle reads: Provide professional services diligently.
Doesn’t it drive you crazy when a word is defined with itself? Diligence
means that you do your job of financial planning well, do it thoroughly, and
do it in a timely manner. Diligence is not grabbing your client’s file two
hours before your meeting and throwing something together. Diligence is
not using a one-size-fits-most approach.
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SECTION VI
THE RULES OF CONDUCT
Script:
Knowing the principles is a great start. However, because of the diverse
nature of CFP Board certificant’s activities, CFP Board adopted the rules of
conduct to provide more specific guidelines. The rules identify specific
areas and activities under each principle that the CFP Board has in mind.
The rules are there to help CFP certificants understand the scope of the
principles.
The rules recognize that all CFP Board certificants do not work the same
way or have the same kinds of jobs. While all of the Principles apply to all
CFP Board certificants, not all of the rules will. Each certificant has to take
the time to determine if a specific rule fits the work he or she does.
The rules have two digit numbers, the first digit relates to the particular
section of the rules of conduct and the second number represents the order
under which that particular rule falls within that section.
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Rules of Conduct
The Rules of Conduct establish the high standards expected of certificants and describe the level of
professionalism required of certificants. The Rules of Conduct are binding on all certificants, regardless of
their title, position, type of employment or method of compensation, and they govern all those who have the
right to use the CFP® marks, whether or not those marks are actually used. The universe of activities
engaged in by a certificant is diverse, and a certificant may perform all, some or none of the typical services
provided by financial planning professionals. Some Rules may not be applicable to a certificant's specific
activity. As a result, when considering the Rules of Conduct, the certificant must determine whether a
specific Rule is applicable to those services. A certificant will be deemed to be in compliance with these
Rules if that certificant can demonstrate that his or her employer completed the required action.
Violations of the Rules of Conduct may subject a certificant or registrant to discipline. Because CFP Board is
a certifying and standards-setting body for those individuals who have met and continue to meet CFP
Board's initial and ongoing certification requirements, discipline extends to the rights of registrants and
certificants to use the CFP® marks. Thus, the Rules are not designed to be a basis for legal liability to any
third party.
CONTENTS of the Rules of Conduct
1. Defining the Relationship with the Prospective Client or Client
2. Information Disclosed to Prospective Clients and Clients
3. Prospective Client and Client Information and Property
4. Obligations to Prospective Clients and Clients
5. Obligations to Employers
6. Obligations to CFP Board
1. Defining the Relationship with the Prospective Client or Client
1.1 The certificant and the prospective client or client shall mutually agree upon the services to be provided
by the certificant.
1.2 If the certificant's services include financial planning or material elements of the financial planning
process, prior to entering into an agreement, the certificant shall provide written information and/or discuss
with the prospective client or client the following:
a. The obligations and responsibilities of each party under the agreement with respect to:
i. Defining goals, needs and objectives,
ii. Gathering and providing appropriate data,
iii. Examining the result of the current course of action without changes,
iv. The formulation of any recommended actions,
v. Implementation responsibilities, and
vi. Monitoring responsibilities.
b. Compensation that any party to the agreement or any legal affiliate to a party to the agreement will or
could receive under the terms of the agreement; and factors or terms that determine costs, how decisions
benefit the certificant and the relative benefit to the certificant.
c. Terms under which the agreement permits the certificant to offer proprietary products.
d. Terms under which the certificant will use other entities to meet any of the agreement's obligations.
If the certificant provides the above information in writing, the certificant shall encourage the prospective
client or client to review the information and offer to answer any questions that the prospective client or client
may have.
1.3 If the services include financial planning or material elements of the financial planning process, the
certificant or the certificant's employer shall enter into a written agreement governing the financial planning
services (“Agreement”). The Agreement shall specify:
a. The parties to the Agreement,
b. The date of the Agreement and its duration,
c. How and on what terms each party can terminate the Agreement, and
d. The services to be provided as part of the Agreement.
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The Agreement may consist of multiple written documents. Written documentation that includes the
elements above and is used by a certificant or certificant's employer in compliance with state and/or federal
law, or the rules or regulations of any applicable self-regulatory organization, such as a Form ADV or other
disclosure, shall satisfy the requirements of this Rule.
1.4 A certificant shall at all times place the interest of the client ahead of his or her own. When the certificant
provides financial planning or material elements of the financial planning process, the certificant owes to the
client the duty of care of a fiduciary as defined by CFP Board.
Rule 1.1 ensures that what you and the client are entering into is mutually
agreeable.
Rule 1.2 ensures provides a framework for the services you will be
providing be in writing or discussed with a prospective client or client.
Rule 1.3 states that when the parties enter into a financial planning
engagement for services that various governing written facts be present,
including the parties to the contract, date and duration, termination rights
and services to be provided.
Rule 1.4 requires you to put the client’s interests ahead of your own, always.
Keep this rule in mind all of the time and it’s less likely any of the other
rules will be broken.
As stated earlier, when responding to the following series of questions, please tie back,
where you can, to any of the new Learning Objectives for CFP Board Ethics CE
Programs.
The 2014 Learning Objectives have been re-listed here for you convenience.
1. Define elements of the fiduciary standard.
2. Determine when the fiduciary standard applies in a variety of financial planning
contexts and scenarios.
3. Determine if a CFP® professional is providing financial planning services or
material elements of financial planning services.
4. Explain CFP Board's compensation disclosure requirements to clients and
prospective clients recommendations to the client/prospective client.
5. Communicate any potential conflicts of interest to a client at the initiation of client
engagement.
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Let’s get ready to rumble!!!
Question #1:
New Code 1.4
Larry was working as a CFP® certificant for a financial services firm. He
manages client assets, has complete discretionary authority over clients
money, yet his firm does not recognize that any firmwide advisors are
considered fiduciaries. Unbeknownst to his firm, Larry illegally uses a
client’s money to buy a vacation house in Mexico for his own use. The firm
gets sued by the client. The firm contends that Larry acted on his own and he
and not the firm is responsible for client retribution. What kind of liability
and responsibility is borne to Larry and to the Firm?
Question #2:
New Code 1.4
- Harmon’s financial planning practice was fee and commission. Julianna, a
referral to Harmon, inherited some money from her grandmother and wanted
to put it away for retirement, but not in an IRA. She wanted to avoid taxes
on any earnings until retirement. Even with over 20 years from her expected
retirement, she was not comfortable with the use of equities. She and
Harmon discussed a number of options and decided on a Single Premium
Deferred Annuity. They looked at two VAs. Aardvark Life offered 8% the
first year as an incentive, adjusted annually, and with a guaranteed 2.5%
minimum interest rate. It paid a straight 5% commission. Aardvark Life
had one 2nd level rating, one third level rating and two 5th level ratings from
four different rating agencies. Boring Life offered 7.25% for the first three
years and a minimum guaranteed interest rate of 3.5%. It paid a 2%
commission each year for the first five years if the annuity stayed in place;
total commission of 10%. Boring Life had two top ratings, one 2nd level
rating and 1 third level rating from the same four rating companies as
Aardvark. In reviewing the last 10 years worth of payouts for the two
companies, Boring Life seems to average a higher return, but also has higher
surrender charges for seven years. Harmon recommended using Boring Life.
How did Harmon do?
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Question #3:
New Code 1.2
- Carlton Clinebeck, a CFP® practitioner, met with Seth Watson to discuss a
possible financial planning engagement. In discussing Seth’s needs and
objectives, it was clear that there wasn’t much Carlton could do other than to
refer him to an estate planning lawyer to do some fine tuning of his estate
plan. However, Seth was moderately wealthy and the fee for doing nothing
more than putting the organization of his financial life on paper could bring
in a very nice fee. The work that he would do wouldn’t likely improve
Seth’s financial position, and it would be the lawyer who would take care of
the document preparation, but Carlton thought that Seth might be more
comfortable just seeing it all on paper, so he suggested that he and Seth enter
into a full financial planning relationship. Carlton gave him all of the
disclosure information, laid out the fee schedule and provided a list of
documents and information to be brought to the next meeting.
How did Carlton do?
Rules that relate to the Prospective Clients and Clients
2. Information Disclosed To Prospective Clients and Clients
2.1 A certificant shall not communicate, directly or indirectly, to clients or prospective clients any false or
misleading information directly or indirectly related to the certificant's professional qualifications or services.
A certificant shall not mislead any parties about the potential benefits of the certificant's service. A certificant
shall not fail to disclose or otherwise omit facts where that disclosure is necessary to avoid misleading
clients.
2.2 A certificant shall disclose to a prospective client or client the following information:
a. An accurate and understandable description of the compensation arrangements being offered. This
description must include:
i. Information related to costs and compensation to the certificant and/or the certificant's employer, and
ii. Terms under which the certificant and/or the certificant's employer may receive any other sources
of compensation, and if so, what the sources of these payments are and on what they are based.
b. A general summary of likely conflicts of interest between the client and the certificant, the certificant's
employer or any affiliates or third parties, including, but not limited to, information about any familial,
contractual or agency relationship of the certificant or the certificant's employer that has a potential to
materially affect the relationship.
c. Any information about the certificant or the certificant's employer that could reasonably be expected to
materially affect the client's decision to engage the certificant that the client might reasonably want to
know in establishing the scope and nature of the relationship, including but not limited to information
about the certificant's areas of expertise.
d. Contact information for the certificant and, if applicable, the certificant's employer.
e. If the services include financial planning or material elements of the financial planning process, these
disclosures must be in writing. The written disclosures may consist of multiple written documents. Written
disclosures used by a certificant or cetificant's employer that includes the elements listed above, and are
used in compliance with state or federal laws, or the rules or requirements of any applicable self-regulatory
organization, such as a Form ADV or other disclosure documents, shall satisfy the requirements of this Rule.
The certificant shall timely disclose to the client any material changes to the above information.
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Here are some general observations about the rules of conduct in this series.
Disclosure is the focus of the 2.2 series of rules. It requires that you tell
your clients everything the law says you have to tell them, and everything
that materially affects the financial planning relationship.
You are expected to tell your clients how you work and how you think about
financial planning. Tell them of any conflicts of interest and all sources of
your compensation. They need to know about everyone who will be
involved in the process. How you are paid for doing financial planning is
part of this and it is quite clear that you may not call yourself a fee-only
financial planner if you sell products and earn a commission concurrent with
doing the planning. Clients need to be told if you are an employee or
working as an agent for someone else.
If you know that a relationship you have with an individual or a company
affects your ability to be objective or independent, tell your client. It is
critically important that the client know. We can assume that you will be as
objective and independent as you can be, but if the client finds out after the
fact, his or her assumption may be that you were not objective.
If a conflict of interest comes up after the relationship has been established,
tell the client and anyone else involved, immediately. If they find out later,
you have ruined the relationship. It’s better to lose a client than be faced
with a lawsuit.
You have to regularly disclose to your clients how you get paid. Since you
need to disclose how the payments are based, what you get paid should be
fair and reasonable.
Rule 2.1 deals with truth in communicating misleading information. This
also includes advertising. Don’t claim to know more than you do or that you
can do more than you can about your professional qualifications. This means
in print or in the words you speak. Honesty is the best policy.
Rule 2.2 provides a framework for disclosure requirements. If entering into a
financial planning relationship, these disclosures must be in writing,
including requirements you have to adhere to/from other regulatory
organizations. Source (and not amount) of compensation must be disclosed,
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conflicts of interest that can materially affect the relationship, and employer
relationships, including contact info, that can affect the scope and nature of
the engagement.
You have an obligation to provide disclosure to your employer, your
principal if you are an agent, and/or your business partners of any activities
or circumstances that might materially affect their working relationship with
you. Any changes in those activities or circumstances must also be
disclosed. You must also disclose to them any relevant compensation you
receive.
Question #4:
NEW CODE 2.1
- Alec, Anne, Andrew, and Abigail all went through their financial planning
studies together. All four worked for one of the national companies that use
financial planning as an entrée to selling mutual funds and insurance. They
became good friends and found that they worked well together. Three years
after becoming certified, they decided they wanted to start their own
financial planning firm. The name was easy: “AAAA Financial Planning.”
They spent nearly two years working on their business plan. On the fifth
anniversary of becoming certified, they opened the doors. Their company
brochure had all of the required disclosure material clearly set forth. The
cover proudly touted their 20 years of financial planning experience and
ability to handle “all of your financial planning needs.” The same
information was on their business cards and mailings they sent to all of their
previous clients.
What’s wrong with this picture?
Question 5:
New Code 2.2
- Davis
partners
broker’s
practice
and Karen share a financial planning practice. They are also
in a number of real estate investments – both having real estate
licenses, they own a mortgage company, and have a seasonal tax
with a CPA they know. Their disclosure information includes
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references to broad based, fee-only financial planning, real estate
investments, credit management and tax advice. Prospective clients also
learn when Davis and Karen became certified and see a list of organizations
for which they have been speakers.
How is their disclosure?
Question #6:
New Code 2.2
- Marlene Wisnant is a CFP Board certificant who specializes in the
financial planning issues of divorce. She is in a small planning firm of five
certificants. She agreed to do financial planning for Joan Martin who had
just started her divorce proceedings. Between their first meeting and the fact
finding meeting Marlene found out that one of the other certificants, with
whom she did a great deal of joint work, had agreed to work with Joan’s
soon to be “ex.”
What is Marlene’s obligation to Joan at this point?
Question #7:
New Code 2.2
- Billie Swan, CFP®, was employed by Dollar & Sense Financial Planning,
LLC. She is paid well in that most of the clients are fairly high end and the
average client fee is in excess of $10,000 initially, with a minimum $5,000
retainer. The firm also provides asset management services, estate planning,
legal document preparation and income tax preparation. A lot of Billie’s
friends could use some help with their financial planning, and they really
want her help because she is clearly competent in the work she does. Her
friends understand that this is her profession, and other than an offhanded
question now and then they feel they need to pay her for her expertise. She
has a small, word of mouth practice on weekends doing financial plans for
her not so wealthy friends.
Does she have an obligation to tell her employer about this?
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Question #8:
New Code 2.2
- Steve, Karl, and Suzanne, all CFP Board certificants, agreed to establish a
financial planning partnership. They each put together a list of material
information about their licensing, legal status, credentials, and all of the rest
of the information that they needed to provide to have full disclosure to one
another. Karl, however, chose to leave out some information. Twelve years
earlier, he was in the middle of a divorce and made some very bad financial
choices. That led him to do some stupid things with client’s money. He lost
his securities license for two years, his insurance license for a year, and was
fined over $100,000. All of this happened in another state, and five years
ago, when it was all over, including getting his finances straight after paying
the fine, he moved to the city where he met Steve and Suzanne. Since it was
over and done with, he didn’t think it was necessary to tell them about it.
Is he right: is it okay not to tell Steve and Suzanne about this dark period?
Rules that relate to Prospective client and Client Information
3. Prospective Client and Client Information and Property
3.1 A certificant shall treat information as confidential except as required in response to proper legal
process; as necessitated by obligations to a certificant's employer or partners; to defend against charges of
wrongdoing; in connection with a civil dispute; or as needed to perform the services.
3.2 A certificant shall take prudent steps to protect the security of information and property, including the
security of stored information, whether physically or electronically, that is within the certificant's control.
3.3 A certificant shall obtain the information necessary to fulfill his or her obligations. If a certificant cannot
obtain the necessary information, the certificant shall inform the prospective client or client of any and all
material deficiencies.
3.4 A certificant shall clearly identify the assets, if any, over which the certificant will take custody, exercise
investment discretion, or exercise supervision.
3.5 A certificant shall identify and keep complete records of all funds or other property of a client in the
custody, or under the discretionary authority, of the certificant.
3.6 A certificant shall not borrow money from a client. Exceptions to this Rule include:
a. The client is a member of the certificant's immediate family, or
b. The client is an institution in the business of lending money and the borrowing is unrelated to the
professional services performed by the certificant.
3.7 A certificant shall not lend money to a client. Exceptions to this Rule include:
a. The client is a member of the certificant's immediate family, or
b. The certificant is an employee of an institution in the business of lending money and the money lent is that
of the institution, not the certificant.
3.8 A certificant shall not commingle a client's property with the property of the certificant or the certificant's
employer, unless the commingling is permitted by law or is explicitly authorized and defined in a written
agreement between the parties.
3.9 A certificant shall not commingle a client's property with other clients' property unless the commingling is
permitted by law or the certificant has both explicit written authorization to do so from each client involved
and sufficient record-keeping to track each client's assets accurately.
3.10 A certificant shall return a client's property to the client upon request as soon as practicable or
consistent with a time frame specified in an agreement with the client.
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Rule 3.1: Information about your client’s financial affairs, your employer’s
financial affairs, and your business associates’ financial affairs is to be kept
confidential and should not be used for your own benefit. It doesn’t matter if
disclosing it would actually cause harm or not. There are a few exceptions:
a) Only as necessary to carry out the work you agreed to do for the
client.
b) To comply with legal requirements or legal process.
c) To defend yourself against charges of wrongdoing in a court of law or
in front of CFP Board’s Disciplinary and Ethics Commission.
d) In connection with a civil dispute between you and your client.
This requirement continues even after the relationship ends.
Rule 3.2: Take the time and be prudent about protecting the security of
confidential client information.
Rule 3.3: Inform the client of any material deficiencies. This is important
because you can not complete a reliable plan without obtaining as much
relevant information as possible. The old “garbage in garbage out” adage
applies here.
Rules 3.4 and 3.5: Clearly identify the assets and keep complete records of
all funds.
Rules 3.6 and 3.7: As a general rule, do NOT borrow or lend money to a
client. Period! However, there are a few exceptions worth noting. These
include family members, if the certificant works for an entity that is in the
business of lending money and the borrowing is unrelelated to the
professional services performed by the certificant, or if the certificant works
for an institution where the money lent is that of the institution and not of the
certificant.
Rules 3.8 and 3.9: To avoid future issues, do NOT Commingle a client’s
property with your property or someone else’s unless it is permitted by law.
Still, it is not advisable to do this.
Rule 3.10: If your client asks for his or her original records, return them as
soon as practicable. This means even if he or she owes you money.
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Question #9:
New Code 3.1
- Markus Weimer, a CFP® practitioner, was notified by CFP Board that it
received a complaint from one of his clients regarding significant questions
regarding his adherence to the Code of Ethics and that the Disciplinary and
Ethics Commission was investigating the allegations. He made copies of
pertinent portions of the client’s file to give to the Disciplinary and Ethics
Commission to review while he explains his position and defends himself.
Is this permissible disclosure of confidential information?
Question #10:
New Code 3.1
- David, Scott and Bob started a financial planning partnership 12 years ago.
Their skills and interests seem to mesh pretty well at that time. Their
business did well. Scott, at age 20 got into financial trouble and had
embezzled money from his employer. David and Bob knew about this
unfortunate experience. It happened fifteen years before they met, and Scott
had served some time in jail and repaid all of the money, plus interest. At
Scott’s suggestion, he wasn’t allowed to have access to any company or
client funds. Since this history was not relevant to the professional
relationship that knowledge was kept among the three of them. Over time
their interests and focus changed. David realized that he didn’t fit with the
firm anymore, so he exercised his option to sell his share of the partnership
to Scott and Bob, and left. He joined a couple of certificants he had known
for many years who had been competitors of his prior firm. When David
moved, he sent a letter to all of the clients with whom he had worked and
told them of the change. Many of them talked to him and asked why he left
the other firm. He explained that he wanted to move in a different direction
than the firm was going.
Would it have been permissible to divulge the information about Scott?
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Question #11:
New Code 3.3
- Mary Jane has had a financial planning practice for eight years. Part or her
practice involved tax return preparation, One of her planning and tax clients,
Jules, works in an auto body shop as a painter. He makes a good income,
but like everyone else wants a little extra. For years he collected fountain
pens. They were cheap for many years because no one else seemed to be
collecting them. He still finds them at garage and estate sales for bargain
prices. He has started selling them through an internet auction. The first
year he sold a few and took in about $150. He didn’t even mention it to
Mary Jane. Last year he was busy and made about $400 per month more
than he paid for the pens. When he asked Mary Jane what he should do
about this income, she said that it seemed to be merely a hobby and not to
worry about it.
Is there any Rule violation here?
Question #12:
New Code 3.8
- Larry’s financial planning practice involved asset management. He
actively managed client money in three families of mutual funds. All were
load funds, but since he controlled so much money in them, the fund
companies agreed to sell the shares to him with no load. Since the money
was, for all practical purposes, invested in something all of the time, Larry
didn’t think it made sense to set up and pay for a checking account merely
for the purpose of passing client money from the clients to the funds and
back. He used his business checking account for everything. He paid his
staff from it, rent, utilities, office supplies, travel, everything related to the
business. He also deposited client checks in it, and, without fail, within one
business day, transferred the client money into one fund or more, even if it
was merely a money market fund.
How’s he doing?
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Question #13:
New Code 3.10
- Carol Milder, a CFP® practitioner, attempted to work with Bill and Carlie
Pnastry for over a year. They missed appointments, didn’t provide the
requested information, gave conflicting information, and changed their
minds every time she spoke with them. She was very patient and did
everything she could think of to make the relationship work. As midNovember came around, and her year end planning sessions were the
heaviest, Bill and Carlie started calling and demanding that she put their file
in order and send it to them immediately because they needed it to do their
taxes. Carol had offices in two cities, and she was not where the Pnastry’s
file was. She also knew that nothing she had was necessary for them to do
their taxes, and she had only copies of records. Her response was that she
was working in her office on the other side of the state and that when she got
back to the other office, she would mail their file to them. The response
made them angry and they demanded that she have it couriered to them the
next day. She reiterated what she was able to do, and at the receiving end of
a hail of obscenities, hung up the phone.
Was Carol in violation of any rule?
Rules that relate to Obligations to Prospective Clients and Clients
4. Obligations to Prospective Clients and Clients
4.1 A certificant shall treat prospective clients and clients fairly and provide professional services with
integrity and objectivity.
4.2 A certificant shall offer advice only in those areas in which he or she is competent to do so and shall
maintain competence in all areas in which he or she is engaged to provide professional services.
4.3 A certificant shall be in compliance with applicable regulatory requirements governing professional
services provided to the client.
4.4 A certificant shall exercise reasonable and prudent professional judgment in providing professional
services to clients.
4.5 In addition to the requirements of Rule 1.4, a certificant shall make and/or implement only
recommendations that are suitable for the client.
4.6 A certificant shall provide reasonable and prudent professional supervision or direction to any
subordinate or third party to whom the certificant assigns responsibility for any client services.
4.7 A certificant shall advise his or her current clients of any certification suspension or revocation he or she
receives from CFP Board.
Rule 4.1 ensures that you treat clients fairly and provide professional
services with integrity and objectivity.
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When you begin a business transaction with a client, you must “bend over
backward” to make sure that he or she is aware of any relevant information
so that they are entering into a fair and equitable transaction.
Rule 4.2: CFP Board knows that you have a broad knowledge of the various
areas of financial planning. CFP Board also recognizes that with the
exception of the areas(s) in which you specialize, there maybe limited depth
to your knowledge. This rule demands that you be aware of when it is
appropriate to call in an expert. Know what you know, and know what you
don’t know. There is no shame in not being an expert in all areas of
financial planning. There is risk in pretending that you do.
If you are NOT competent in an area, you need to either punt, bring in
someone who can assist you or take the lead, or alert the client that this is
not an area you get involved with and provide qualified referrals.
Rule 4.3 discusses the following. You are obliged to abide by any laws, rules
or regulations imposed by any governmental agencies or other applicable
authorities as well as follow the rules, regulations and policies of CFP
Board. This is all to be done to avoid any conduct that may detract from the
CFP® mark or the financial planning profession.
Further, if you operate as an investment advisor, you must meet any
regulatory requirements to register and tell anyone who may be affected by
that registration that you are registered. The rule also states when you
shouldn’t refer to yourself as a Registered Investment Adviser, and it
reiterates the SEC position that you may not use the initials RIA or R.I.A. in
advertising or on business correspondence.
Rule 4.4 states that a CFP Board certificant shall exercise reasonable and
prudent professional judgment in providing professional services. This is
where intelligent thought replaces gut level reactions. It is what you know
to be true, not what you want to be true.
Rule 4.5 states not to get into a financial planning engagement unless the
individual’s needs and objectives warrant it, you can provide the necessary
services competently, and you can make recommendations that are
SUITABLE to the client.
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Rule 4.6 states that you are ultimately responsible for anything leaving your
office. Therefore, you need to supervise very carefully, any professionals,
paraplanners or admins you assign client work to.
Rule 4.7 You do have an obligation to report any changes in your licensing
status to your clients.
Question #14:
New Code 4.2
- Barbara Adams, a CFP® practitioner, has a great family financial planning
practice. She works primarily with middle income families. In order to
make it possible for them to pay for her services, she provides each family
with a book and CD of standard legal forms so they can put together their
own trusts, wills, powers of attorney, etc. She makes sure she tells them she
isn’t a lawyer and can’t prepare any forms for them, but she also answers
any questions they may have, to the best of her knowledge.
Is this approach acceptable?
Question #15:
New Code 4.2
- Charmaign’s financial planning practice is broad based. The principal of
her firm is a registered investment advisor. Her primary background, before
earning her CFP® certification, was as a series 6 licensed registered
representative for a mutual fund company. She is still a registered rep and
most of her CE courses deal with investment planning, asset management
and taxes. Jake and Julie Jonson are new clients of hers. She reviewed their
financial information and made a number of recommendations. She
included specific recommendations about investments, insurance, trusts and
estate planning issues.
Did she meet the requirements?
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Question #16:
New Code 4.4
- Wendy, a CFP® certificant provides broad based financial planning. One
of her clients asked her about an investment property he was considering in a
nearby suburb. Wendy had a bad experience with a piece of real estate in
that suburb about 10 years ago and so she told her client to look somewhere
else.
Does this comply with the rules?
Question #17:
New Code 4.6
- Stephanie Bramel, CFP® practitioner, started her own financial planning
firm 12 years ago. She now had eight other professionals working for her.
Her management style was essentially hands off. She figured all of her
certificants had earned their certification and deserved to be treated as
professionals. So it came as a big surprise when she was notified by the
Disciplinary and Ethics Commission about allegations that a certificant who
worked for her had been involved in serious breaches of the Code of Ethics.
Did Stephanie violate any code provision?
Rules that relate to the Obligations to Employers
5. Obligations To Employers
5.1 A certificant who is an employee/agent shall perform professional services with dedication to the lawful
objectives of the employer/principal and in accordance with CFP Board's Code of Ethics.
5.2 A certificant who is an employee/agent shall advise his or her current employer/principal of any
certification suspension or revocation he or she receives from CFP Board.
Rule 5.1: Even if you are working as an employee or agent of another
person, you, as a CFP® certificant, are bound to work within the framework
of the law, and your employer, and meet the requirements of these rules.
Rule 5.2 states that you are always responsible to notify the current
employer of any suspension or revocation from CFP Board.
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Question #18:
New Code 5.1
- Nadia Smith, a CFP® practitioner, is with one of the large financial services
firms. While working with the large company, she attends numerous
meetings and training sessions, few of which are preceded with notices that
information divulged in the meeting is confidential and not to leave the
company. Some of these involved the methods used to determine planning
fees, marketing methods, sales methods, and planning approaches. Nadia
was constantly amazed that the company thought any of the information was
unique to them, most of it seemed logical. Through her local association she
has developed some good friendships with other certificants. Some of them
were interested in how the large firm was different from the ways they were
working. Some of the questions touched on areas her firm said were
confidential. Since Nadia thought anything she related was either common
knowledge or common sense, she wasn’t concerned about giving details.
Under these circumstances, has Nadia done anything wrong?
Rules that relate to the Obligations to CFP Board
6. Obligations to CFP Board
6.1 A certificant shall abide by the terms of all agreements with CFP Board, including, but not limited to,
using the CFP® marks properly and cooperating fully with CFP Board's trademark and professional review
operations and requirements.
6.2 A certificant shall meet all CFP Board requirements, including continuing education requirements, to
retain the right to use the CFP®marks.
6.3 A certificant shall notify CFP Board of changes to contact information, including, but not limited to, e-mail
address, telephone number(s) and physical address, within forty-five (45) days.
6.4 A certificant shall notify CFP Board in writing of any conviction of a crime, except misdemeanor traffic
offenses or traffic ordinance violations unless such offense involves the use of alcohol or drugs, or of any
professional suspension or bar within ten (10) calendar days after the date on which the certificant is notified
of the conviction, suspension or bar.
6.5 A certificant shall not engage in conduct which reflects adversely on his or her integrity or fitness as a
certificant, upon the CFP®marks, or upon the profession.
Rule 6.1 implies that the CFP® designation must be used correctly. Any
improper use of the mark requires that you succumb to CFP Board’s
requirements for enforcement.
Rule 6.2: Keep up with what’s going on in financial planning and meet your
CE requirements. A certificant who meets CE requirements by seeking the
shortest route to the required hours is not complying with the spirit of the
Code of Ethics.
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Rules 6.3 – 6.4 requires immediate notification by you in the event that you
change contact information, are convicted of a crime (other than a traffic
violation).
Rule 6.5 states that always be a professional at all times. Your conduct
reflects positively or negatively against the mark and the profession as a
whole.
Question #19:
New Code 6.2
-DeAnn worked very hard to prepare for her certification exam. The Code
of Ethics and Practice Standards, were so full of details. She was glad that
she only had to learn it once. All she wanted to do was get through the exam
and then she could forget all these shalls and shall nots.
Is she right?
Question #20:
New Code 6.5
- Philip Scatter, CFP® was proud of his certification. He spent five years in
securities sales before studying for and passing the certification exam. With
his new proof of knowledge and expertise he jumped right in and started
accepting financial planning clients, just as his company wanted. As he
reviewed the materials brought in by clients, he would sometimes see nice
looking insurance needs analysis presentations along with various insurance
policies. In spite of what his study materials had tried to do to sway him, he
knew the truth. His most common comment was: “Look at this fancy report.
Unfortunately, these guys only put it together to sell you policies that made
them the most money. I’m confident I can get your insurance plan
straightened out.”
How professional is Philip’s demeanor in this case.
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Question #21:
New Code 6.2
- Marley has a great financial planning practice. He sees 20 clients a week,
all fee paying, sells investments, insurance, and does tax returns. As
expected, 60 - 70 hour weeks are the norm. He is so busy that he doesn’t
have a lot of time to read or take CE courses. He receives e-mails and
mailings about CE programs that can provide his necessary hours, at bargain
prices. As the deadline approaches for his CE requirements, he starts calling
on these folks and finds that he can get all of his hours by reading the
materials sent and taking a quiz that is intended to verify that he read all of
the material. One of the reps told him that most people can get 10 hours
worth of credits in about two and a half hours with each of their programs.
Knowing he can’t possibly find all the CE courses to attend before his time
runs out, he signs up for three “courses” that will provide all of his hours.
Is Marley meeting the requirements of the rules that apply to the principle of
Competence?
Question #22:
NEW CODE 6.5
- Hal earned his certification in 1978. He is quite proud of the fact that
he was an early member of the profession. With a thriving practice
and great respect from the financial planning community, he was
often asked for interviews about financial planning topics. In one
interview he was asked about the difference in certification
requirements today compared to when he became certified. He told
the interviewer that in his opinion CFP Board candidates of the last 10
years had a much more difficult time qualifying than those who came
earlier.
He emphasized that the long-standing CFP® certificants he knows
who have worked hard to improve the image of the CFP® mark and to
expand their own knowledge. The profession has matured over the years
and refined its focus and image a number of times. Hal told the
interviewer that he was comfortable with the way CFP Board had
focused on the activities of the profession and had worked to create
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practical guidelines for CFP Board certificants. He stated that he would
prefer it if the CFP Board made it more clear as to what a financial
planner does. Right now, financial planners operate in so many different
ways and with so many different focuses that it is hard to point to a
specific set of activities and say that those are the things that make
someone a financial planner. He said that it probably wasn’t possible,
but that it was something he thought about a lot.
Has a violation taken place here?
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SECTION VII.
FINANCIAL PLANNING PRACTICE STANDARDS
Script:
The CFP Board has established an ongoing process of developing Financial
Planning Practice Standards. This is the most recent development in CFP
Board’s efforts to improve the image of the CFP® marks.
THE PRACTICE STANDARDS
Financial Planning Practice Standards
Statement of Purpose for Financial Planning Practice Standards . . . . . . . . . . . . . . . . . . . . . . . . . . .
History of Practice Standards . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Description of Practice Standards . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Format of Practice Standards . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Compliance with Practice Standards . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
100 SERIES: Establishing and Defining the Relationship with the Client
100-1 Defining the Scope of the Engagement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
200 SERIES: Gathering Client Data
200-1 Determining a Client’s Personal and Financial Goals, Needs and Priorities . . . . . .
200-2 Obtaining Quantitative Information and Documents . . . . . . . . . . . . . . . . . . . . . . . .
300 SERIES: Analyzing and Evaluating the Client’s Financial Status
300-1 Analyzing and Evaluating the Client’s Information . . . . . . . . . . . . . . . . . . . . . . . . .
400 SERIES: Developing and Presenting the Financial Planning Recommendation(s)
Preface to the 400 Series . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
400-1 Identifying and Evaluating Financial Planning Alternative(s) . . . . . . . . . . . . . . . . .
400-2 Developing the Financial Planning Recommendation(s) . . . . . . . . . . . . . . . . . . . .
400-3 Presenting the Financial Planning Recommendation(s) . . . . . . . . . . . . . . . . . . . .
500 SERIES: Implementing the Financial Planning Recommendation(s)
500-1 Agreeing on Implementation Responsibilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
500-2 Selecting Products and Services for Implementation . . . . . . . . . . . . . . . . . . . . . . .
600 SERIES: Monitoring
600-1 Defining Monitoring Responsibilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Copyright © 1986-2011, CFP Board of Standards Inc. All rights reserved.
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STATEMENT OF PURPOSE FOR FINANCIAL PLANNING PRACTICE STANDARDS
Financial Planning Practice Standards are developed and promulgated by Certified Financial Certificant
Board of Standards Inc. (CFP Board) for the ultimate benefit of consumers of financial planning services.
These Practice Standards are intended to:
1. Assure that the practice of financial planning by CERTIFIED FINANCIAL CERTIFICANT™ professionals is
based on established norms of practice;
2. Advance professionalism in financial planning; and
3. Enhance the value of the financial planning process.
HISTORY OF PRACTICE STANDARDS
CFP Board is a professional regulatory organization founded in 1985 to benefit the public by establishing
and enforcing education, examination, experience and ethics requirements for CFP® professionals. Through
its certification process, CFP Board established fundamental criteria necessary for competency in the
financial planning profession.
In 1995, CFP Board established its Board of Practice Standards, composed exclusively of CFP®
practitioners, to draft standards of practice for financial planning. The Board of Practice Standards drafted
and revised the standards considering input from CFP® certificants, consumers, regulators and other
organizations. CFP Board adopted the revised standards.
DESCRIPTION OF PRACTICE STANDARDS
A Practice Standard establishes the level of professional practice that is expected of certificants engaged in
financial planning.
The Practice Standards apply to certificants in performing the tasks of financial planning regardless of the
person's title, job position, type of employment or method of compensation. Compliance with the Practice
Standards is mandatory for certificants whose services include financial planning or material elements of the
financial planning process, but all financial planning professionals are encouraged to use the Practice
Standards when performing financial planning tasks or activities addressed by a Practice Standard.
The Practice Standards are designed to provide certificants with a framework for the professional practice of
financial planning. Similar to the Rules of Conduct, the Practice Standards are not designed to be a basis for
legal liability to any third party.
The Practice Standards were developed for selected financial planning activities identified in a financial
certificant job analysis first conducted by CFP Board in 1987, updated in 1994 by CTB/McGraw-Hill, an
independent consulting firm, and again in 1999 by the Chauncey Group. The financial planning process is
defined as follows:
FORMAT OF PRACTICE STANDARDS
Each Practice Standard is a statement regarding an element of the financial planning process. It is followed
by an explanation of the Standard, its relationship to the Code of Ethics and Rules of Conduct, and its expected
impact on the public, the profession and the practitioner.
The Explanation accompanying each Practice Standard explains and illustrates the meaning and purpose of
the Practice Standard. The text of each Practice Standard is authoritative and directive. The related
Explanation is a guide to interpretation and application of the Practice Standard based, where indicated, on a
standard of reasonableness, a recurring theme throughout the Practice Standards. The Explanation is not
intended to establish a professional standard or duty beyond what is contained in the Practice Standard itself.
COMPLIANCEWITH PRACTICE STANDARDS
The practice of financial planning consistent with these Practice Standards is required for certificants who
are financial planning practitioners. The Practice Standards are used by CFP Board's Disciplinary and Ethics
Commission and Appeals Committee in evaluating the certificant's conduct to determine if the Rules of
Conduct
have been violated, based on the Disciplinary Rules established by CFP Board.
1. Establishing and defining the relationship with a client
2. Gathering client data
3. Analyzing and evaluating the client’s financial status
4. Developing and presenting financial planning recommendations
5. Implementing the financial planning recommendations
6. Monitoring
100-1 Defining the Scope of the Engagement
200-1 Determining a Client’s Personal and Financial Goals, Needs and Priorities
200-2 Obtaining Quantitative Information and Documents
300-1 Analyzing and Evaluating the Client’s Information
400-1 Identifying and Evaluating Financial Planning Alternative(s)
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400-2 Developing the Financial Planning Recommendation(s)
400-3 Presenting the Financial Planning Recommendation(s)
500-1 Agreeing on Implementation Responsibilities
500-2 Selecting Products and Services for Implementation
600-1 Defining Monitoring Responsibilities
FINANCIAL PLANNING PROCESS RELATED PRACTICE STANDARD
Practice Standards 100 Series
ESTABLISHING AND DEFINING THE RELATIONSHIPWITH THE CLIENT
100_1: Defining the Scope of the Engagement
The financial planning practitioner and the client shall mutually define the scope of the engagement before
any financial planning service is provided.
Explanation of this Practice Standard
Prior to providing any financial planning service, the financial planning practitioner and the client
shall mutually define the scope of the engagement. The process of “mutually-defining” is
essential in determining what activities may be necessary to proceed with the engagement.
This process is accomplished in financial planning engagements by:
• Identifying the service(s) to be provided;
• Disclosing the practitioner’s material conflict(s) of interest;
• Disclosing the practitioner’s compensation arrangement(s);
• Determining the client’s and the practitioner’s responsibilities;
• Establishing the duration of the engagement; and
• Providing any additional information necessary to define or limit the scope.
The scope of the engagement may include one or more financial planning subject areas. It is
acceptable to mutually define engagements in which the scope is limited to specific activities.
Mutually defining the scope of the engagement serves to establish realistic expectations for both
the client and the practitioner.
This Practice Standard does not require the scope of the engagement to be in writing. However,
as noted in the “Relationship” section, which follows, there may be certain disclosures that are
required to be in writing.
As the relationship proceeds, the scope may change by mutual agreement.
This Practice Standard shall not be considered alone, but in conjunction with all other Practice
Standards.
Effective Date
Original version, January 1, 1999. Updated version, January 1, 2002.
Relationship of this Practice Standard to CFP Board’s Code of Ethics and Rules of Conduct
This Practice Standard relates to CFP Board’s Code of Ethics and Rules of Conduct through
Principle 4 – Fairness, Principle 7 – Diligence and Rules 1.1, 1.2, 1.3 and 2.2.
Anticipated Impact of this Practice Standard
Upon the Public
The public is served when the relationship is based upon a mutual understanding of the
engagement. Clarity of the scope of the engagement enhances the likelihood of achieving client
expectations.
Upon the Financial Planning Profession
The profession benefits when clients are satisfied. This is more likely to take place when clients
have expectations of the process, which are both realistic and clear, before services are provided.
Upon the Financial Planning Practitioner
A mutually-defined scope of the engagement provides a framework for the financial planning
process by focusing both the client and the practitioner on the agreed upon tasks. This Practice
Standard enhances the potential for positive results.
Practice Standards 200 Series
GATHERING CLIENT DATA
200_1: Determining a Client’s Personal and Financial Goals, Needs and Priorities
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The financial planning practitioner and the client shall mutually define the client’s personal and financial
goals, needs and priorities that are relevant to the scope of the engagement before any recommendation is
made and/or implemented.
Explanation of this Practice Standard
Prior to making recommendations to the client, the financial planning practitioner and the client
shall mutually define the client’s personal and financial goals, needs and priorities. In order to
arrive at such a definition, the practitioner will need to explore the client's values, attitudes,
expectations, and time horizons as they affect the client’s goals, needs and priorities. The process
of “mutually-defining” is essential in determining what activities may be necessary to proceed
with the client engagement. Personal values and attitudes shape the client’s goals and objectives
and the priority placed on them. Accordingly, these goals and objectives must be consistent with
the client’s values and attitudes in order for the client to make the commitment necessary to
accomplish them.
Goals and objectives provide focus, purpose, vision and direction for the financial planning
process. It is important to determine clear and measurable objectives that are relevant to the
scope of the engagement. The role of the practitioner is to facilitate the goal-setting process in
order to clarify, with the client, goals and objectives. When appropriate, the practitioner shall try
to assist clients in recognizing the implications of unrealistic goals and objectives.
This Practice Standard addresses only the tasks of determining the client's personal and financial
goals, needs and priorities; assessing the client's values, attitudes and expectations; and
determining the client's time horizons. These areas are subjective and the practitioner’s
interpretation is limited by what the client reveals.
This Practice Standard shall not be considered alone, but in conjunction with all other Practice
Standards.
Effective Date
Original version, January 1, 1999. Updated version, January 1, 2002.
Relationship of this Practice Standard to CFP Board’s Code of Ethics and Rules of Conduct
This Practice Standard relates to CFP Board’s Code of Ethics and Rules of Conduct through
Principle 7 – Diligence and Rules 3.3, 4.4 and 4.5.
Anticipated Impact of this Practice Standard
Upon the Public
The public is served when the relationship is based upon mutually-defined goals, needs and
priorities. This Practice Standard reinforces the practice of putting the client’s interests first, which
is intended to increase the likelihood of achieving the client’s goals and objectives.
Upon the Financial Planning Profession
Compliance with this Practice Standard emphasizes to the public that the client’s goals, needs and
priorities are the focus of the financial planning process. This encourages the public to seek out
the services of a financial planning practitioner who uses such an approach.
Upon the Financial Planning Practitioner
The client’s goals, needs and priorities help determine the direction of the financial planning
process. This focuses the practitioner on the specific tasks that need to be accomplished.
Ultimately, this will facilitate the development of appropriate recommendations.
200_2: Obtaining Quantitative Information and Documents
The financial planning practitioner shall obtain sufficient quantitative information and documents about a
client relevant to the scope of the engagement before any recommendation is made and/or implemented.
Explanation of this Practice Standard
Prior to making recommendations to the client and depending on the scope of the engagement,
the financial planning practitioner shall determine what quantitative information and documents
are sufficient and relevant.
The practitioner shall obtain sufficient and relevant quantitative information and documents
pertaining to the client's financial resources, obligations and personal situation. This information
may be obtained directly from the client or other sources such as interview(s), questionnaire(s),
client records and documents.
The practitioner shall communicate to the client a reliance on the completeness and accuracy of
the information provided and that incomplete or inaccurate information will impact conclusions
and recommendations.
If the practitioner is unable to obtain sufficient and relevant quantitative information and
documents to form a basis for recommendations, the practitioner shall either:
(a) Restrict the scope of the engagement to those matters for which sufficient and relevant
information is available; or
(b) Terminate the engagement.
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The practitioner shall communicate to the client any limitations on the scope of the engagement, as
well as the fact that this limitation could affect the conclusions and recommendations.
This Practice Standard shall not be considered alone, but in conjunction with all other Practice
Standards.
Effective Date
Original version, January 1, 1999. Updated version, January 1, 2002.
Relationship of this Practice Standard to CFP Board’s Code of Ethics and Professional
Responsibility
This Practice Standard relates to CFP Board’s Code of Ethics and Rules of Conduct through
Principle 7 – Diligence and Rules 3.3, 4.4 and 4.5.
Anticipated Impact of this Practice Standard
Upon the Public
The public is served when financial planning recommendations are based upon sufficient and
relevant quantitative information and documents. This Practice Standard is intended to increase
the likelihood of achieving the client’s goals and objectives.
Upon the Financial Planning Profession
The financial planning process requires that recommendations be made based on sufficient and
relevant quantitative data. Therefore, compliance with this Practice Standard encourages the
public to seek financial planning practitioners who use the financial planning process.
Upon the Financial Planning Practitioner
Sufficient and relevant quantitative information and documents provide the foundation for
analysis. Ultimately, this will facilitate the development of appropriate recommendations.
Practice Standards 300 Series
ANALYZING AND EVALUATING THE CLIENT’S FINANCIAL STATUS
300_1: Analyzing and Evaluating the Client’s Information
A financial planning practitioner shall analyze the information to gain an understanding of the client’s
financial
situation and then evaluate to what extent the client’s goals, needs and priorities can be met by the client’s
resources and current course of action.
Explanation of this Practice Standard
Prior to making recommendations to a client, it is necessary for the financial planning practitioner
to assess the client’s financial situation and to determine the likelihood of reaching the stated
objectives by continuing present activities.
The practitioner will utilize client-specified, mutually-agreed-upon, and/or other reasonable
assumptions. Both personal and economic assumptions must be considered in this step of the
process. These assumptions may include, but are not limited to, the following:
• Personal assumptions, such as: retirement age(s), life expectancy(ies), income needs, risk factors,
time horizon and special needs; and
• Economic assumptions, such as: inflation rates, tax rates and investment returns.
Analysis and evaluation are critical to the financial planning process. These activities form the
foundation for determining strengths and weaknesses of the client’s financial situation and
current course of action. These activities may also identify other issues that should be addressed.
As a result, it may be appropriate to amend the scope of the engagement and/or to obtain
additional information.
Effective Date
Original version, January 1, 2000. Updated version, January 1, 2002.
Relationship of this Practice Standard to CFP Board’s Code of Ethics and Rules of Conduct
This Practice Standard relates to CFP Board’s Code of Ethics and Rules of Conduct through
Principle 2 – Objectivity, Principle 3 – Competence, Principle 7 - Diligence and Rules 1.4, 4.1, 4.4
and 4.5.
Anticipated Impact of this Practice Standard
Upon the Public
The public is served when objective analysis and evaluation by a financial planning practitioner
results in the client’s heightened awareness of specific financial planning issues. This Practice
Standard is intended to increase the likelihood of achieving the client’s goals and objectives.
Upon the Financial Planning Profession
Objective analysis and evaluation enhances the public’s recognition of and appreciation for the
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financial planning process and increases the confidence in financial planning practitioners who
provide this service.
Upon the Financial Planning Practitioner
Analysis and evaluation helps the practitioner establish the foundation from which
recommendations can be made that are specific to the client’s financial planning goals, needs and
priorities.
Practice Standards 400 Series
DEVELOPING AND PRESENTING THE FINANCIAL PLANNING RECOMMENDATION(S)
Preface to the 400 Series
The 400 Series, “Developing and Presenting the Financial Planning Recommendation(s),” represents the
very heart of the financial planning process. It is at this point that the financial planning practitioner, using
both science and art, formulates the recommendations designed to achieve the client’s goals, needs and
priorities.
Experienced financial planning practitioners may view this process as one action or
task. However, in reality, it is a series of distinct but interrelated tasks.
These three Practice Standards emphasize the distinction among the several
tasks which are part of this process. These Practice Standards can be
described as, “What is Possible?,” “What is Recommended?” and “How is
it Presented?” The first two Practice Standards involve the creative
thought, the analysis, and the professional judgment of the practitioner,
which are often performed outside the presence of the
client. First, the practitioner identifies and considers the various
alternatives, including continuing the present course of action
(Practice Standard 400-1). Second, the practitioner develops
the recommendation(s) from among the selected
alternatives (Practice Standard 400-2). Once the practitioner
has determined what to recommend, the final
task is to communicate the recommendation(s) to the
client (Practice Standard 400-3).
The three Practice Standards that comprise the 400 series should not be considered alone, but in
conjunction with all other Practice Standards.
400_1: Identifying and Evaluating Financial Planning Alternative(s)
The financial planning practitioner shall consider sufficient and relevant alternatives to the client’s current
course
of action in an effort to reasonably meet the client’s goals, needs and priorities.
Explanation of this Practice Standard
After analyzing the client’s current situation (Practice Standard 300-1) and prior to developing and
presenting the recommendation(s) (Practice Standards 400-2 and 400-3), the financial planning
practitioner shall identify alternative actions. The practitioner shall evaluate the effectiveness of
such actions in reasonably meeting the client’s goals, needs and priorities.
This evaluation may involve, but is not limited to, considering multiple assumptions, conducting
research or consulting with other professionals. This process may result in a single alternative,
multiple alternatives or no alternative to the client’s current course of action.
In considering alternative actions, the practitioner shall recognize and, as appropriate, take into
account his or her legal and/or regulatory limitations and level of competency in properly
addressing each of the client’s financial planning issues.
More than one alternative may reasonably meet the client’s goals, needs and priorities.
Alternatives identified by the practitioner may differ from those of other practitioners or advisers,
illustrating the subjective nature of exercising professional judgment.
How
iEffective Date
Original version, January 1, 2001. Updated version, January 1, 2002.
Relationship of this Practice Standard to CFP Board’s Code of Ethics and Rules of Conduct
This Practice Standard relates to CFP Board’s Code of Ethics and Rules of Conduct through
Principle 2 – Objectivity, Principle 3 – Competence, Principle 6 – Professionalism, Principle 7 –
Diligence and Rules 1.4, 4.1 and 4.5.
400_2: Developing the Financial Planning Recommendation(s)G THE FINANCIAL PLANNING
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The financial planning practitioner shall develop the recommendation(s) based on the selected alternative(s)
and
the current course of action in an effort to reasonably meet the client’s goals, needs and priorities.
Explanation of this Practice Standard
After identifying and evaluating the alternative(s) and the client’s current course of action, the
practitioner shall develop the recommendation(s) expected to reasonably meet the client’s goals,
needs and priorities. A recommendation may be an independent action or a combination of
actions which may need to be implemented collectively.
The recommendation(s) shall be consistent with and will be directly affected by the following:
• Mutually-defined scope of the engagement;
• Mutually-defined client goals, needs and priorities;
• Quantitative data provided by the client;
• Personal and economic assumptions;
• Practitioner’s analysis and evaluation of client’s current situation; and
• Alternative(s) selected by the practitioner.
A recommendation may be to continue the current course of action. If a change is recommended,
it may be specific and/or detailed or provide a general direction. In some instances, it may be
necessary for the practitioner to recommend that the client modify a goal.
The recommendations developed by the practitioner may differ from those of other practitioners
or advisers, yet each may reasonably meet the client’s goals, needs and priorities.
Effective Date
Original version, January 1, 2001. Updated, effective January 1, 2002.
Relationship of this Practice Standard to CFP Board’s Code of Ethics and Rules of Conduct
This Practice Standard relates to CFP Board’s Code of Ethics and Rules of Conduct through
Principle 2 – Objectivity, Principle 3 – Competence, Principle 6 – Professionalism, Principle 7 –
Diligence and Rules 1.4, 4.1 and 4.5.
400_3: Presenting the Financial Planning Recommendation(s)
The financial planning practitioner shall communicate the recommendation(s) in a manner and to an extent
reasonably necessary to assist the client in making an informed decision.
Explanation of this Practice Standard
When presenting a recommendation, the practitioner shall make a reasonable effort to assist the
client in understanding the client’s current situation, the recommendation itself, and its impact on
the ability to meet the client’s goals, needs and priorities. In doing so, the practitioner shall avoid
presenting the practitioner’s opinion as fact.
The practitioner shall communicate the factors critical to the client’s understanding of the
recommendations. These factors may include but are not limited to material:
• Personal and economic assumptions;
• Interdependence of recommendations;
• Advantages and disadvantages;
• Risks; and/or
• Time sensitivity.
The practitioner should indicate that even though the recommendations may meet the client’s
goals, needs and priorities, changes in personal and economic conditions could alter the intended
outcome. Changes may include, but are not limited to: legislative, family status, career, investment
performance and/or health.
If there are conflicts of interest that have not been previously disclosed, such conflicts and how
they may impact the recommendations should be addressed at this time.
Presenting recommendations provides the practitioner an opportunity to further assess whether
the recommendations meet client expectations, whether the client is willing to act on the
recommendations, and whether modifications are necessary.
Effective Date
Original version, January 1, 2001. Updated version, January 1, 2002.
Relationship of this Practice Standard to CFP Board’s Code of Ethics and Rules of Conduct
This Practice Standard relates to CFP Board’s Code of Ethics and Rules of Conduct through
Principle 1 – Integrity, Principle 2 – Objectivity, Principle 6 – Professionalism and Rules 2.1, 4.1, 4.4
and 4.5.
Anticipated Impact of these Practice Standards
Upon the Public
The public is served when strategies and objective recommendations are developed and
are communicated clearly to specifically meet each client’s individual financial planning
goals, needs and priorities.
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Upon the Financial Planning Profession
A commitment to a systematic process for the development and presentation of the
financial planning recommendations advances the financial planning profession. Development of
customized strategies and recommendations enhances the public’s perception of the objectivity
and value of the financial planning process. The public will seek out those professionals who
embrace these Practice Standards.
Upon the Financial Planning Practitioner
Customizing strategies and recommendations forms a foundation to communicate meaningful
and responsive solutions. This increases the likelihood that a client will accept the
recommendations and act upon them. These actions will contribute to client satisfaction.
Practice Standards 500 Series
IMPLEMENTING THE FINANCIAL PLANNING RECOMMENDATION(S):
500_1: Agreeing on Implementation Responsibilities
The financial planning practitioner and the client shall mutually agree on the implementation responsibilities
consistent with the scope of the engagement.
Explanation of this Practice Standard
The client is responsible for accepting or rejecting recommendations and for retaining and/or
delegating implementation responsibilities. The financial planning practitioner and the client shall
mutually agree on the services, if any, to be provided by the practitioner. The scope of the
engagement, as originally defined, may need to be modified.
The practitioner’s responsibilities may include, but are not limited to the following:
• Identifying activities necessary for implementation;
• Determining division of activities between the practitioner and the client;
• Referring to other professionals;
• Coordinating with other professionals;
• Sharing of information as authorized; and
• Selecting and securing products and/or services.
If there are conflicts of interest, sources of compensation or material relationships with other
professionals or advisers that have not been previously disclosed, such conflicts, sources or relationships
shall be disclosed at this time.
When referring the client to other professionals or advisers, the financial planning practitioner
shall indicate the basis on which the practitioner believes the other professional or adviser may be
qualified.
If the practitioner is engaged by the client to provide only implementation activities, the scope of
the engagement shall be mutually defined, orally or in writing, in accordance with Practice
Standard 100-1. This scope may include such matters as the extent to which the practitioner will
rely on information, analysis or recommendations provided by others.
Effective Date
January 1, 2002.
Relationship of this Practice Standard to CFP Board’s Code of Ethics and Rules of Conduct
This Practice Standard relates to CFP Board’s Code of Ethics and Rules of Conduct through
Principle 3 – Competence, Principle 4 – Fairness, Principle 6 – Professionalism, Principle 7 –
Diligence and Rules 1.2, 2.2, 4.1 and 4.4.
500_2: Selecting Products and Services for Implementation
The financial planning practitioner shall select appropriate products and services that are consistent with the
client’s goals, needs and priorities.
Explanation of this Practice Standard
The financial planning practitioner shall investigate products or services that reasonably address
the client’s needs. The products or services selected to implement the recommendation(s) must be
suitable to the client’s financial situation and consistent with the client’s goals, needs and
priorities.
The financial planning practitioner uses professional judgment in selecting the products and
services that are in the client’s interest. Professional judgment incorporates both qualitative and
quantitative information.
Products and services selected by the practitioner may differ from those of other practitioners or
advisers. More than one product or service may exist that can reasonably meet the client’s goals,
needs and priorities.
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The practitioner shall make all disclosures required by applicable regulations.
Effective Date
January 1, 2002.
Relationship of this Practice Standard to CFP Board’s Code of Ethics and Rules of Conduct
This Practice Standard relates to CFP Board’s Code of Ethics and Rules of Conduct through
Principle 2 – Objectivity, Principle 4 – Fairness, Principle 6 – Professionalism, Principle 7 – Diligence
and Rules 1.2, 1.4, 2.2, 4.1, 4.4 and 4.5.
Anticipated Impact of these Practice Standards
Upon the Public
The public is served when the appropriate products and services are used to implement
recommendations, thus increasing the likelihood that the client’s goals will be achieved.
Upon the Financial Planning Profession
Over time, implementing recommendations using appropriate products and services for
the client increases the credibility of the profession in the eyes of the public.
Upon the Financial Planning Practitioner
In the selection of products and services, putting the interest of the client first benefits the
practitioner over the long-term.
Practice Standards 600 Series
MONITORING
600_1: Defining Monitoring Responsibilities
The financial planning practitioner and client shall mutually define monitoring responsibilities.
Explanation of this Practice Standard
The purpose of this Practice Standard is to clarify the role, if any, of the practitioner in the
monitoring process. By clarifying this responsibility, the client’s expectations are more likely to be in
alignment with the level of monitoring services which the practitioner intends to provide.
If engaged for monitoring services, the practitioner shall make a reasonable effort to define and
communicate to the client those monitoring activities the practitioner is able and willing to
provide. By explaining what is to be monitored, the frequency of monitoring and the
communication method, the client is more likely to understand the monitoring service to be
provided by the practitioner.
The monitoring process may reveal the need to reinitiate steps of the financial planning process.
The current scope of the engagement may need to be modified.
Effective Date
January 1, 2002.
Relationship of this Practice Standard to CFP Board’s Code of Ethics and Rules of Conduct
This Practice Standard relates to CFP Board’s Code of Ethics and Rules of Conduct through
Principle 7 – Diligence and Rules 1.2, 3.3, 3.4 and 4.1.
Anticipated Impact of this Practice Standard
Upon the Public
The public is served when the practitioner and client have similar perceptions and a mutual
understanding about the responsibilities for monitoring the recommendation(s).
Upon the Financial Planning Profession
The profession benefits when clients are satisfied. Clients are more likely to be satisfied when
expectations of the monitoring process are both realistic and clear. This Practice Standard
promotes awareness that financial planning is a dynamic process rather than a single action.
Upon the Financial Planning Practitioner
A mutually-defined agreement of the monitoring responsibilities increases the potential for client
satisfaction and clarifies the practitioner’s responsibilities.
Question #22:
For five team points: What is one of the three purposes of Practice
Standards?
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Question #23:
For 10 team points: What are Practice Standards?
Question #24:
For five team points: What subsidiary organization develops and writes
the Practice Standards, and who makes up the membership of the
organization?
Question #25:
For five team points: To what extent are CFP certificants expected to
follow the Practice Standards?
Question #26:
For five more team points: Who is encouraged to consider and use the
Practice Standards?
Question #27:
And now for the 64 Zambian Kwacha (1.4 cent) question: The Practice
Standards are based on what six topic areas?
Question #28:
For extra credit and a big plus sign on your permanent record: Are the
Practice Standards enforceable?
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Question #29:
Here’s an important note.
There is one line that is exactly the same for each Practice Standard. Who
knows what it is?
Just as no step in the financial planning process stands alone, the Practice
Standards are to be applied as a whole, as they relate to one another.
Okay, enough about what they are about, let’s talk about the Practice
Standards themselves.
The following is a discussion of what the practice standards are by the
narrator discussing these topics and asking the entire audience to comment
and participate, where appropriate.
Practice Standard 100-1
Establishing and Defining the Relationship with the Client
Defining the Scope of the Engagement
The scope of the engagement shall be mutually defined by the financial
planning practitioner and the client prior to providing any financial
planning service.
Explanation of this Practice Standard
Script:
The first Practice Standard deals with the first step in the financial planning
process: Establishing and Defining the Relationship with the Client.
There are certain things that need to be covered here:
• identifying the service(s) to be provided
• disclosing financial planning practitioner’s compensation arrangement(s)
• determining the client’s and the financial planning practitioner’s
responsibilities
• establishing the duration of the engagement
• providing any additional information necessary to define or limit the scope
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Why is it important to identify the service(s) to be provided?
Discussion
Ans. No one is surprised later with differing expectations as to what the client will
receive.
disclose financial planning practitioner’s
compensation arrangement(s)?
Discussion
Why is it important to
Ans. If compensation questions are addressed up front, the client knows
what is coming. The client can compare the expected cost with the services
to determine whether he or she thinks it’s a good value.
Why is it important to determine the client’s and the financial planning
practitioner’s responsibilities?
Discussion
Financial planning requires the efforts of both parties. The certificant knows
what he or she can and will provide, but the client needs to understand his or
her part of the process. Try going to a physician and saying – what’s wrong
with me. The physician will first want to know your symptoms and
concerns. You have to play a part in the process for a successful outcome.
The same applies to financial planning.
Why is it important to establish the duration of the engagement?
Discussion
Ans. Clients may have no idea how long the process may take. How long is
a Cricket match? How do you define a game of Mah Jong? If a client has
no experience with the financial planning process, failure to meet his or her
expectations may create anxiety.
Why is it important to provide any additional information necessary to
define or limit the scope?
Discussion
Ans. If your client comes in and expects that at the end of the process, you
will have single-handedly created a new investment program, insurance
plan, income tax strategy, estate plan, and created all of the various legal
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documents to accomplish all of it, you may have an unhappy client if you are
not competent and permitted to provide all of these services.
**********
Just for the record, as you review these Practice Standards, and I’m
confident that you keep the CFP Board’s blue booklet by your bed, you have
probably noticed the effective dates for each one. This tells you two things.
One, when the CFP Board expected you to start following it. And two; that
these may be revised periodically.
One of the reasons for requiring the two hour Ethics programs periodically is
that some CFP Board certificants, no one in here of course, but some
certificants don’t read every word the CFP Board sends to CFP certificants
to ensure that they don’t miss any changes in the Code of Ethics or Practice
Standards.
Now let’s look at Gathering Client Data:
Practice Standard 200-1:
Determining a Client’s Personal and
Financial Goals, Needs and Priorities
A client’s personal and financial goals, needs and priorities that are relevant to the
scope of the engagement and the service(s) being provided shall be mutually defined
by the financial planning practitioner and the client prior to making and/or
implementing any recommendations.
Script:
There are two Practice Standards for this step in the financial planning
process.
When you hear the words “Gathering Client Data,” what do you think of
first?
The first things that usually come to mind are:
- Bank statements
- Investment information
- Loan agreements
- Legal documents
- Insurance policies
- Asset valuation and ownership details
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- Income information, etc.
Question #30:
For 10 team points: Which is one of the most important information to
gather in this step?
Question #31:
So what is so important about this stuff?
Question #32:
For five team points:
financial goals?
How do values and attitudes affect personal
What are we talking about? (group discussion)
Now for the other side of the coin.
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Practice Standard 200-2
Gathering Client Data
Script:
We’ve discussed to soft side of client data, now let’s look at the hard side.
What was on the list of things we talked about a few minutes ago when we
were considering the kinds of information we need to get for doing a
financial plan? No points for this, you already heard the answer.
- Bank statements
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- Investment information
- Loan agreements
- Legal documents
- Insurance policies
- Asset valuation and ownership details
- Income information, etc.
Yes, all the fun stuff; numbers, long sentences in legalese and insuranceese,
Tax returns; the quantitative data, the stuff you can sink your teeth into.
So, how many of you who have been at this a while have every client
bring in everything you ask for in its most current iteration? There’s
one hand in the back – oops sorry, he’s shooing flies.
Right, it usually takes a while to gather all of the most current information.
It’s hard to create a balance sheet – a financial snapshot of a single point in
time – if the information you get has current dates that spread out over a
year.
Question #33:
Five more team points on the line: What do you do if your client won’t
provide all of the “hard” information you request? You must get both
options to get the points.
Question #34:
If restricting the scope of the work is the choice, make sure your client
knows what?
Okay. Now you know how to begin the process and what information to
get. So what now? What do you do with all of it?
Practice Standard 300-1
Analyzing and Evaluating the Client’s Financial Status
Analyzing and Evaluating the Client’s Information
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A financial planning practitioner shall analyze the information to gain
an understanding of the client’s financial situation and then evaluate to
what extent the client’s goals, needs and priorities can be met by the
client’s resources and current course of action.
Script:
You’re sitting down sorting through the financial information with your
notes about the clients hopes, dreams, attitudes, etc. and you realize that
something is missing. You flip through your information gathering forms
and find what you are looking for.
Question #35:
What specific goals and assumptions do you need to have for virtually
every financial plan? Five team points if you get them all.
Question #36:
For five incredibly valuable team points: What are you trying to
accomplish as you apply this Practice Standard?
The CFP Board includes a preface to the 400 Series Practice Standards.
Question #37:
The 400 Series Practice Standards are based on the fourth step in the financial planning
process:
Developing and Presenting the Financial Planning
Recommendation(s)
There are currently three Practice Standards in the 400 Series. Why, and what are they
based on?
Okay, so let’s take a look.
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The first of the 400 series is
Practice Standard 400-1
Developing and Presenting the Financial Planning Recommendation(s)
Identifying and Evaluating Financial Planning Alternatives
A financial planning practitioner shall consider sufficient and relevant alternatives to the
client’s current course of action in an effort to reasonably achieve the client’s goals,
needs and priorities.
Script:
Question #38:
Five potential team points for knowing this: When you are ready to start
this step in the process, what do you have and what might you
determine?
Question #39:
For two more team points: To what extent are CFP Board certificant
practitioners expected to come up with the same alternatives other CFP
Board certificant practitioners would devise?
Now we’ll look at the second phase of the fourth step in the process.
Practice Standard 400-2
Developing and Presenting the Financial Planning Recommendation(s)
Developing the Financial Planning Recommendation(s)
A financial planning practitioner shall develop the recommendation(s) based on the
selected alternative(s) and the current course of action in an effort to reasonably achieve
the client’s goals, needs and priorities.
Question #40:
For five team points: Where does the practitioner start when developing
specific recommendations?
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When developing the recommendations what six things must be kept in
mind? No points – we already went over these:
Ans.
• mutually defined scope of the engagement;
• mutually defined client goals, needs and priorities;
• quantitative data provided by the client;
• personal and economic assumptions;
• practitioner’s analysis and evaluation of client’s current situation; and
• alternative(s) selected by the practitioner.
Question #41:
How specific do the recommendations need to be according to this
Practice Standard? – five more team points on the line here.
Now we are ready to tackle the third phase of the fourth step in the financial
planning process.
Practice Standard 400-3
Developing and Presenting the Financial Planning Recommendation(s)
Presenting the Financial Planning Recommendation(s)
A financial planning practitioner shall communicate the recommendation(s) in a manner
and to an extent reasonably necessary to assist the client in making an informed decision.
Script:
Question #42:
- Five points for this toughie: What might be the most difficult, and important, part
of presenting the recommendations?
- Raise your hand if you believe a client who doesn’t understand the recommendation(s)
or how it, or they, will help meet his or her goals will enthusiastically jump into the
implementation stage of the plan.
Everyone with your hands up will have to stay and clean the erasers after class.
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Question #43:
What are key pieces of information that the certificant needs to review with the client
before getting into the presentation of recommendations? Five Team points at stake here
(hint, there are two)
Question #44:
- What critical information needs to be included with each recommendation? Two points
each for the three key pieces.
These factors are not all inclusive and their maybe others.
- Fitting in with the risks involved, what things might change the outcome of the planning
or require plans to change? This is just a thinking exercise, and to see if anyone is still
awake.
So far so good. Let’s move on to the 500 Series Practice Standards.
Practice Standard 500-1
Implementing the Financial Planning Recommendation(s):
A financial planning practitioner and the client shall mutually agree on
the implementation responsibilities consistent with the scope of the e n g a
g e m e n t. Explanation of this Practice Standard
Question #45:
Here’s a two-part question.
45a) - To emphasize how logical much of this is, who is it who may accept
or reject the recommendations as well as retaining and/or delegating
responsibilities?
45b) -Why is this?
Question #46:
-What are some to the responsibilities the certificant has?
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Question #47:
- One of the things you may be asked to do periodically is make referrals to
other professionals. What, if anything, does this Practice Standard tell you
about making referrals? (Beware of trick questions.)
On to the second part of the 500 series.
Practice Standard 500-2
Implementing the Financial Planning Recommendation(s)
Selecting Products and Services for Implementation A financial planning
practitioner shall select appropriate products and services that are
consistent with the client’s goals, needs and priorities.
Question #48:
- Where do you turn to come up with the specific recommendations for the
products and services needed to meet your client’s needs? Five team points
for this very important point.
Question #49:
- What types of information do you need when making a judgment? (we
already discussed this)
Question #50:
-What is it you have to investigate and evaluate, and why?
Question #51:
- What do we mean by suitability?
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• An 80 year old lady who is very frugal about her money situation
comes into your office with $200,000, all the money she has in the
world.
- Give me an example of:
A suitable product or service.
An unsuitable product or service
• A 25 year old white collar employee comes into your office asking
you to develop a suitable investment plan. He has shown a huger
tolerance for accepting risk in the past and wants to be more proactive
in his investing than reactive.
- Give me an example of:
A suitable product or service.
An unsuitable product or service
Question #52:
So, the great thing about this stage in the financial planning process is you
finally get down to where there are clear, specific recommendations you can
make that are the perfect ones for each client. Right?
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SECTION VIII.
CASE STUDIES
Whew!
We have covered the new Learning Objectives, Code of Ethics, and the
Practice Standards.
Now we’ll look at some cases and see if we can apply all the great
knowledge we have gathered.
The teams will be given five minutes to determine if there may have been
any violations. Each team will then be given two minutes to summarize the
specific violations it believes occurred. A team can receive as many as 25
points per case.
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CASE 1
STEVEN (SLEEPY SAM) WEST, CFP®
You and Steve have been in a practice together with two other certificants
for a number of years. Steve earned his nickname as a kid, but it seems that
he is coming to the office more and more with bloodshot eyes, looking
exhausted, but acting wired. You and the other certificants believe he has a
drug and alcohol problem. His work is erratic, and what used to be among
the best looking plans in the practice look like they were created and
assembled by a 6th grader.
The other certificant elected you to confront Steve. He exploded at your
suggestion that his extracurricular activities were interfering with is abilities.
He claimed he was just tired and too much coffee made him act nervous.
“Besides, I stay up all night getting my client presentations done, and you
hardly ever get yours done on time. You are always taking on the big clients
and leaving the dregs to me.”
Steve did a great job of avoiding the topic of discussion, but he was right,
you do tend to take on the big clients and are usually behind in getting their
plans together.
Questions:
1. What is the most serious issue here?
2. If Steve is involved with drugs and/or alcohol, does he have an
obligation to his partners that he isn’t meeting?
3. If you really are taking on more than your share of big cases, and not
getting them handled on schedule, are you in violation of the Code?
Provide specific references to the Code/standards of practice as
applicable.
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CASE 2
MARY WESTON, CFP®
Mary Weston, CFP® has been in the financial planning business for over
10 years as a partner in a three person firm. She is a Registered
Investment Advisor, and Registered Representative licensed with a Series
7 license through ArchMoney Investors as her broker/dealer.
Mary and eight of her friends decided to invest in a house boat on Lake
Powell. It would be sort of a time-share plan. Since the boat was about
$200,000 plus the cost of a mooring and a maintenance agreement with
the local marina, They wanted to add at least four more owners. They
had nice brochures made up and put them in their offices. All references
were made to the Marina’s sales office that did this type of work for
many boat owners.
If any of Mary’s clients asked her about it, she told them that
houseboating on Lake Powell was great fun, and that if they had any
questions about it to contact the marina at the phone number or e-mail
address on the brochure.
Questions:
1. Did her answers to her clients violate any code principles or rules?
2. Does she have any obligation to her broker/dealer or her partners?
3. Might the SEC or NASD have any concerns here and does that
involve any principles or rules?
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CASE 3
THOMSON ROASTER, CFP®
You and Thomson Roaster joined the local FPA chapter during the same
month. You have seen him regularly for the last eight years. Last week, you
were talking with a good friend of yours and the subject of financial
certificants came up. Your friend asked if you knew of any certificants who
specialized in divorce planning. You have done it, but it gets too ugly
sometimes and you generally refer that work to Thomson.
When you mention his name, your friend said that his brother, who lived in a
different state, had told him years ago about someone with that name who
had been convicted of embezzling money from his employer and some of
the business’s clients. The only reason he remembered the name was that it
was so unusual. Thomson told you he came from that state, and the same
city, but never talked about what he had done there. You really have no
reason to doubt your friend, but you also don’t know how to confirm it.
Questions:
1. Do you have any obligation under the Code of Ethics now that you
have heard this?
2. Should you provide information to your friend as to how he should
proceed with the information or should you do your own investigation
as to the veracity of the information?
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Section IX: Disciplinary Rules and Procedures
Script:
To promote and maintain the integrity of its , CFP® and CERTIFIED FINANCIAL CERTIFICANT™ certification
marks for the benefit of the clients and potential clients of certificants and registrants, CFP Board has the
ability to enforce the provisions of the Rules of Conduct and Practice Standards. Adherence to the Rules of
Conduct and compliance with the Practice Standards by certificants and registrants is required, with the
potential for CFP Board sanctions against those who violate the regulations proscribed in these documents.
CFP Board will follow the disciplinary rules and procedures set forth below when enforcing the Rules of
Conduct and Practice Standards.
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SECTION IX - Disciplinary Rules and Procedures
ARTICLE 1: Introduction ........................................................................................................... ....... 76
ARTICLE 2: Disciplinary and Ethics Dec..................................................................................
76
2.1 Function and Jurisdiction of the Disciplinary and Ethics Dec ......................
.76
2.2 Powers and Duties of the Dec.......................................................................
.76
2.3 Hearing Panel ................................................................................................................
.76
2.4 Disqualification...............................................................................................................
.76
2.5 CFP Board Counsel ..........................................................................................................
.76
ARTICLE 3: Grounds for Discipline............................................................................................
78
ARTICLE 4: Forms of Discipline................................................................................................ ...... 78
4.1 Private Censure.................................................................................................................
78
4.2 Public Letter of Admonition ...........................................................................................
78
4.3 Suspension ........................................................................................................................
78
4.4 Revocation ........................................................................................................................
78
4.5 Forms of Discipline Concerning Candidates..................................................................
78
ARTICLE 5: Interim Suspension Status ........................................................................................... 79
5.1 Issuance of a Show Cause Order ....................................................................................
79
5.2 Service...............................................................................................................................
79
5.3 Response ...........................................................................................................................
79
5.4 Failure to Respond to the Order to Show Cause..........................................................
79
5.5 Show Cause Hearing........................................................................................................
79
5.6 Interim Suspension...........................................................................................................
79
5.7 Automatic Reinstatement Upon Reversal of Conviction or Suspension....................
79
5.8 Publication ........................................................................................................................
79
ARTICLE 6: Investigation................................................................................................................... 80
6.1 Commencement ...............................................................................................................
80
6.2 Procedures for Investigation...........................................................................................
80
6.3 Probable Cause Determination Procedures ..................................................................
80
6.4 Disposition ........................................................................................................................
80
ARTICLE 7: Complaint _ Answer _ Default...................................................................................... 80
7.1 Complaint.........................................................................................................................
80
7.2 Service of the Complaint .................................................................................................
80
7.3 Answer..............................................................................................................................
80
7.4 Default and Orders of Revocation and Denial .............................................................
80
7.5 Request for Appearance..................................................................................................
80
ARTICLE 8: Discovery and Evidence................................................................................................ 80
8.1 Discovery ...........................................................................................................................
80
8.2 Documents ........................................................................................................................
81
8.3 Witnesses..........................................................................................................................
81
8.4 Administrative Dismissal..................................................................................................
81
ARTICLE 9: Hearings ......................................................................................................................... 81
9.1 Notice ...............................................................................................................................
81
9.2 Designation of a Hearing Panel .....................................................................................
81
9.3 Procedure and Proof........................................................................................................
81
ARTICLE 10: Report, Findings of Fact and Recommendation....................................................... 81
10.1 Hearing Panel...................................................................................................................
81
10.2 Report of the Hearing Panel ..........................................................................................
81
10.3 Power of the Commission...............................................................................................
81
ARTICLE 11: Appeals ........................................................................................................................ 82
ARTICLE 12: Conviction of a Crime or Professional Suspension................................................. 82
12.1 Proof of Conviction or Professional Suspension...........................................................
82
12.2 Duty to Report Criminal Conviction or Professional Suspension................................
82
12.3 Commencement of Disciplinary Proceedings
Upon Notice of Conviction or Professional Suspension ..............................................
82
12.4 Conviction of Serious Crime or Professional Suspension
- Immediate Suspension..................................................................................................
82
12.5 Serious Crime Defined.....................................................................................................
82
12.6 Definition of a Professional Suspension........................................................................
82
ARTICLE 13: Settlement Procedure................................................................................................ 83
13.1 Offer of Settlement .......................................................................................................
.. 83
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13.2 Acceptance of Offer ........................................................................................................
83
13.3 Rejection of Offer; Counter Offer..................................................................................
83
13.4 Publication.......................................................................................................................
83
ARTICLE 14: Required Action After Revocation or Suspension.................................................. 83
ARTICLE 15: Reinstatement After Discipline .................................................................................. 84
15.1 Reinstatement After Revocation....................................................................................
84
15.2 Reinstatement After Suspension....................................................................................
84
15.3 Investigation....................................................................................................................
84
15.4 Successive Petitions..........................................................................................................
84
15.5 Reinstatement Fee...........................................................................................................
84
ARTICLE 16: Confidentiality of Proceedings................................................................................... 84
16.1 Confidentiality.................................................................................................................
84
16.2 Exceptions to Confidentiality .........................................................................................
84
ARTICLE 17: General Provisions...................................................................................................... 84
17.1 Quorum............................................................................................................................
84
17.2 Notice and Service ...........................................................................................................
84
17.3 Costs .................................................................................................................................
85
17.4 Electronic Signature.........................................................................................................
85
Anonymous Case Histories .............................................................................................................. 85
Copyright © 1986-2012, Certified Financial Certificant Board of Standards Inc. All rights reserved.
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DISCIPLINARY RULES AND PROCEDURES
(as amended November 2012, effective January 1, 2013)
ARTICLE 1: INTRODUCTION
Certified Financial Planner Board of Standards, Inc. (“CFP Board”) has adopted
the Code of Ethics and Professional Responsibility (“Code of Ethics”), Rules of
Conduct, and Financial Planning Practice Standards (“Practice Standards”),
which establish the expected level of professional conduct and practice for CFP®
professionals. CFP Board has also established the Fitness Standards for
Candidates and Professionals Eligible for Reinstatement (“Fitness Standards”),
which apply to candidates for CFP® certification and individuals who were
previously certified and are eligible to reinstate the CFP® certification
(“Professionals Eligible for Reinstatement”). The Code of Ethics, Rules of
Conduct, Practice Standards, Disciplinary Rules and Procedures (“Disciplinary
Rules”) and Fitness Standards may be amended from time to time, with revisions
submitted to the public for comment before final adoption by CFP
Board. To promote and maintain the integrity of its CFP®, CERTIFIED
FINANCIAL PLANNER™, and certification marks (“the marks”) for the benefit of
the clients and potential clients of CFP® professionals, CFP Board has the ability
to enforce the provisions of the Code of Ethics, Rules of Conduct and Practice
Standards. Adherence to the Code of Ethics and Rules of Conduct and
compliance with the Practice Standards by CFP® professionals is required, with
the potential for CFP Board sanctions against those who violate the regulations
contained in these documents. CFP Board will follow the Disciplinary Rules set
forth below when enforcing the Code of Ethics, Rules of Conduct and Practice
Standards for CFP® professionals and enforcing the Fitness Standards.
Hereafter, CFP® professionals, candidates for CFP® certification and
Professionals Eligible for Reinstatement may be referred to as “Respondent” or
“Respondents.”
ARTICLE 2: DISCIPLINARY AND ETHICS DEC
2.1 Function and Jurisdiction of the DEC
CFP Board’s Disciplinary and Ethics Commission (referred to herein as “the
DEC”), formed pursuant to and governed by the bylaws of CFP Board, is charged
with the duty of reviewing and taking appropriate action with respect to alleged
violations of the Code of Ethics and Rules of Conduct, alleged non-compliance
with the Practice Standards and conduct reviewed pursuant to the Fitness
Standards. The DEC shall have original jurisdiction over all such matters.
2.2 Powers and Duties of the DEC
The DEC shall be required to:
(a) Evaluate the performance of the volunteers during the hearings;
(b) Report annually to the Chief Executive Officer and Board of Directors of CFP
Board on the operation of the DEC;
(c) Provide input to the CEO on the selection of prospective DEC members. The
DEC Chair and Chair-Designee shall provide input to the CEO on the
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selection of prospective volunteers who serve temporarily on a Hearing
Panel;
(d) At its summer meeting each year, the DEC shall recommend to the CEO,
subject to the CEO’s appointment, the DEC Chair to serve during the
following calendar year;
(e) Recommend to the CEO, as may be necessary and subject to review and
approval of the Board of Directors, amendments to these Disciplinary Rules;
(f) Adopt rules or procedures, subject to review and approval of the CEO, as
may be necessary to ensure that the hearings, ratification process and
disciplinary decisions are fair to all participants; and
(g) Recommend to the CEO such other rules or procedures as may be
necessary or appropriate.
2.3 Powers and Duties of the CEO of CFP Board
The CEO shall be required to:
(a) Appoint the DEC Chair, members and volunteers of the DEC;
(b) Oversee the DEC to ensure it follows the established rules and procedures
required to provide a fair process to all participants;
(c) Ensure that each Hearing Panel is comprised of individuals who act in an
impartial and objective manner and have no conflicts of interest with the
complainant or Respondent subject to the complaint;
(d) Conduct appropriate background investigations of prospective DEC
members and volunteers; seek the input of the Board of Directors and the
DEC on prospective DEC members; and seek the input of the DEC Chair
and Chair-Designee on prospective volunteers; and
(e) Report to the Board of Directors the intended appointments to, and activities
of, the DEC.
2.4 Hearing Panel
The Hearing Panel shall consist of three persons, two of whom must be CFP®
professionals. A Hearing Panel shall be comprised of two DEC members and
one volunteer, unless circumstances make it impractical. One member of each
Hearing Panel shall serve as Chair of each hearing. The Hearing Panel Chair
must be a DEC member. The Chair shall rule on all motions, objections and other
matters presented at, or prior to, a hearing.
2.5 Disqualification
DEC members and volunteers shall not participate in any proceeding in which
they, a member of their immediate family or a member of their firm have any
interest or where such participation otherwise would involve a conflict of interest
or the appearance of impropriety. A Respondent must identify any conflicts with
potential Hearing Panel members in his or her Answer to CFP Board’s
Complaint. Failure to do so will result in the waiver of an objection to the Hearing
Panel member. A Respondent may raise any conflicts arising after the filing of
his/her answer with the Hearing Panel at the start of the hearing and the Chair of
the Hearing Panel shall make a ruling pursuant to Article 9.4.
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2.6 “CFP Board Counsel,” “CFP Board Designated Counsel” and “CFP
Board Advisory Counsel,” and the duties thereof:
(a) CFP Board Counsel refers to the staff attorney who:
i. Conducts any investigation commenced under Article 6.1;
ii. Makes the probable cause determination under Article 6.3;
iii. Issues Administrative Orders of Revocation under Article 7.4; and
iv. Presents the case to the Hearing Panel as an advocate for CFP Board.
(b) CFP Board Designated Counsel refers to the outside attorney who presents
the case to the Hearing Panel as an advocate for CFP Board.
(c) CFP Board Advisory Counsel refers to the attorney who acts in an advisory
capacity in providing advice on the Standards of Professional Conduct and
hearing procedures to the Hearing Panel and the DEC during the Ratification
Meeting.
(d) No person shall act as both CFP Board Counsel and CFP Board Advisory
Counsel during the same set of hearings.
2.7 Venue
Unless otherwise approved by the Board of Directors, CFP Board’s headquarters
shall serve as a central office for the filing of requests for:
(a) the investigation of Respondent conduct;
(b) the coordination of such investigations;
(c) the administration of all disciplinary enforcement proceedings carried out
pursuant to these Disciplinary Rules; and
(d) the performance of such other activities as are designated by the CEO.
ARTICLE 3: GROUNDS FOR DISCIPLINE
Misconduct by a Respondent, individually or in concert with others, including the
following acts or omissions, shall constitute grounds for discipline, whether or not
the act or omission occurred in the course of a client relationship:
(a) Any act or omission that violates the provisions of the Code of Ethics and/or
Rules of Conduct;
(b) Any act or omission that fails to comply with the Practice Standards;
(c) Any act or omission that violates the criminal laws of any State or of the
United States or of any province, territory or jurisdiction of any other country,
provided however, that conviction thereof in a criminal proceeding shall not
be a prerequisite to the institution of disciplinary proceedings, and provided
further, that acquittal in a criminal proceeding shall not bar a disciplinary
action;
(d) Any act that is the proper basis for professional discipline, as defined herein,
provided professional discipline shall not be a prerequisite to the institution of
disciplinary proceedings, and provided further, that dismissal of charges in a
professional discipline proceeding shall not necessarily bar a disciplinary
action;
(e) Any act or omission that violates these Disciplinary Rules or that violates an
order of discipline;
(f) Failure to respond to a request by CFP Board staff, or obstruction of the
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DEC, or any panel thereof, or CFP Board staff in the performance of its or
their duties;
(g) Any false or misleading statement made to CFP Board.
The enumeration of the foregoing acts and omissions constituting grounds for
discipline is not exclusive and other acts or omissions amounting to
unprofessional conduct may constitute grounds for discipline.
ARTICLE 4: FORMS OF DISCIPLINE
In cases where no grounds for discipline have been established, the DEC may
dismiss the matter as either without merit or with a cautionary letter. In all cases,
the DEC has the right to require the Respondent to complete additional
continuing education or other remedial work, which includes, but is not limited to,
retaking the CFP® Certification Exam and/or completing the coursework required
by a CFP Board-Registered Program. Such continuing education or remedial
work may be ordered instead of, or in addition to, any discipline listed below.
Where grounds for discipline have been established, any of the following forms of
discipline may be imposed.
4.1 Private Censure
The DEC may order private censure of a Respondent, which shall be an
unpublished written reproach mailed by the DEC to a censured Respondent.
4.2 Public Letter of Admonition
The DEC may order that a Public Letter of Admonition be issued against a
Respondent, which shall be a publishable written reproach of the Respondent’s
behavior. It shall be standard procedure to publish the Public Letter of
Admonition in a press release or in such other form of publicity selected by the
DEC.
4.3 Suspension
The DEC may order suspension for a specified period of time, not to exceed five
years .In the event of a suspension, CFP Board must publish the fact of the
suspension together with identification of the Respondent in a press release, or
in such other form of publicity as is selected by the DEC. Respondents receiving
a suspension may qualify for reinstatement to use the marks as provided in
Article 15.
4.4 Revocation
The DEC may order permanent revocation of a Respondent’s right to use the
marks. In the event of a permanent revocation it shall be standard procedure to
publish the fact of the revocation together with identification of the Respondent in
a press release, or in such other form of publicity as is selected by the DEC.
ARTICLE 5: INTERIM SUSPENSION STATUS
Interim suspension is the temporary suspension by the DEC of a CFP®
professional’s right to use the marks for a definite or indefinite period of time,
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while proceedings conducted pursuant to these Disciplinary Rules are pending
against the CFP® professional. Imposition of an interim suspension shall not
preclude the imposition of any other form of discipline entered by the DEC in final
resolution of the disciplinary proceeding.
5.1 Issuance of a Show Cause Order
Although a CFP® professional’s right to use the marks shall not ordinarily be
suspended during the pendency of such proceedings, when CFP Board receives
evidence that a CFP® professional has engaged in conduct: 1) that poses an
immediate threat to the public; and 2) the gravity of the conduct significantly
impinges upon the stature and reputation of the marks, CFP Board Counsel may
issue an Order to Show Cause why the CFP® professional’s right to use the
marks should not be suspended during the pendency of the proceedings.
5.2 Service
CFP Board shall serve the Order to Show Cause upon the CFP® professional as
provided in Article 18.2.
5.3 Response
All responses to Orders to Show Cause shall be in writing and shall be submitted
within 20 calendar days from the date of service of the Order to Show Cause
upon the CFP® professional. Extensions and/or continuances are generally
disfavored by CFP Board. CFP Board Counsel may, however, grant reasonable
requests for extensions and continuances, as deemed appropriate. The CFP®
professional shall, in the response, either request or waive the right to participate
in the Show Cause Hearing.
5.4 Failure to Respond to the Order to Show Cause
If the CFP® professional fails to file a Response within the period provided in
Article 5.3, the CFP® professional shall be deemed to have waived the right to
respond, the allegations set forth in the Order to Show Cause shall be deemed
admitted and an interim suspension will automatically be issued.
5.5 Show Cause Hearing
Upon receiving the CFP® professional’s response as provided in Article 5.3, a
hearing shall be scheduled as soon as practicable before a Hearing Panel
consisting of three members of the DEC, generally no more than 40 days from
the date of service of the Order to Show Cause. The CFP® professional shall
have the opportunity to participate at such hearing presenting arguments and
evidence on his/her behalf. All evidence presented must be submitted to CFP
Board Counsel with the CFP® professional’s Response to the Order to Show
Cause in accordance with Article 5.3. Either party may make a motion at the
hearing to admit evidence discovered by either party after the CFP® professional
files a Response to the Order to Show Cause. The Chair of the Hearing Panel
shall have the discretion to grant or deny the motion. CFP Board Counsel will
provide the CFP® professional with the evidence submitted to the Hearing
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Panel prior to the Show Cause Hearing. In making its determination whether to
issue an interim suspension, the Hearing Panel shall consider all of the evidence
presented.
5.6 Interim Suspension
Upon a showing of any of the factors listed in Article 5.1, an interim suspension
shall be issued, subject to review by the DEC under the provisions of Article 11.2,
unless the Hearing Panel determines that the CFP® professional has provided
evidence that establishes by a preponderance of the evidence that the CFP®
professional does not pose an immediate threat to the public and that the gravity
of the CFP® professional’s conduct does not significantly impinge upon the
stature and reputation of the marks. The fact that a CFP® professional is seeking
appellate review of a conviction or professional discipline shall not limit the power
of the Hearing Panel to impose an interim suspension.
5.7 Automatic Interim Suspension
An interim suspension shall immediately be issued without a hearing when CFP
Board Counsel receives evidence of a conviction or a professional discipline in
accordance with Article 13.1 for any of the following conduct:
(a) Felony conviction for any crime;
(b) Misdemeanor conviction for fraud, misrepresentation or crimes of moral
turpitude; or
(c) Revocation of a financial professional license (securities, insurance,
accounting or bank-related license) unless the revocation is administrative
in nature, i.e. the result of the individual determining to not renew the license
by not paying the required fee and/or not completing the required continuing
education. CFP Board Counsel will notify any CFP® professional subject to
interim suspension under this Article as provided in Article 18.2.
5.8 Proceedings Subsequent to Interim Suspensions
After the issuance of an interim suspension or an automatic interim suspension,
CFP Board Counsel shall continue to investigate as outlined in Article 6. After
CFP Board Counsel issues a Complaint, as outlined in Article 7, a CFP®
professional will have the opportunity to be heard in accordance with the
Disciplinary Rules. An Interim Suspension issued under this Article, however, is
not subject to the CFP® professional’s right of appeal as outlined in Article 12.
5.9 Automatic Reinstatement Upon Reversal of Conviction or Professional
Discipline
A CFP® professional subject to a suspension under this Article shall have the
suspension vacated immediately upon filing with the DEC a certificate
demonstrating that the underlying criminal conviction or professional discipline
has been reversed; provided, however, the reinstatement upon such reversal
shall have no effect on any proceeding conducted pursuant to these Disciplinary
Rules then pending against a CFP® professional.
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ARTICLE 6: INVESTIGATION
6.1 Commencement
Proceedings involving potential ethics violations shall be commenced upon: 1)
receipt of information by CFP Board Counsel indicating a potential violation of the
Code of Ethics, Rules of Conduct and/or non-compliance with the Practice
Standards; or 2) disclosure by a Respondent of any matter constituting a
potential violation of the Code of Ethics, Rules of Conduct and/or non-compliance
with the Practice Standards.
6.2 Procedures for Investigation
Upon receipt of a request for investigation containing allegations which, if true,
could give rise to a violation of the Code of Ethics, Rules of Conduct and/or noncompliance with the Practice Standards, or upon the acquisition by CFP Board
Counsel of information which, if true, could give rise to a violation of the Code of
Ethics, Rules of Conduct and/or non-compliance with the Practice Standards,
CFP Board Counsel shall give written notice to the Respondent that the
Respondent is under investigation and of the general nature of the allegations
asserted against the Respondent. The Respondent shall have 30 calendar days
from the date of notice of the investigation to file a written response to the
allegations with the CFP Board.
(a) No Response. At the expiration of the 30 calendar-day period if no response
has been received, CFP Board Counsel shall give written notice of a second
request for information via certified mail. The Respondent shall have 20
calendar days from the date of the second request to file a written response
to the allegations with CFP Board. At the expiration of the 20 calendar-day
period if no response has been received, the matter shall be referred to the
DEC.
(b) Adverse Inference. Failure to provide requested information may give rise to
an adverse inference with respect to the underlying subject matter. An
adverse inference is an inference, adverse to the concerned party, drawn
from silence or absence of requested evidence. This rule applies to
evidence that has been destroyed, evidence that exists but the party refuses
to produce, and evidence that the party has under his/her control and has
not produced. This adverse inference is based upon the presumption that
the party who controls the evidence would have produced it, if it had been
supportive of his/her position.
(c) Response. Upon receipt of a response within the prescribed time period,
CFP Board Counsel shall compile all documents and materials and
commence probable cause determination procedures as soon thereafter as
is reasonably practicable.
6.3 Probable Cause Determination Procedures
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CFP Board Counsel or his/her designee shall be responsible for determining if
there is probable cause to believe grounds for discipline exist and shall: 1)
dismiss the allegations as not warranting further investigation at this time; 2)
dismiss the allegations with a letter of caution indicating that CFP Board Counsel
has determined that based on the available evidence, the Respondent’s conduct
may have violated the Code of Ethics, Rules of Conduct and/or not complied with
the Practice Standards but does not warrant referral to the DEC; or 3) begin
preparation and processing of a Complaint against the Respondent in
accordance with Article 7. For matters that are dismissed, CFP Board reserves
the right to reopen the investigation in the future if appropriate.
When CFP Board Counsel issues a letter of caution, the Respondent may submit
a letter in response to the letter of caution. The response letter will become part
the Respondent’s record, but will not receive any additional consideration by CFP
Board Counsel. The letter of caution and the response to the letter of caution will
be available for consideration by the DEC.
6.4 Disposition
CFP Board Counsel shall conduct CFP Board’s investigation as expeditiously as
reasonably practicable.
6.5 Relinquishment
A Respondent may not voluntarily relinquish his/her CFP® certification during the
course of an investigation.
ARTICLE 7: COMPLAINT - ANSWER - DEFAULT
7.1 Complaint
An original Complaint shall be prepared by CFP Board Counsel and forwarded to
the Respondent. Copies of the Complaint shall be included with the materials
provided to the Hearing Panel in advance of the hearing. The Complaint shall
reasonably set forth the grounds for discipline with which the Respondent is
charged and the conduct or omission that gave rise to those charges.
7.2 Service of the Complaint
CFP Board Counsel shall promptly serve the Complaint upon the Respondent as
provided in Article 18.2.
7.3 Answer
All Answers to Complaints shall be in writing. The Answer shall be submitted
within 20 calendar days from the date of service of the Complaint on the
Respondent. The Respondent shall file an original of such Answer with CFP
Board. A copy of the Answer shall be included with the materials provided to the
Hearing Panel in advance of the hearing. In the Answer, the Respondent shall
respond to every material allegation contained in the Complaint. In addition, the
Respondent shall set forth in the Answer any defenses or mitigating
circumstances.
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7.4 Default and Administrative Orders of Revocation
If the Respondent fails to file an Answer within the period provided by Article 7.3
or fails to pay the hearing costs assessed by CFP Board pursuant to Article 18.3,
except in cases where CFP Board Counsel has granted a waiver due to financial
hardship, such Respondent shall be deemed to be in default, and the allegations
set forth in the Complaint shall be deemed admitted. In such circumstance, CFP
Board Counsel shall serve upon the Respondent an Administrative Order of
Revocation. Such orders shall state clearly and with reasonable particularity the
grounds for the revocation of Respondent’s right to use the marks. These orders
are subject to the Respondent’s right of appeal as outlined in Article 12.
7.5 Request for Appearance
Upon the filing of an Answer, the Respondent may request an appearance at the
hearing before the Hearing Panel, at which the Respondent may present
arguments, witnesses and evidence on his/her behalf. Alternatively, the
Respondent may request a paper review in which the DEC will consider the
Complaint and Answer as well as documents contained in CFP Board’s files to
make its decision. Neither CFP Board Counsel nor Respondent will be permitted
to make an appearance or present witnesses.
7.6 Request for Extension or Continuance
A Respondent may request an extension to answer the Complaint or a
continuance of the hearing no later than within 20 calendar days from the date of
service of the Complaint. Upon receipt of the request, CFP Board Counsel shall
either grant or deny all requests for extension and continuances. Extensions
and/or continuances are generally disfavored by CFP Board Counsel. CFP Board
Counsel may, however, grant reasonable requests for extensions and
continuances, as deemed appropriate. CFP Board Counsel shall not grant any
extension to file an Answer to the Complaint longer than 14 calendar days. CFP
Board Counsel shall not grant more than one continuance. If more than one
continuance is requested, the matter shall proceed to the DEC for review of the
hearing materials without appearances by CFP Board or the Respondent.
ARTICLE 8: DISCOVERY AND EVIDENCE
8.1 Discovery
Discovery of a disciplinary case may be obtained only after a Complaint has
been issued against a Respondent. A Respondent may obtain copies of all
documents in the Respondent’s disciplinary file that are not privileged or do not
constitute attorney work product and are relevant to the subject matter in the
pending action before the Hearing Panel. Requests for copies of CFP Board
documents must be made to CFP Board Counsel in writing. Release of
information contained in a Respondent’s disciplinary file is premised on the
understanding that materials will be used only for purposes directly
connected to the pending CFP Board action.
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8.2 Documents
Documents submitted by a Respondent to the DEC for consideration in
resolution of the issues raised during an investigation shall be limited to 100
pages. No evidence may be accepted less than 45 calendar days prior to the
scheduled hearing, except by motion at the hearing. Should a Respondent deem
it necessary to exceed the 100 page limit, the Respondent shall be required to
submit a written memorandum that outlines clearly and with reasonable
particularity how each and every document submitted by the Respondent or on
his or her behalf relates to the allegations contained in the CFP Board Complaint.
After reviewing such outline, the DEC shall determine which documents will be
permitted.
8.3 Witnesses
Witnesses, if any, shall be identified by the Respondent and CFP Board no later
than 45 calendar days prior to the scheduled hearing. When witnesses are
identified, the Respondent and CFP Board shall also state the nature and extent
of the witnesses’ testimony, as well as whether the witnesses will appear in
person or via telephone.
8.4 Respondent’s Counsel
Respondent’s Counsel, if any, shall be identified to CFP Board no later than 45
calendar days prior to the scheduled hearing. When Respondent’s Counsel is
identified, the Respondent shall provide the counsel’s contact information as well
as whether the counsel will appear in person or via telephone. Respondent’s
counsel must be an active member in good standing of the bar of a United States
state, jurisdiction, possession, territory or dependency.
8.5 Administrative Dismissal
If, upon receipt of a Respondent’s Answer to the Complaint, new information
becomes available that eliminates all questions of fact and may warrant a
dismissal of the case prior to review by a Hearing Panel, CFP Board Counsel
may administratively dismiss the Complaint.
ARTICLE 9: MOTIONS
9.1 Motion
Respondent and/or CFP Board Counsel may file a written motion regarding
procedural and/or evidentiary matters. The motion must be filed no later than 30
calendar days prior to the hearing, except as otherwise referenced in Articles 5.5
and 8.2. Filing is accomplished by depositing the motion in the U.S. Mail, by
Certified Mail, return receipt requested, properly addressed in accordance with
Articles 2.7 and/or 18.2. The motion must state with reasonable particularity the
grounds for the motion, the relief sought and whether a hearing is requested. If
the motion pertains to a specific rule or rules, the motion must identify the rules.
The Chair of the Hearing Panel shall have the discretion to summarily rule on a
motion without a requested hearing.
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9.2 Response
Respondent and/or CFP Board Counsel may file a written response to any
motion filed by another party. Any response must be filed no later than 10
calendar days after the filing of the motion. Filing is accomplished by depositing
the response in the U.S. Mail, by Certified Mail, return receipt requested, properly
addressed accordance with Articles 2.7 and/or 18.2. If a response is filed, a
rebuttal is not permitted.
9.3 Length
Motions shall not exceed two single-spaced pages. Attachments shall not exceed
10 pages.
9.4 Disposition of a Motion
The Chair of the Hearing Panel shall rule on all motions, objections and other
matters presented at, or prior to, a hearing.
ARTICLE 10: HEARINGS
10.1 Notice
Not less than 30 calendar days before the date set for the hearing of a
Complaint, notice of such hearing shall be given as provided in Article 18.2 to the
Respondent, or to the Respondent’s counsel. The notice shall designate the date
and place of the hearing.
10.2 Designation of a Hearing Panel
All hearings on Complaints seeking disciplinary action against a Respondent
shall be conducted by the Hearing Panel.
10.3 Procedure and Proof
The Hearing Panel may be guided by the rules of procedure and evidence
applicable in a court of law to the extent it believes it is appropriate. Such rules,
however, are not binding on the Hearing Panel. Proof of misconduct shall be
established by a preponderance of the evidence. A preponderance of the
evidence is a legal standard of review that generally means “more probable than
not,” i.e., evidence which shows that, as a whole, the fact sought to be proved is
more probable than not to have occurred. In the course of the proceedings, the
Chair of the Hearing Panel shall administer affirmations. A complete record shall
be made of all testimony taken at hearings before the Hearing Panel.
10.4 Recommendation
CFP Board Counsel or CFP Board Designated Counsel shall present to the
Hearing Panel the information and documentation gathered during the
investigation and make a recommendation regarding an appropriate sanction.
ARTICLE 11: REPORT, FINDINGS OF FACT AND RECOMMENDATION
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11.1 Recommendation of the Hearing Panel
At the conclusion of the hearing, the Hearing Panel shall record its findings of
fact and recommendations and report its findings and recommendations to the
DEC for its consideration. In this report, the Hearing Panel shall: 1) determine
that the Complaint is not proved or that the facts as established do not warrant
the imposition of discipline and recommend the Complaint be dismissed, either
as without merit or with caution; or 2) refer the matter to the DEC with the
recommendation that discipline by the DEC is appropriate. The recommendation
of the Hearing Panel shall state specifically the form of discipline the Hearing
Panel deems appropriate. The Hearing Panel may also recommend that the DEC
enter other appropriate orders. In making its recommendation, the Hearing Panel
may take into consideration the Respondent’s prior disciplinary record, if any,
which includes, but is not limited to, any previous sanction issued by the DEC
and/or a letter of caution issued by CFP Board Counsel.
11.2 Power of the DEC
The DEC reserves the authority to review any determination made by the
Hearing Panel in the course of a disciplinary proceeding and to enter any order
with respect thereto including an order directing that further proceedings be
conducted as provided by these Disciplinary Rules. The DEC shall review the
recommendation of the Hearing Panel and may either approve the
recommendation or remand it to the Hearing Panel for further consideration.
Within 45 calendar days of the hearing, the DEC must mail by certified
mail to Respondent a final order containing the DECs’ findings of fact and, if
appropriate, the sanction imposed. Once the DEC has issued an order, the
DEC’s decision is final.
ARTICLE 12: APPEALS
All appeals from orders of the DEC and orders of CFP Board Counsel shall be
submitted to CFP Board’s Appeals Committee in accordance with the Rules and
Procedures of the Appeals Committee. If an order of the DEC or an order of CFP
Board Counsel is not appealed within 30 calendar days after notice of the order
is sent to the Respondent, such order shall become final. All orders of the DEC
and orders of CFP Board Counsel are appealable unless otherwise noted in
these Disciplinary Rules.
ARTICLE 13: CONVICTION OF A CRIME ORPROFESSIONAL DISCIPLINE
13.1 Proof of Conviction or Professional Discipline
Except as otherwise provided in these Disciplinary Rules, a certificate from the
clerk of any court of criminal jurisdiction indicating that a Respondent has been
convicted of a crime in that court or a letter or other writing from a governmental
or industry self regulatory authority to the effect that a Respondent has been the
subject of an order of professional discipline (as hereinafter defined) by such
authority, shall conclusively establish the existence of such conviction or such
professional discipline for purposes of disciplinary proceedings and shall be
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conclusive proof of the DEC of that crime or of the basis for such discipline, by
the Respondent.
13.2 Duty to Report Criminal Conviction or Professional Discipline
Every Respondent:
(1) upon being convicted of a crime, other than minor traffic offenses;
(2) upon being the subject of professional discipline; or
(3) upon notification of a change to a matter previously disclosed under items
(1) and (2) to CFP Board,
shall notify CFP Board in writing of such conviction or professional discipline
within 30 calendar days after the date on which the Respondent is notified of the
conviction or professional discipline.
13.3 Commencement of Disciplinary Proceedings Upon Notice of
Conviction or Professional Discipline.
Upon receiving notice that a Respondent has been convicted of any crime
occurring within the last 10 years, other than minor traffic offenses, or been the
subject of professional discipline, CFP Board Counsel shall determine whether
an investigation is warranted. CFP Board shall obtain the record of conviction or
proof of discipline and, if appropriate, file a Complaint against the Respondent as
provided in Article 7. If the Respondent’s criminal conviction or professional
discipline is either proved or admitted as provided herein, the Respondent shall
have the right to be heard by the Hearing Panel only on matters of rebuttal of any
evidence presented by CFP Board Counsel other than proof of the conviction or
professional discipline.
13.4 Definition of Professional Discipline
Professional discipline as used herein shall include the suspension, bar or
revocation as a disciplinary measure by any governmental agency, industry selfregulatory organization or professional association.
ARTICLE 14: SETTLEMENT PROCEDURE
A Respondent or CFP Board Counsel may propose an Offer of Settlement
(“Offer”) in lieu of a disciplinary hearing pursuant to these Disciplinary Rules.
Submitting an Offer shall stay all proceedings conducted pursuant to these
Disciplinary Rules.
14.1 Offer of Settlement
CFP Board Counsel shall be permitted to negotiate settlements with
Respondents on behalf of CFP Board where it is in the best interests of all
parties to attempt to arrive at an expedited resolution. Either CFP Board counsel
or Respondent may initiate the settlement negotiations. CFP Board Counsel and
Respondent may negotiate violations and penalties, but not factual findings
unless evidence proving the contrary is produced during negotiations. CFP Board
Counsel shall be authorized to reach a provisional
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agreement for CFP Board. Upon agreement, the final Offer shall be reduced to
writing and signed for presentation by both parties to the DEC. The Offer shall be
in writing and must be submitted to CFP Board staff at least 40 calendar days
prior to the Respondent’s scheduled disciplinary hearing. CFP Board Counsel
may endorse the Offer to the Hearing Panel.
A Hearing Panel shall consider the Offer and take one of the actions described in
Articles 14.2 and 14.3. The Hearing Panel shall consider only one Offer after the
Complaint is filed. Only the DEC shall have final decision making authority to
accept or reject an Offer.
The Offer shall contain and describe in reasonable detail:
(a) The act or practice which the Respondent is alleged to have engaged in or
omitted;
(b) The principle, rule, regulation or statutory provision which such act, practice
or omission to act is alleged to have violated;
(c) The mitigating factors that were considered during the negotiations;
(d) Any evidence produced during negotiations that exonerated or resulted in
the recommendation of a lesser violation or penalty or the removal of same;
(e) Any other information CFP Board Counsel found relevant in settlement
discussions.
(f) Proposed acceptance and a statement that the Respondent consents to the
entry of the Offer; and
(g) A waiver of all rights of appeal to CFP Board’s Appeals Committee and the
courts or to otherwise challenge or contest the validity of the Order issued if
the Settlement Agreement is accepted. If negotiations between CFP Board
Counsel and Respondent are unsuccessful, then Respondent shall have the right
to present the Offer directly to the DEC.
14.2 Acceptance of Offer
If an Offer is accepted by a Hearing Panel, the decision of the Hearing Panel
shall be reviewed by the DEC. The DEC’s decision to affirm the decision of the
Hearing Panel to accept the Offer shall conclude the proceeding as of the date
the Offer is accepted. If the Offer includes a penalty of revocation or suspension,
the revocation or suspension shall become effective immediately upon execution
of the Offer by the Hearing Panel and affirmation by the DEC.
14.3 Rejection of Offer; Counter Offer
If the Offer is rejected by a Hearing Panel, the Offer shall be deemed void and
the matters raised in the Complaint shall be set for hearing at the next meeting of
the DEC.
The Respondent shall not be prejudiced by the prior Offer, and it shall not be
given consideration in the determination of the issues involved in the pending or
any other proceeding.
If the Hearing Panel deems it appropriate, it may make a Counter Settlement
Offer (“Counter Offer”) to the Respondent modifying the proposed finding(s) of
fact, violation(s) and/or discipline. The Respondent must respond to CFP Board
within 20 calendar days from the date of service of the Counter Offer by either
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accepting or rejecting the Counter Offer. Respondent’s failure to respond within
20 calendar days shall be considered rejection of the Counter Offer. If the
Counter Offer is rejected by the Respondent, the Offer and Counter Offer shall
be deemed void and the matters raised in the Complaint will be set for hearing at
the next meeting of the DEC. The Respondent shall not be prejudiced by the
prior Offer or the Counter Offer, and neither shall be given consideration in the
determination of the issues involved in the pending or any other proceeding.
ARTICLE 15: REQUIRED ACTION AFTER REVOCATION OR SUSPENSION
After the entry of an order of revocation or suspension is final, the Respondent
shall promptly terminate any use of the marks and in particular shall not use them
in any advertising, announcement, letterhead or business card. Within 30 days of
receiving an order of suspension or the execution of an Offer in which a
Respondent consented to a suspension, the Respondent must provide to CFP
Board evidence that he/she has ceased all use of the marks by providing copies
of documents requested by the DEC in its order. Failure to provide the
information requested by the DEC will result in an automatic issuance of a
revocation under Article 4.4.
ARTICLE 16: REINSTATEMENT AFTER DISCIPLINE
16.1 Reinstatement After Revocation
Revocation shall be permanent, and there shall be no opportunity for
reinstatement.
16.2 Reinstatement After Suspension
Unless otherwise provided by the DEC in its order of suspension, a Respondent
who has been suspended for a period of one year or less shall be automatically
reinstated upon the expiration of the period of suspension, provided the
Respondent files with CFP Board within 30 calendar days of the expiration of the
period of suspension a request for reinstatement. A Respondent who has been
suspended for a period longer than one year must petition the DEC for a
reinstatement hearing within six months of the end of his/her suspension, or the
Respondent shall be permanently barred from using the CFP® certification.
Before any reinstatement hearing will be scheduled, the Respondent must meet
all administrative requirements for recertification, pay the reinstatement
hearing costs and provide evidence, if necessary, that all prior hearing costs
have been paid. At the reinstatement hearing, the Respondent must prove by
clear and convincing evidence that the Respondent has been rehabilitated, has
complied with all applicable disciplinary orders and provisions of these
Disciplinary Rules, and that the Respondent is fit to use the marks. Clear and
convincing evidence means that the DEC must have no reasonable doubt that
the Respondent has met his/her burden. The Respondent may prove
rehabilitation by providing to the DEC:
1. Evidence that the Respondent maintained competence and learning in the
area of financial planning during the suspension period;
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2. Evidence that the Respondent’s conduct since the issuance of the DEC’s
order has been exemplary and beyond reproach;
3. Evidence that the Respondent made restitution or settled all claims from
persons injured or harmed by his/her misconduct; and
4. Documentary evidence of all business activities during the suspension period.
The Respondent may prove that he/she is fit to use the marks by demonstrating
to the DEC:
1. Whether the Respondent has a proper understanding of CFP Board’s
Standards and is willing to act in conformity with the Standards;
2. Whether the Respondent can be confidently recommended to the public as a
CFP® professional;
3. How the Respondent plans to use the CFP® marks in his/her future business;
and
4. Any other information obtained during the hearing that the DEC chooses to
consider.
16.3 Investigation
Immediately upon receipt of a petition for reinstatement, CFP Board Counsel will
initiate an investigation. The petitioner shall cooperate in any such investigation,
and CFP Board Counsel or CFP Board Designated Counsel shall provide to the
DEC the Respondent’s past disciplinary record and any recommendation
regarding reinstatement.
16.4 Successive Petitions
If a Respondent is denied reinstatement, he/she must wait two years to petition
again for reinstatement. The second petition must be received by CFP Board
within six months of the expiration of the two -year period, or the Respondent’s
right to use the marks will be revoked. If the second petition is denied, the
Respondent will be permanently barred from using the marks.
16.5 Reinstatement Fee
Respondents petitioning for reinstatement will be assessed the costs of the
reinstatement proceeding.
ARTICLE 17: CONFIDENTIALITY OF PROCEEDINGS
17.1 Confidentiality
Except as otherwise provided in these Disciplinary Rules, all proceedings
conducted pursuant to these Disciplinary Rules shall be confidential and the
records of the DEC, Hearing Panel, CFP Board Counsel and CFP Board staff
shall remain confidential and shall not be made public.
17.2 Exceptions to Confidentiality
CFP Board may release the records of the proceedings, subject to privilege, if: 1)
the proceeding is predicated on a criminal conviction or professional discipline as
defined herein; 2) the Respondent has waived confidentiality; 3) such disclosure
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is required by legal process of a court of law, governmental agency or an industry
self-regulatory organization having appropriate jurisdiction; 4) CFP Board
Counsel provides the information to a governmental agency or industry selfregulatory organization having appropriate jurisdiction; or 5) in proceedings
involving a consumer, CFP Board staff contacts the consumer and/or the
Respondent’s current and/or former employer to request documents relevant to
the proceeding.
ARTICLE 18: GENERAL PROVISIONS
18.1 Quorum
Two-thirds of the members of the DEC must be present in order to constitute a
quorum of such DEC, and the approval of a majority of the quorum shall be the
action of such DEC.
18.2 Notice and Service
Except as may otherwise be provided in these Disciplinary Rules, notice shall be
in writing and the giving of notice and/or service shall be sufficient when made by
certified mail sent to the last known address of the Respondent according to the
records of CFP Board. In matters where a Respondent has designated counsel,
notice and service shall be accomplished by certified mail to counsel’s address
as provided by Respondent.
18.3 Submissions
All documents received by CFP Board shall be date-stamped and deemed filed
on the date received by CFP Board. All such documents shall become part of the
investigative file.
18.4 Costs
In all disciplinary cases wherein a proceeding is initiated, the DEC will assess
against the Respondent the costs of the proceedings. In addition, a Respondent
who desires an appearance, whether telephonically or in person, or a paper
review, or who submits an Offer of Settlement pursuant to Article 14, will be
required to submit hearing costs not less than 45 days prior to the date of the
scheduled hearing. In the event that the hearing results in a dismissal without
merit, the hearing costs shall be refunded to the Respondent. Hearing costs will
not be refunded if the hearing results in any action other than a dismissal without
merit. A Respondent who petitions for reinstatement from a suspension or
revocation or who petitions for appeal shall bear the costs of such proceeding.
Financial hardship. In the event a Respondent is unable to pay the required
hearing
costs due to financial hardship, the Respondent must submit a written statement
and supporting documentation explaining his or her financial situation and
request a deferral, reduction or waiver of the hearing costs. Upon receipt and
review of such request, CFP Board Counsel shall have the discretion to defer,
reduce or waive the required hearing costs. All written requests for a reduction or
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waiver of hearing costs due to financial hardship must be submitted with
Respondent’s Answer to the Complaint.
18.5 Electronic Signature
Some documents that require a handwritten signature may be submitted
electronically through CFP Board’s closed website. Any document received by
CFP Board through this process shall constitute conclusive proof that: 1) the
Respondent whose name appears on the document submitted such document;
and 2) the Respondent intended to be bound by the terms and conditions
contained therein. Accordingly, the document shall be as legally binding as any
containing a handwritten signature.
18.6 Publication
It shall be standard procedure to publish the fact of an interim suspension, Public
Letter of Admonition, suspension, revocation or permanent bar issued pursuant
to Article 4, together with identification of the CFP® professional in a press
release and on CFP Board’s website. In the event proceedings pursuant to
Article 14 result in a Public Letter of Admonition, suspension, revocation, or
otherwise result in a termination of the right to use the marks, it shall be standard
procedure to publish such fact together with identification of the Respondent in a
press release and on CFP Board’s website.
18.7 Anonymous Case Histories and Sanction Guidelines
Anonymous Case Histories are available through CFP Board’s website.
Anonymous Case Histories are summaries of prior decisions rendered by the
DEC. While the Anonymous Case Histories may be relied on by the DEC during
hearings and deliberations, the Anonymous Case Histories are not binding on the
DEC. The DEC considers all allegations of misconduct on a case-by-case basis,
taking into consideration the details specific to each case. While CFP Board has
attempted to capture in the Anonymous Case Histories the details relevant to
each DEC decision, the summary nature of an Anonymous Case History may
omit certain details affecting the decision. Accordingly, the decisions and/or
rationale described in the Anonymous Case History may not apply to other cases
reviewed by the DEC or reflect the DEC’s future interpretation or application of
the Standards. The Sanction Guidelines identify specific conduct that is a
violation of CFP Board’s Standards, the sanction guideline for that conduct and
policy notes for the DEC to consider when imposing the appropriate sanction.
The DEC is not bound by the Sanction Guidelines, which are intended, along
with the Anonymous Case Histories, to guide the decision making of the DEC.
When considering the appropriate sanction in a particular case, the DEC may
deviate from the sanction guideline if there are aggravating facts that warrant a
more severe sanction or mitigating factors that warrant a less severe sanction.
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Part X. Anonymous Case Histories
Script:
These are case studies where the events reported and described here by
the CFP Board have actually happened. The CFP Board has provided
many detailed scenarios involving various CFP® certificants on its
website for the CFP® certificant to learn from and understand the
issues affecting the public and other professionals. It is interesting to
note that these cases all stem from real-life happenings!
The CFP Board has provided an excellent cross-reference of these
issues by topic and by the specific principal, rule or practice standard
affected, and the disciplinary action charge and what was initially
implemented against each wrongdoer.
You will be able to see how various standards of conduct have affected
CFP® certificants and what the CFP Board has done in each
circumstance. It will also provide you with an understanding of what
NOT to do in many situations.
Due to the lack of time, we can not cover all of these examples in our
program, but I would encourage you to visit the CFP Board’s website:
www.cfp,net for a full description and resolution of these issues.
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Part XI. SAMPLE DISCLOSURE FORMS
The use of the following forms is intended to help CFP® certificants meet their
obligations under CFP Board’s updated Standards of Professional Conduct. CFP Board
believes that using the form appropriately will supply clients with:
• information about a CFP® certificant;
• the services being provided,
• any conflict of interest a CFP® certificant may have; and
• the costs to the client associated with the services being provided, which includes
compensation arrangements, financial or investment product fees, or other costs related
generally to transactions or advice by a CFP® certificant.
Following are three sample disclosure forms for use by CFP® certificants in complying
with the disclosure
and agreement requirements of CFP Board’s Rules of Conduct:
Form OPS: This form may be used by any CFP® certificant to make required disclosures
to prospective clients and clients prior to formalizing a relationship with a client that only
involves executing transactions on behalf of or providing investment advisory services to
a client. The use of this form is intended to aid a CFP® certificant fulfill CFP Board’s
Rules of Conduct 2.2(a) to 2.2(d), because the CFP® certificant will not provide financial
planning services or use material elements of the financial planning process. Rule 2.2 of
CFP Board’s Rules of Conduct requires a CFP® certificant to make certain disclosures to
prospective clients and clients prior to formalizing a relationship with a client that only
involves executing transactions on behalf of or providing investment advisory services to
a client.
Form FPD: This form may be used by a CFP® certificant when engaged in financial
planning using the financial planning process or providing services using material
elements of the financial planning process integrating multiple financial planning subject
areas. This form may aid a CFP® certificant fulfill CFP Board’s Rules of Conduct 1.2 and
2.2. These rules require a CFP® certificant to make certain disclosures in writing to
prospective clients and clients prior to entering into an agreement for financial planning
services. It may not fulfill the requirements under Rule 1.3, which requires an agreement.
To fulfill that requirement, please use Form FPDA. This form guides those certificants
who are investment advisors or representatives of an investment advisor. Certificants
who are not investment advisors or their representatives are encouraged to contact their
employers’ compliance office or legal staff for any assistance to fill out this form.
Form FPDA: This form may be used by a CFP® certificant when engaged in financial
planning using the financial planning process or providing services using material
elements of the financial planning process integrating multiple financial planning subject
areas. Form FPDA incorporates Form FPD with a sample financial planning client
agreement or engagement letter. This form may aid a CFP® certificant fulfill CFP Board’s
Rules of Conduct 1.2, 1.3 and 2.2. These rules require a CFP® certificant to make certain
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disclosures in writing to prospective clients and clients prior to entering into an
agreement for financial planning services. Rule 1.3 of CFP Board’s Rules of
Conduct requires that a client agreement specify certain terms. This form guides those
certificants who are investment advisors or representatives of an investment advisor.
Certificants who are not investment advisors or their representatives are encouraged to
contact their employers’ compliance office or legal staff for any assistance to fill out this
form. Beside each item in the forms is a reference to the corresponding Rule(s) from the
Rules of Conduct, referenced in brackets. Also, Forms FPD and FPDA include more
guidance on the use of the U.S. Securities and Exchange Commission’s Form ADV for
investment advisors. Certificants who do not use the Form ADV are encouraged to
consult with their employers’ compliance office or legal staff. These forms are provided
as sample models to help CFP® certificants meet the requirements of CFP Board’s Rules
of Conduct. CFP® certificants are welcome to develop their own formats for written
disclosures and agreements. CFP® certificants may satisfy the requirements of CFP
Board’s Rules of Conduct with existing written documentation that:
• includes the required terms of CFP Board’s Rules of Conduct; and
• is used by a certificant or certificant’s employer in compliance with state and/or federal
law, such as Form ADV or other disclosures, or the rules or regulations of any applicable
self regulatory organization.
Written disclosures need not be provided in a single document; multiple written
documents may satisfy the written disclosure and agreement requirements if they
collectively include all elements required by the
Rules of Conduct.
Compliance with the disclosure requirements of CFP Board’s Rules of Conduct is
accomplished only when information relevant to the professional relationship (which
includes everything required, pertinent and appropriate to the given client relationship)
has been disclosed to the client or prospective client. Mere completion of a suggested
disclosure form does not, in and of itself, constitute full compliance with the
Rules of Conduct disclosure requirements. If a client lodges a complaint against a
certificant, CFP Board at that time will make an independent determination of full
compliance with the Rules of Conduct.
Questions about CFP Board’s written disclosure and agreement requirements, and
questions on any aspect of CFP Board’s updated Standards of Professional Conduct, may
be submitted to standards@CFPBoard.org.
Other Professional Services (Form OPS)
CFP Board is providing this sample disclosure document (Form OPS) to assist you in satisfying
the requirements of Rules 1.2 and 2.2 of the Rules of Conduct, which require CFP® certificants
to provide specific information and disclosures to prospective clients and clients prior to
entering into an arrangement to provide financial services other than financial planning
services.
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Part I: Contact Information [See Rule 2.2(d)]
A. Client’s Name and Contact Information
B. Certificant and Employer’s (if applicable) Contact Information
Part II: Services to be Provided
A. Describe the obligations and responsibilities of each party with respect to: [Be
sure the services provided to clients are allowed (or not prohibited) by the
certificant’s employer or in the employer’s Form ADV.]
B. Describe other professionals and/or firms the certificant may work with to
provide the necessary services listed above [See Rule 1.2(d)]
Part III: Material Information Relevant to the Relationship
A. Sources of Compensation [See Rule 2.2(a)]
1. Describe how the certificant and/or certificant’s employer are
compensated for the services provided [See Rule 2.2(a)]
2. Describe costs incurred that may be charged separately to the client
[See Rule 2.2(a)]
3. Describe other sources of [direct or indirect] compensation received but
not yet listed. Include source(s) and terms for receipt of compensation
(i.e., 12b-1 fees; soft dollars; etc.) [See Rule 2.2(a)]
4. Include compensation that any affiliate or affiliated entity to the
certificant or certificant’s employer may receive for the services
provided [See Rule 1.2(b)]
B. Conflicts of Interest [See Rule 2.2(b)]
1. Describe the conflicts of interest the certificant or certificant’s
employers (including affiliates and affiliated entities) may have [See
Rule 2.2(b)]
2. Describe the limitations placed on products, services and/or solutions
the certificant may recommend under this agreement. These limitations
may be caused by the relationship the certificant has with his/her
employer or a limitation on products the certificant may offer, as
examples [See Rule 1.2(c)]
C. Describe other material information relevant to the professional relationship
that the client should know before making an informed decision [See Rule
2.2(b)]
Part IV: Additional Information
You, the client, are encouraged to review the information contained in this disclosure form
and ask the certificant any questions you may have. [See Rule 1.2] Should any material
changes occur to this information, updated information will be provided to you in a
reasonable time frame. [See Rule 2.2] As a CFP® certificant, I acknowledge my
responsibility to adhere to the standards established in CFP Board’s Standards of
Professional Conduct. [See Rule 1.4] If you become aware that my conduct may violate the
Standards, you may file a complaint with CFP Board at www.CFP.net/complaint.
(Optional)
I hereby acknowledge the receipt the disclosures made above.
__________________________ / _________ __________________________ / _________
Client’s Signature Date Client’s Signature Date
_____________________________________ _____________________________________
Client’s Printed Name Client’s Printed Name
__________________________ / _________
Certificant’s Signature Date
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Form FPDA Rev. 6/08
Copyright © 2008, Certified Financial Planner Board of Standards, Inc. All Rights Reserved
Financial Planning Disclosure Sample (Form FPD)
CFP Board is providing this sample disclosure document (Form FPD) to assist you in satisfying
the requirements of Rules 1.2 and 2.2 of the Rules of Conduct, which require CFP® certificants
to provide specific information and disclosures to prospective clients and clients prior to
entering into an agreement to provide financial planning services. If applicable, references to
similar questions in your Form ADV are provided for guidance. This form may be used
contemporaneously with the certificant’s employer’s client agreement that satisfies Rule 1.3
of the Rules of Conduct.
Part I: Contact Information [See Rule 2.2(d)]
A. Client’s Name and Contact Information [Form ADV Part 1, Item 1]
B. Certificant and Employer’s (if applicable) Contact Information
Part II: Services to be Provided
A. Describe the obligations and responsibilities of each party with respect to: [See
Rule 1.2(a)] [Be sure the services you plan to provide to your client are allowed (or
not prohibited) in your Form ADV.]
1. Defining goals, needs and objectives
2. Gathering and providing appropriate data
3. Determining the results if no changes are made to the client/prospect’s
current course of action
4. Determining recommendations and possible changes to the current
course of action
5. Determining implementation responsibilities
6. Determining monitoring responsibilities
B. Description of other professionals and/or firms the certificant may work with to
provide the necessary services listed above [See Rule 1.2(d)] [Form ADV Part
1.A., Schedule D, Section 5.3(2), Section 7.A., Section 7.B. Form ADV Part II, Item
8., Item 12.B., Item 13.A. and 13.B.]
Part III: Material Information Relevant to the Relationship
A. Sources of Compensation [See Rule 2.2(a)]
1. Describe how the certificant and/or certificant’s employer are
compensated for the services provided [See Rule 2.2(a)] [Form ADV Part
1A, Item 5.E., Item 6.B.(3), Part II, Item 9.A., 9.B., 9.C., 9.D., and 9.E.,
Item 13.A. and 13.B.]
2. Describe costs incurred that may be charged separately to the client
[See Rule 2.2(a)] [This is probably defined in your client agreement.]
3. Describe other sources of [direct or indirect] compensation received but
not yet listed. Include source(s) and terms for receipt of compensation
(i.e., 12b-1 fees; soft dollars; etc.) [See Rule 2.2(a)]
4. Include compensation that any affiliate or affiliated entity to the
certificant or certificant’s employer may receive for the services
provided [See Rule 1.2(b)]
B. Conflicts of Interest [See Rule 2.2(b)] [Form ADV Part 1, Item 8.A., 8.B., 8.C. and
8.d., Item 9.A., 9.B., 9.C., and 9.D., Item 12.B., Item 13.A. and 13.B.]
1. Describe the conflicts of interest the certificant or certificant’s
employers (including affiliates and affiliated entities) may have [See
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Rule 2.2(b)]
2. Describe the limitations placed on products, services and/or solutions
the certificant may recommend under this agreement. These limitations
may be caused by the relationship the certificant has with his/her
employer or a limitation on products the certificant may offer, as
examples [See Rule 1.2(c)]
C. Describe other material information relevant to the professional relationship
that the client should know before making an informed decision [See Rules
2.2(b) and 2.2(e)]
Part IV: Additional Information
You, the client, are encouraged to review the information contained in this disclosure form
and ask the certificant any questions you may have. [See Rule 1.2] Should any material
changes occur to this information, updated information will be provided to you in a
reasonable time frame. [See Rule 2.2] As a CFP® certificant, I acknowledge my
responsibility to adhere to the standards established in CFP Board’s Standards of
Professional Conduct, including the duty of care of a fiduciary, as defined by the CFP
Board. [See Rule 1.4] If you become aware that my conduct may violate the Standards,
you may file a complaint with CFP Board at www.CFP.net/complaint.
(Optional)
I hereby acknowledge receipt of the terms of an agreement and the disclosures made
above.
__________________________ / _________ __________________________ / _________
Client’s Signature Date Client’s Signature Date
_____________________________________ _____________________________________
Client’s Printed Name Client’s Printed Name
__________________________ / _________
Certificant’s Signature Date
Form FPDA Rev. 6/08
Copyright © 2008, Certified Financial Planner Board of Standards, Inc. All Rights Reserved
Financial Planning Disclosure and Agreement Sample (Form FPDA)
CFP Board is providing this sample disclosure document and agreement (Form FPDA) to assist
you in satisfying the requirements of Rules 1.2, 1.3 and 2.2 of the Rules of Conduct, which
require CFP® certificants to provide specific information and disclosures to prospective clients
and clients prior to entering into an agreement to provide financial planning services. If
applicable, references to similar questions in your Form ADV are provided for guidance.
Part I: Contact Information for Parties to the Agreement [See Rules 1.3 and 2.2(d)]
A. Client’s Name and Contact Information [Form ADV Part 1, Item 1]
B. Certificant and Employer’s (if applicable) Contact Information
Part II: Services to be Provided
A. Describe the services to be provided under this Agreement with the Client [See
Rule 1.3(d)] [Form ADV Part 1A, Item 5.G. Form ADV Part II, Item 1.A., 1.D., Item
4.A., 4.B., and 4.C. Item 10, Item 11.A. and 11.B. give general information on the
services you offer clients. Don’t forget to provide a specific list of the services you
provide to this particular client.]
B. Describe the obligations and responsibilities of each party with respect to: [See
Rule 1.2(a)] [Be sure the services you plan to provide to your Client are allowed
(or not prohibited) in your Form ADV.]
1. Defining goals, needs and objectives
2. Gathering and providing appropriate data
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3. Determining the results if no changes are made to the client/prospect’s
current course of action
4. Determining recommendations and possible changes to the current
course of action
5. Determining implementation responsibilities
6. Determining monitoring responsibilities
C. Description of other professionals and/or firms the certificant may work with to
provide the necessary services listed under this agreement [See Rule 1.2(d)]
[Form ADV Part 1.A., Schedule D, Section 5.3(2), Section 7.A., Section 7.B. Form
ADV Part II, Item 8., Item 12.B., Item 13.A. and 13.B.]
Part III: Material Information Relevant to the Relationship
A. Sources of Compensation [See Rule 2.2(a)]
1. Describe how the certificant and/or certificant’s employer are
compensated for the services provided [See Rule 2.2(a)] [Form ADV Part
1A, Item 5.E., Item 6.B.(3), Part II, Item 9.A., 9.B., 9.C., 9.D., and 9.E.,
Item 13.A. and13.B., ]
2. Describe costs incurred that may be charged separately to the client
[See Rule 2.2(a)] [This is probably defined in your client agreement.]
3. Describe other sources of [direct or indirect] compensation received but
not yet listed. Include source(s) and terms for receipt of compensation
(i.e., 12b-1 fees; soft dollars; etc.) [See Rule 2.2(a)]
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Form FPD Rev. 6/08
4. Include compensation that any affiliate or affiliated entity to the
certificant or certificant’s employer may receive under the terms of this
agreement [See Rule 1.2(b)]
B. Conflicts of Interest [See Rule 2.2(b)] [Form ADV Part 1, Item 8.A., 8.B., 8.C. and
8.d., Item 9.A., 9.B., 9.C., and 9.D., Item 12.B., Item 13.A. and 13.B. ]
1. Describe the conflicts of interest the certificant or certificant’s
employers (including affiliates and affiliated entities) may have [See
Rule 2.2(b)]
2. Describe the limitations placed on products, services and/or solutions
the certificant may recommend under this agreement. These limitations
may be caused by the relationship the certificant has with his/her
employer or a limitation on products the certificant may offer, as
examples [See Rule 1.2(c)]
C. Describe other material information relevant to the professional relationship
that the client should know before making an informed decision [See Rules
2.2(b) and 2.2(e)]
Part IV: Additional Information
This agreement is effective as of the date signed below and will last in duration until
[________].[See Rule 1.3(b)] To terminate the agreement, [list terms each party may
follow to terminate the agreement]. [See Rule 1.3(c)] You are encouraged to review the
information contained in this disclosure form and ask the certificant any questions you may
have. [See Rule 1.2] Should any material changes occur to this information, updated
information will be provided to you in a reasonable time frame. [See Rule 2.2] As a CFP®
certificant, I acknowledge my responsibility to adhere to the standards established in CFP
Board’s Standards of Professional Conduct, including the duty of care of a fiduciary, as
defined by CFP Board. [See Rule 1.4] If you become aware that my conduct may violate
the Standards, you may file a complaint with CFP Board at www.CFP.net/complaint.
(Optional)
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I hereby acknowledge the terms of this Agreement and the disclosures made above.
__________________________ / _________ __________________________ / _________
Client’s Signature Date Client’s Signature Date
_____________________________________ _____________________________________
Client’s Printed Name Client’s Printed Name
__________________________ / _________
Certificant’s Signature Date
The entire Sample Disclosure form section is copywrited by CFP Board as stated below:
Form OPS Rev. 6/08
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Section XII.
SANCTION GUIDELINES
(effective August 27, 2012)
Contents
1. Bankruptcy: Two or More Personal or Business Bankruptcies ........................... 5
2. Books and Records Violation ............................................................................... 5
3. Borrowing from Client .....................................................................................
.6
4. Breach of Contract ................................................................................................ . 6
5. Breach of Fiduciary Duty ..................................................................................... ... 7
6. Commingling ............................................................................................................ 7
7. Conflict of Interest .................................................................................................... 8
8. Continuing Education Violation ............................................................................... 9
9. Conviction within the last 10 years of a felony or any misdemeanor involving fraud,
misrepresentation or crimes of moral turpitude involving a jail sentence ................10
10. Conviction within the last 10 years of a felony or any misdemeanor involving fraud,
misrepresentation or crimes of moral turpitude involving probation only. ..............10
11. Diligence
............................................................................................................11
12. Employer Policies Violation ................................................................................11
13. Failure to Act in Client’s Interest Outside of a Financial Planning Relationship ..12
14. Failure to Disclose: ..............................................................................................12
a) Failure to Disclose to CFP Board
........................................................................12
b) Failure to Provide in Writing, Discuss, or Disclose Required Information to Client 13
15. Failure to Pay Back Loan to Firm ........................................................................13
16. Failure to Enter into a Written Financial Planning Agreement While in a Financial
Planning Engagement ....
14
17. Failure to Respond to a CFP Board Request for Information or Notice of
Investigation .................................
14
18. Failure to Supervise .............................................................................................15
19. Forgery ................................................................................................................15
20. Fraud, Misrepresentation or Deceit .....................................................................16
(a) Fraud Involving Professional Activities ..............................................................16
(b) “Holding Out” as a Financial Planner to a Client, Then Not Providing Financial
Planning Services to that
Client...........................................................................................................................17
(c) Misrepresentation to Non-Clients .........................................................................17
(d) Misrepresentation to Clients and Prospective Clients............. ...........................17
21. Judgment
....................................................................................................17
22. Inappropriate Relationship with Client.................................................................17
23. Loaning Money to Client .................................................................................18
24. Misdemeanor Criminal Convictions ...................................................................18
25. Misuse of the CFP® Marks ................................................................................19
26. Ponzi Scheme .......................................................................................................20
27. Practicing Without a Professional License ...........................................................21
28. Revocation of a financial professional license (e.g. registered securities
representative, broker/dealer, insurance, accountant or investment advisor), unless the
revocation is administrative in nature, i.e. the result of
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the individual’s determining not to renew the license by not paying the required fees.
........................................
21
29. Revocation or suspension of a non-financial professional license (e.g. real estate,
attorney) or certification, unless the revocation is administrative in nature, i.e. the result
of the individual’s determining not to renew the license by not paying the required fees.
..............................................................................................................
22
30. Securities Law Violation .....................................................................................23
31. Suitability Violation ............................................................................................25
32. Professional Discipline as defined in Article 13.6 involving a suspension for up to one
calendar month (30 days) .........................................................................................
33. Professional discipline as defined in Article 13.6 involving a suspension for more
than one calendar month (30 days) and less than three calendar months (90 days) .26
34. Professional discipline as defined in Article 13.6 involving a suspension for more
than three months (90 days)..........................................................................................
35. Unauthorized Use of Designations......................................................................28
36. Unauthorized Use of the CFP® Marks...............................................................28
Introduction to Sanction Guidelines
Purpose of the Sanction Guidelines
The mission of Certified Financial Planner Board of Standards, Inc. (CFP Board) is to
benefit the public by granting the CFP® certification and upholding it as the recognized
standard of excellence for competent and ethical personal financial planning. CFP
Board’s Disciplinary Rules and Procedures (Disciplinary Rules) outline CFP Board’s
procedures for investigating incidents of allegedly unethical behavior and enforcing its
Standards of Professional Conduct (Standards), which includes the Code of Ethics and
Professional Responsibility (Code of Ethics), Rules of Conduct and Financial Planning
Practice Standards (Practice Standards), which establish standards of ethical conduct for
CERTIFIED FINANCIAL PLANNER™ professionals. In cases where violations
are found, CFP Board may impose discipline ranging from a private letter of censure or
public admonition to suspension or revocation of the right to use the CFP® marks.
CFP Board’s enforcement process includes written notice to individuals under
investigation, an opportunity to respond to the matters under investigation and any related
allegations of misconduct, the opportunity to appear at any hearing that may be
conducted with regard to allegations of misconduct (including opportunities to be
represented by legal counsel and to introduce witnesses and evidence), and the right to
appeal decisions involving discipline. CFP Board has developed these Sanction
Guidelines to assist the Disciplinary and Ethics Commission (DEC), the group charged
with conducting disciplinary hearings in accordance with CFP Board’s Disciplinary
Rules, in imposing disciplinary action against CFP® professionals when necessary and to
promote consistency in the imposition of sanctions for similar offenses. The Sanction
Guidelines are also designed to assist the Appeals Committee of the Board of Directors,
which considers appeals of DEC decisions. The Sanction Guidelines are not binding on
the DEC or Appeals Committee; the Sanction Guidelines are
intended to serve as guidance only. Deviation from the Sanction Guidelines by the DEC
and/or Appeals
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Committee is not in and of itself clear error as defined in the Rules and Procedures of the
Appeals Committee. It is CFP Board’s intent that publication of these Sanction
Guidelines will provide notice to CFP® professionals and others to identify the types of
sanctions that will follow from specific types of conduct that CFP Board deems are
not in compliance with the Standards. The Sanction Guidelines may also be useful in
determining the appropriateness of offers of settlement proposed in cases presented to the
DEC and Appeals Committee.
Principal Considerations
CFP Board has adopted the following list of factors to assist the DEC and Appeals
Committee in evaluation of whether discipline is warranted. These factors are not
absolute and are meant to serve as guidance. The DEC and Appeals Committee may
consider other factors in addition to the factors listed below. The Sanction
Guidelines contain additional factors that the DEC and Appeals Committee should
consider when making an evaluation. Although a factor listed below may be an
“aggravating factor,” the absence of that factor does not necessarily lead to an inference
of mitigation. The DEC and Appeals Committee have discretion to determine the
relevancy of the factors listed below and will evaluate each case on a case-by-case basis
taking into consideration the facts and circumstances of the particular case. For violations
that are not addressed within the Sanction Guidelines, the DEC and Appeals Committee
are encouraged to look to the Sanction Guidelines for comparable violations.
The following factors may serve as either aggravating or mitigating factors:
1. Did the CFP® professional have a prior disciplinary history? If yes, what is the nature
of his or her prior disciplinary history?
2. Did the CFP® professional acknowledge the conduct and the harm that resulted from
that conduct?
3. Has the CFP® professional exhibited exemplary conduct since the violation?
4. Did the CFP® professional attempt to remedy or rectify the misconduct prior to
detection?
5. Did the conduct occur more than 5 years ago?
6. Did the CFP® professional reasonably rely on the assistance of counsel or the
assistance of an accountant?
7. Was there a pattern of misconduct?
8. Were there numerous violations?
9. Did the CFP® professional engage in the conduct over an extended period of time?
10. Did the CFP® professional attempt to conceal his or her misconduct?
11. What was the mental state (i.e., negligent, reckless or intentional) of the CFP®
professional?
12. Did the CFP® professional’s misconduct result in direct or indirect harm or injury to
the client? If yes,
what was the nature and extent of the harm or injury?
13. Did the CFP® professional provide extraordinary cooperation with CFP Board?
14. Did the CFP® professional intentionally fail to cooperate with CFP Board?
15. What was the level of sophistication of the injured or affected client(s)?
16. Has the CFP® professional filed for bankruptcy?
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The following factors should not be considered aggravating or mitigating:
1. The CFP® professional was forced or compelled to pay restitution.
2. The CFP® professional agreed to the client’s demand for certain improper behavior or
settled a lawsuit.
3. A complaint or lawsuit against the CFP® professional was withdrawn.
Amendments to the Sanction Guidelines
The Sanction Guidelines may be amended from time to time. CFP Board will publish for
comment any material changes to the Sanction Guidelines prior to implementation.
Sanction Guidelines
Substantial revisions to CFP Board’s Standards were adopted in May 2007 with an
effective date of July 1, 2008 and an enforcement date of January 1, 2009. The revision
included the development of the Rules of Conduct, which supersede the Rules contained
in the previous Code of Ethics and apply to conduct occurring on or after
January 1, 2009. References to Code of Ethics Rules (with three digits and no decimal)
refer to the previous version of the Standards and apply to conduct occurring before
January 1, 2009. This should only be considered an aggravating factor if the CFP®
professional has filed once. In the event that the CFP® professional has filed more than
once, please see the sanction guideline entitled “Bankruptcy: Two or more personal or
business bankruptcies.”
Conduct / Underlying Rule Violation Sanction Guideline Policy Notes
1. Bankruptcy: Two or More Personal2 or
Business3 Bankruptcies
Code of Ethics Rule 607: A CFP Board designee shall not engage in any conduct which
reflects adversely on his or her integrity or fitness as a CFP Board designee, upon the
marks, or upon the profession.
Rules of Conduct Rule 6.5: A certificant shall not engage in conduct which reflects
adversely on his or her integrity or fitness as a certificant, upon the CFP® marks, or upon
the profession.
Revocation
2. Books and Records Violation
Code of Ethics Rule 103(b): A CFP Board designee has the following responsibilities
regarding funds and/or property of client: A CFP Board designee shall identify and keep
complete records of all funds or other property of a client in the custody, or under
the discretionary authority, of the CFP Board designee.
Private Censure
2 A personal bankruptcy is a Chapter 7 or Chapter 13. If a bankruptcy is converted from a
Chapter 7 to a Chapter 13 or vice versa, it shall be counted as one.
3 A business bankruptcy is a Chapter 11. A CFP® professional is presumed to have been
involved in a business bankruptcy if the CFP® professional was, at the time of the
bankruptcy filing, any one of the following:
(a) a Chief Executive Officer, Chief Financial Officer, Chief Operations Officer, Chief
Legal Officer, Chief Compliance
Officer, Director, or an individual with similar status or functions;
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(b) a participant in the financial management of the entity, which includes, but is not
limited to, reviewing the entity’s financial statements on a regular basis, participating in
the creation of budgets, approving expenditures in excess of 5% of the entity’s quarterly
revenue and holding the authority to write checks on behalf of the entity and one of the
following:
1) A direct owner of 5% or more of a class of a voting stock;
2) A general, limited or special partner who had the right to receive upon dissolution, or
who has contributed, 5%
or more of the partnership’s capital;
3) In the case of a trust, a direct owner of 5% or more of the class of voting stock, or an
individual who had the right to receive upon dissolution, or has contributed, 5% or more
of the trust’s capital; or 4) In the case of a Limited Liability Company (“LLC”), a
member who had the right to receive upon dissolution, or who contributed, 5% or more
of the LLC’s capital.
(c) the CFP® professional was a material participant in the business.
Conduct / Underlying Rule Violation Sanction Guideline Policy Notes
Rules of Conduct Rule 3.5: A certificant shall identify and keep complete records of all
funds or other property of a client in the custody, or under the discretionary authority, of
the certificant.
3. Borrowing from Client
Code of Ethics Rule 202: A financial planning practitioner shall act in the interest of the
client.
Code of Ethics Rule 607: A CFP Board designee shall not engage in any conduct which
reflects adversely on his or her integrity or fitness as a CFP Board designee, upon the
marks, or upon the profession.
Rules of Conduct Rule 3.6: A certificant shall not borrow money from a client.
Exceptions to this Rule include: a). The client is a member of the certificant’s
immediate family, or b). The client is an institution in the business of lending money and
the borrowing is unrelated to the professional services performed by the certificant.
Advisory Opinion 2001-1: Loans between CFP Board designees and their clients should
be avoided in the client-planner relationship.
Public Letter of Admonition
The following should be considered additional aggravating or mitigating factors in
determining the appropriate sanction:
(1) Was this an isolated incident?
(2) Was there informed consent?
(3) Was there a pre-existing relationship?
(4) Was there harm to the client?
(5) Did the CFP® professional profit from the incident?
4. Breach of Contract
Code of Ethics Rule 607: A CFP Board designee shall not engage in any conduct which
reflects adversely on his or her integrity or fitness as a CFP Board designee, upon the
marks, or upon the profession.
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Rules of Conduct Rule 6.5: A certificant shall not engage in conduct which reflects
adversely on his or her integrity or fitness as a certificant, upon the CFP® marks, or upon
the profession. The minimum sanction imposed for breach of a contract that relates to a
financial planning engagement should be:
Public Letter of Admonition
The minimum sanction imposed for breach of a contract that involves financial services
but does not relate to a financial planning. Generally, if the alleged breach of contract
relates to a contract not involving financial services and this is the only conduct at
issue, the conduct will not be considered. See also failure to pay back a loan to the firm.
The following should be considered additional aggravating or mitigating
Conduct / Underlying Rule Violation Sanction Guideline Policy Notes
engagement should be:
Private Censure factors in determining the appropriate sanction:
(1) What was the nature of the breach?
(2) Was there harm to the client?
(3) Did the CFP® professional profit from the incident?
(4) Was the CFP® professional reckless?
(5) Was the CFP® professional negligent?
5. Breach of Fiduciary Duty
Rules of Conduct Rule 1.4: A certificant shall at all times place the interest of the client
ahead of his or her own. When the certificant provides financial planning or material
elements of financial planning, the certificant owes to the client the duty of care of a
fiduciary as defined by CFP Board.
Rules of Conduct Rule 6.5: A certificant shall not engage in conduct which reflects
adversely on his or her integrity or fitness as a certificant, upon the CFP® marks, or upon
the profession. Suspension for at least one year and one day “Fiduciary”, as defined by
CFP Board is “[o]ne who acts in utmost good faith, in a manner he or she reasonably
believes to be in the best interest of the client.”
The Following should be considered aggravating and mitigating factors:
(1) What was the materiality of the breach?
(2) Was it intentional or inadvertent?
(3) What was the relative harm to the client?
6. Commingling
Code of Ethics Rule 103(d): A CFP Board designee shall not commingle client funds or
other property with a CFP Board designee’s personal funds and/or other property or the
funds and/or other property of a CFP Board designee’s firm. Commingling one or
more clients’ funds or other property together is Suspension for at least one year and one
day
Conduct / Underlying Rule Violation Sanction Guideline Policy Notes
permitted, subject to compliance with applicable legal requirements and provided
accurate records are maintained for each client’s funds or other property.
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Rules of Conduct Rule 3.8: A certificant shall not commingle a client’s property with the
property of the certificant or the certificant’s employer, unless the commingling is
permitted by law or is explicitly authorized and defined in a written agreement between
the parties.
Rules of Conduct Rule 3.9: A certificant shall not commingle a client’s property with
other clients’property unless the commingling is permitted by law or the certificant has
both explicit written authorization to do so from each client involved and sufficient
record-keeping to track each client’s assets accurately.
7. Conflict of Interest
Principle 4 – Fairness: Be fair and reasonable in all professional relationships. Disclose
conflicts of interest. Fairness requires impartiality, intellectual honesty and disclosure of
material conflicts of interest. It involves a subordination of one’s own feelings, prejudices
and desires so as to achieve a proper balance of conflicting interests. Fairness is treating
others in the same fashion that you would want to be treated.
Code of Ethics Rule 401(a): In rendering professional services, a CFP Board designee
shall disclose to the client: (a) Material information relevant to the professional
relationship, including, conflict(s) of interest, the CFP Board designee’s business
affiliation, address, telephone number, credentials, qualifications, licenses, compensation
structure and any agency relationships, and the scope of the CFP Board designee’s
authority in that capacity.
Rules of Conduct Rule 2.2(b): A certificant shall disclose to a prospective client or client
the following information: A general summary of likely
Public Letter of Admonition
The following should be considered additional aggravating or mitigating factors in
determining the appropriate sanction:
(1) Was it a foreseeable conflict?
(2) Was there harm or potential harm to the client?
(3) Was the CFP® professional reckless?
(4) Was the CFP® professional negligent?
(5) Was it an isolated incident?
The following should be considered additional aggravating or mitigating factors in
determining the appropriate sanction when a conflict exists between two
Conduct / Underlying Rule Violation Sanction Guideline Policy Notes
conflicts of interest between the client and the certificant, the certificant’s employer or
any affiliates or third parties, including, but not limited to, information about any
familial, contractual or agency relationship of the certificant or the certificant’s
employer that has a potential to materially affect the relationship.
Practice Standards 100-1: Disclosing the practitioner’s material conflict(s) of interest.
clients:
(1) Did the CFP® professional approach the conflicting parties in order to implement a
solution that was agreeable to both parties?
(2) Did the CFP® professional approach his or her compliance department for advice on
dealing with the conflict?
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8. Continuing Education Violation
Principle 3 – Competence: Maintain the knowledge and skill necessary to provide
professional services competently. Competence means attaining and maintaining an
adequate level of knowledge and skill, and application of that knowledge and skill in
providing services to clients. Competence also includes the wisdom to recognize the
limitations of that knowledge and when consultation with other professionals is
appropriate or referral to other professionals necessary. Certificants make a
continuing commitment to learning and professional improvement.
Code of Ethics Rule 612: A CFP Board designee shall comply with all applicable renewal
requirements established by CFP Board including, but not limited to, payment of the
biennial CFP Board designee fee as well as signing and returning the Terms and
Conditions of Certification in connection with the certification renewal process.
Rule of Conduct Rule 6.2: A certificant shall meet all CFP Board requirements, including
continuing education requirements, to retain the right to use the CFP® marks.
Private Censure
A continuing education violation includes, but is not limited to, misrepresenting that
Respondent completed the continuing education, allowing another individual to complete
the continuing education and/or a failure to complete continuing education required by
order of the Commission. The sanction imposed must be higher than Private Censure if
the Commission determines that the Respondent intended to deceive CFP Board.
Conduct / Underlying Rule Violation Sanction Guideline Policy Notes
9. Conviction within the last 10 years of a felony or any misdemeanor involving
fraud, misrepresentation or crimes of moral turpitude involving a jail sentence
Code of Ethics Rule 607: A CFP Board designee shall not engage in any conduct which
reflects adversely on his or her integrity or fitness as a CFP Board designee, upon the
marks, or upon the profession.
Rule of Conduct Rule 6.5: A certificant shall not engage in conduct which reflects
adversely on his or her integrity or fitness as a certificant, upon the CFP® marks, or upon
the profession.
Disciplinary Rules Article 3(c): Grounds For Discipline: Misconduct by a certificant or
registrant, individually, or in concert with others, including the following acts or
omissions, shall constitute grounds for discipline, whether or not the act or omission
occurred in the course of a client relationship: (c) Any act or omission which violates the
criminal laws of any State or of the United States or of any province, territory or
jurisdiction of any other country, provided however, that conviction thereof in a criminal
proceeding shall not be a prerequisite to the institution of disciplinary proceedings, and
provided further, that acquittal in a criminal proceeding shall not bar a disciplinary
action.
Suspension for at least one year and one day
A felony conviction for: 1)theft, embezzlement or other financially-based crimes; 2)
any violent crime; 3) murder or rape; and 4) tax fraud or other tax-related crimes
should result in a Revocation or Bar.4
10. Conviction within the last 10 years of a felony or any misdemeanor involving
fraud, misrepresentation or crimes of moral turpitude involving probation only.
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Code of Ethics Rule 607: A CFP Board designee shall not engage in any conduct which
reflects adversely on his or her integrity or fitness as a CFP Board designee, upon the
marks, or upon the profession.
Public Letter of Admonition
For clarification purposes, a felony conviction of the underlying crime is defined by the
jurisdiction in which the conviction was entered. The jurisdiction could be federal, state
or territorial, such as Puerto Rico or the District of Columbia. This clarification applies to
all conduct involving a felony conviction.
11
Conduct / Underlying Rule Violation Sanction Guideline Policy Notes
Rule of Conduct Rule 6.5: A certificant shall not engage in conduct which reflects
adversely on his or her integrity or fitness as a certificant, upon the CFP® marks, or upon
the profession.
Disciplinary Rules Article 3(c): Grounds For Discipline: Misconduct by a certificant or
registrant, individually, or in concert with others, including the following acts or
omissions, shall constitute grounds for discipline, whether or not the act or omission
occurred in the course of a client relationship: (c) Any act or omission which violates the
criminal laws of any State or of the United States or of any province, territory or
jurisdiction of any other country, provided however, that conviction thereof in a criminal
proceeding shall not be a prerequisite to the institution of disciplinary proceedings, and
provided further, that acquittal in a criminal proceeding shall not bar a disciplinary
action.
11. Diligence
Principle 7: Diligence: Provide professional services diligently. Diligence is the provision
of services in a reasonably prompt and thorough manner, including the proper planning
for, and supervision of, the rendering of professional services.
Code of Ethics Rule 701: A CFP Board designee shall provide services diligently.
Private Censure
The following should be considered additional aggravating or mitigating factors in
determining the appropriate sanction:
(1) What was the harm to the client?
(2) Was it an isolated instance?
(3) Was the CFP® professional negligent?
(4) Was the CFP® professional reckless?
12. Employer Policies Violation
Code of Ethics Rule 406: A CFP Board designee who is an employee shall perform
professional services with dedication to the lawful objectives of the employer and in
accordance with this Code of Ethics.
Private Censure
If the Firm terminated the Respondent due to the violation, the termination should be
considered as an aggravating factor.
Conduct / Underlying Rule Violation Sanction Guideline Policy Notes
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Rule of Conduct Rule 5.1: A certificant who is an employee/agent shall perform
professional services with dedication to the lawful objectives of the employer/principal
and in accordance with CFP Board’s Code of Ethics.
13. Failure to Act in Client’s Interest Outside of a Financial Planning Relationship
Rule of Conduct Rule 1.4: A certificant shall at all times place the interest of the client
ahead of his or her own. When the certificant provides financial planning or material
elements of financial planning, the certificant owes to the client the duty of care of a
fiduciary as defined by CFP Board.
Public Letter of Admonition
The following should be considered additional aggravating or mitigating factors in
determining the appropriate sanction:
(1) What was the harm to the client?
(2) Was it an isolated instance?
(3) Was the CFP® professional negligent?
(4) Was the CFP® professional reckless?
14. Failure to Disclose:
a) Failure to Disclose to CFP Board
Rule of Conduct Rule 6.4: A certificant shall notify CFP Board in writing of any
conviction of a crime, except misdemeanor traffic offenses or traffic ordinance violations
unless such offense involves the use of alcohol or drugs, or of any professional
suspension or bar within 30 calendar days after the date on which the certificant is
notified of the conviction, suspension or bar.
Disciplinary Rules Article 3(g): Grounds for Discipline: Misconduct by a certificant or
registrant, individually, or in concert with others, including the following acts or
omissions, shall constitute grounds for discipline, whether or not the act or omission
occurred in the course of a client relationship: (g) Any false or misleading statement
made to CFP Board.
Private Censure
The sanction imposed may be higher than Private Censure if it is determined that the
Respondent’s failure to disclose was intentional.
Conduct / Underlying Rule Violation Sanction Guideline Policy Notes
14. Failure to Disclose:
b) Failure to Provide in Writing, Discuss, or
Disclose Required Information to Client
Rule of Conduct Rule 2.1: A certificant shall not communicate, directly or indirectly, to
clients or prospective clients any false or misleading information directly or indirectly
related to the certificant’s professional qualifications or services. A certificant shall not
mislead any parties about the potential benefits of the certificant’s service. A certificant
shall not fail to disclose or otherwise omit facts where that disclosure is necessary to
avoid misleading clients.
Practice Standards 100-1: Defining the scope of the engagement:
Disclosing the practitioner’s material conflict(s) of interest;
Disclosing the practitioner’s compensation arrangement(s)
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Practice Standards 400-3: Presenting the Financial
Planning Recommendation(s): The financial planning practitioner shall communicate the
recommendation(s) in a manner and to an extent reasonably necessary to assist the client
in making an informed decision.
Public Letter of Admonition
15. Failure to Pay Back Loan to Firm
Rules of Conduct Rule 5.1: A certificant who is an employee/agent shall perform
professional services with dedication to the lawful objectives of the employer/principal
and in accordance with CFP Board’s Code of Ethics.
Rules of Conduct Rule 6.5: A certificant shall not engage in conduct which reflects
adversely on his or her integrity or fitness as a certificant, upon the CFP® marks, or upon
the profession.
Private Censure
Conduct / Underlying Rule Violation Sanction Guideline Policy Notes
16. Failure to Enter into a Written Financial Planning Agreement While in a
Financial Planning Engagement
Rules of Conduct Rule 1.3: If the services include financial planning or material elements
of financial planning, the certificant or the certificant’s employer shall enter into a written
agreement governing the financial planning services (“Agreement”). The Agreement
shall specify:
a. The parties to the Agreement,
b. The date of the Agreement and its duration,
c. How and on what terms each party can terminate the Agreement, and
d. The services to be provided as part of the Agreement. The Agreement may consist of
multiple written documents. Written documentation that includes the items above and is
used by a certificant or certificant’s employer in compliance with state or federal law, or
the rules or regulations of any applicable self-regulatory organization, such as the
Securities and Exchange Commission’s Form ADV or other disclosure documents, shall
satisfy the requirements of this Rule.
Public Letter of Admonition
17. Failure to Respond to a CFP Board Request for Information or Notice of
Investigation
Rules of Conduct Rule 6.1: A certificant shall abide by the terms of all agreements with
CFP Board, including, but not limited to, using the CFP® marks properly and
cooperating fully with CFP Board’s trademark and professional review operations and
requirements.
Disciplinary Rules Article 3(f): Grounds for Discipline: Misconduct by a certificant or
registrant, individually, or in concert with others, including the following acts or
omissions, shall constitute grounds for discipline, whether or not the act or omission
occurred in the course of a client relationship: (f) Failure to respond to a request by the
Commission, without good cause shown, or obstruction of the Private Censure
Conduct / Underlying Rule Violation Sanction Guideline Policy Notes
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Commission, or any panel or board thereof, or CFP Board staff in the performance of its
or their duties. Good cause includes, without limitation, an assertion that a response
would violate a certificant’s or registrant’s constitutional privilege against selfincrimination.
18. Failure to Supervise
Code of Ethics Rule 705: A CFP Board designee shall properly supervise subordinates
with regard to their delivery of financial planning services, and shall not accept or
condone conduct in violation of this Code of Ethics.
Rules of Conduct Rule 4.6: A certificant shall provide reasonable and prudent
professional supervision or direction to any subordinate or third party to whom the
certificant assigns responsibility for any client services.
Private Censure
19. Forgery
Code of Ethics Rule 102: In the course of professional activities, a CFP Board designee
shall not engage in conduct involving dishonesty, fraud, deceit or misrepresentation, or
knowingly make a false or misleading statement to a client, employer, employee,
professional colleague, governmental or other regulatory body or official, or any other
person or entity.
Code of Ethics Rule 607: A CFP Board designee shall not engage in any conduct which
reflects adversely on his or her integrity or fitness as a CFP Board designee, upon the
marks, or upon the profession.
Rules of Conduct Rule 6.5: A certificant shall not engage in conduct which reflects
adversely on his or her integrity or fitness as a certificant, upon the CFP® marks, or upon
the profession.
Suspension for at least one year and one day. The following should be considered
additional aggravating or mitigating factors in determining the appropriate sanction:
(1) What is the nature of the documents that were either forged or falsified?
(2) Did the CFP® professional mistakenly believe he or she had implied authority?
(3) What was the CFP® professional’s intent?
Conduct / Underlying Rule Violation Sanction Guideline Policy Notes
20. Fraud, Misrepresentation or Deceit
Code of Ethics Rule 102: In the course of professional activities, a CFP Board designee
shall not engage in conduct involving dishonesty, fraud, deceit or misrepresentation, or
knowingly make a false or misleading statement to a client, employer, employee,
professional colleague, governmental or other regulatory body or official, or any other
person or entity.
Rules of Conduct Rule 2.1: A certificant shall not communicate, directly or indirectly, to
clients or prospective clients any false or misleading information directly or indirectly
related to the certificant’s professional qualifications or services. A certificant shall not
mislead any parties about the potential benefits of the certificant’s service. A
certificant shall not fail to disclose or otherwise omit facts where that disclosure is
necessary to avoid misleading clients.
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Rules of Conduct Rule 4.1: A certificant shall treat prospective clients and clients fairly
and provide professional services with integrity and objectivity.
Rules of Conduct Rule 4.3: A certificant shall be in compliance with applicable
regulatory requirements governing professional services provided to the client.
Rules of Conduct Rule 6.5: A certificant shall not engage in conduct which reflects
adversely on his or her integrity or fitness as a certificant, upon the CFP® marks, or upon
the profession. Examples of Conduct: Fraud is a finding by the Commission that a
Respondent knowingly or recklessly misrepresented or concealed a material fact to
induce another to act to his or her detriment. The following should be considered
additional aggravating or mitigating factors in determining the appropriate sanction:
(1) What was the nature of the conduct?
(2) Was there harm to the client or a prospective client?
(3) Was the CFP® professional negligent?
(4) Was the CFP® professional reckless?
(5) Was this an isolated incident?
(a) Fraud Involving Professional Activities
Suspension for at least one year and one day
5 Black’s Law Dictionary, Second Pocket Edition, 2001.
Conduct / Underlying Rule Violation Sanction Guideline Policy Notes
(b) “Holding Out” as a Financial Planner to a Client, Then Not Providing Financial
Planning Services to that Client
Public Letter of Admonition
“Holding Out” appears in Rule 203(b)(3)1.c. of the Investment Advisers Act of 1940.
Though not defined in the Advisers Act, it essentially means representing oneself to a
prospective client or client as a financial planner. Note: An investment-only
relationship does not require a written financial planning agreement.
(c) Misrepresentation to Non-Clients
Private Censure
(d) Misrepresentation to Clients and Prospective Clients
Public Letter of Admonition
21. Judgment
Code of Ethics Rule 607: A CFP Board designee shall not engage in any conduct which
reflects adversely on his or her integrity or fitness as a CFP Board designee, upon the
marks, or upon the profession.
Rules of Conduct Rule 6.5: A certificant shall not engage in conduct which reflects
adversely on his or her integrity or fitness as a certificant, upon the CFP® marks, or upon
the profession. Public Letter of Admonition
Only applies when there are two or more judgments not identified in a bankruptcy filing.
22. Inappropriate Relationship with Client
Code of Ethics Rule 607: A CFP Board designee shall not engage in any conduct which
reflects adversely on his or her integrity or fitness as a CFP
Public Letter of Admonition
The following should be considered additional aggravating or mitigating factors in
determining the appropriate sanction:
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(1) Was this an isolated
6 A judgment is a decision issued by a court, arbitrator or other entity or individual
having jurisdiction over Respondent that is adverse to Respondent’s interests.
Conduct / Underlying Rule Violation Sanction Guideline Policy Notes
Board designee, upon the marks, or upon the profession.
Rules of Conduct Rule 6.5: A certificant shall not engage in conduct which reflects
adversely on his or her integrity or fitness as a certificant, upon the CFP® marks, or upon
the profession. incident?
(2) Was there informed consent?
(3) Was there a pre-existing relationship?
(4) Was there harm to the client?
(5) Did the CFP® professional profit from the incident?
23. Loaning Money to Client
Code of Ethics Rules 202: A financial planning practitioner shall act in the interest of the
client.
Code of Ethics Rules 607: A CFP Board designee shall not engage in any conduct which
reflects adversely on his or her integrity or fitness as a CFP Board designee, upon the
marks, or upon the profession.
Rules of Conduct Rule 3.7: A certificant shall not lend money to a client. Exceptions to
this Rule include: a). The client is a member of the certificant’s immediate family, or b).
The certificant is an employee of an institution in the business of lending money and the
money lent is that of the institution, not the certificant.
Advisory Opinion 2001-1: Loans between CFP Board designees and their clients should
be avoided in the client-planner relationship.
Public Letter of Admonition
The following should be considered additional aggravating or mitigating factors in
determining the appropriate sanction:
(1) Was this an isolated incident?
(2) Was there informed consent?
(3) Was there a pre-existing relationship?
(4) Was there harm to the client?
(5) Did the CFP® professional profit from the incident?
24. Misdemeanor Criminal Convictions
Code of Ethics Rules 607: A CFP Board designee shall not engage in any conduct which
reflects adversely on his or her integrity or fitness as a CFP Board designee, upon the
marks, or upon the profession.
Private Censure
The following should be considered additional aggravating or mitigating factors in
determining the appropriate sanction:
(1) Were there multiple charges relating to the same
Conduct / Underlying Rule Violation Sanction Guideline Policy Notes
Rules of Conduct Rule 6.5: A certificant shall not
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engage in conduct which reflects adversely on his or her integrity or fitness as a
certificant, upon the CFP® marks, or upon the profession.
Disciplinary Rules Article 3(c): Grounds For Discipline: Misconduct by a certificant or
registrant, individually, or in concert with others, including the following acts or
omissions, shall constitute grounds for discipline, whether or not the act or omission
occurred in the course of a client relationship: (c) Any act or omission which violates the
criminal laws of any State or of the United States or of any province, territory or
jurisdiction of any other country, provided however, that conviction thereof in a criminal
proceeding shall not be a prerequisite to the institution of disciplinary proceedings, and
provided further, that acquittal in a criminal proceeding shall not bar a disciplinary
action. incident?
(2) What was the degree of the misdemeanor offense?
(3) Did the offense involve criminal sexual activity?
(4) Has the certificant or registrant been convicted of other misdemeanor crimes not
identified as serious crimes in the Disciplinary Rules (see Article 12.5)
(5) Did the number of misdemeanor crimes reveal that there was a pattern of misconduct?
Over what period of time? How long ago? Note: Misdemeanor criminal convictions that
do not involve criminal sexual activity, physical abuse or an extreme pattern of
misconduct will not be considered. Higher sanctions will be considered for misdemeanor
criminal convictions that involve criminal sexual activity related to minors.
25. Misuse of the CFP® Marks
Code of Ethics Rule 601: A CFP Board designee shall use the marks in compliance with
the rules and regulations of CFP Board, as established and amended from time to time.
Rules of Conduct Rule 6.1: A certificant shall abide by the terms of all agreements with
CFP Board, including, but not limited to, using the CFP® marks properly and
cooperating fully with CFP Board’s trademark and professional review operations and
requirements. Private Censure
Conduct / Underlying Rule Violation Sanction Guideline Policy Notes
Rules of Conduct Rule 6.5: A certificant shall not engage in conduct which reflects
adversely on his or her integrity or fitness as a certificant, upon the CFP® marks, or upon
the profession.
26. Ponzi Scheme
Code of Ethics Rule 102: In the course of professional activities, a CFP Board designee
shall not engage in conduct involving dishonesty, fraud, deceit or misrepresentation, or
knowingly make a false or misleading statement to a client, employer, employee,
professional colleague, governmental or other regulatory body or official, or any other
person or entity.
Rules of Conduct Rule 2.1: A certificant shall not communicate, directly or indirectly, to
clients or prospective clients any false or misleading information directly or indirectly
related to the certificant’s professional qualifications or services. A certificant shall not
mislead any parties about the potential benefits of the certificant’s service. A certificant
shall not fail to disclose or otherwise omit facts where that disclosure is necessary to
avoid misleading clients.
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Rules of Conduct Rule 6.5: A certificant shall not engage in conduct which reflects
adversely on his or her integrity or fitness as a certificant, upon the CFP® marks, or upon
the profession.
Disciplinary Rules Article 3(c): Grounds For Discipline: Misconduct by a certificant or
registrant, individually, or in concert with others, including the following acts or
omissions, shall constitute grounds for discipline, whether or not the act or omission
occurred in the course of a client relationship: (c) Any act or omission which violates the
criminal laws of any State or of the United States or of any province, territory or
jurisdiction of any other country, provided however, that conviction thereof in
a criminal proceeding shall not be a prerequisite to the institution of disciplinary
proceedings, and provided further, that acquittal in a criminal proceeding shall not bar a
disciplinary action. Revocation Must have regulatory finding.
Conduct / Underlying Rule Violation Sanction Guideline Policy Notes
27. Practicing Without a Professional License
Code of Ethics Rule 609: A CFP Board designee shall not practice any other profession
or offer to provide such services unless the CFP Board designee is qualified to practice in
those fields and is licensed as required by state law.
Rules of Conduct Rule 4.3: A certificant shall be in compliance with applicable
regulatory requirements governing professional services provided to the client.
Public Letter of Admonition
This finding must be made by the appropriate regulatory licensing agency.
28. Revocation of a financial professional license (e.g. registered securities
representative, broker/dealer, insurance, accountant or investment advisor), unless
the revocation is administrative in nature, i.e. the result of the individual’s
determining not to renew the license by not paying the required fees.
Code of Ethics Rule 606(a): In all professional activities a CFP Board designee shall
perform services in accordance with Applicable laws, rules and regulations of
governmental agencies and other applicable authorities
Rules of Conduct Rule 4.3: A certificant shall be in compliance with applicable
regulatory requirements governing professional services provided to the client.
Disciplinary Rules Article 3(d): Grounds For Discipline: Misconduct by a certificant or
registrant, individually, or in concert with others, including the following acts or
omissions, shall constitute grounds for discipline, whether or not the act or omission
occurred in the course of a client relationship: (d) Any act which is the proper basis for
professional suspension, as defined herein, provided professional suspension shall not be
a prerequisite to the institution of disciplinary proceedings, and provided further, that
dismissal of charges in a Revocation
Conduct / Underlying Rule Violation Sanction Guideline Policy Notes
professional suspension proceeding shall not necessarily bar a disciplinary action.
Disciplinary Rules Article 13.1: Proof of Conviction or Professional Discipline: Except
as otherwise provided in these Disciplinary Rules, a certificate from the clerk of any
court of criminal jurisdiction indicating that a Respondent has been convicted of
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a crime in that court or a letter or other writing from a governmental or industry selfregulatory authority to the effect that a Respondent has been the subject of an order of
professional discipline (as hereinafter defined) by such authority, shall conclusively
establish the existence of such conviction or such professional discipline for purposes of
disciplinary proceedings and shall be conclusive proof of the commission of that crime or
of the basis for such suspension, by the Respondent.
29. Revocation or suspension of a non-financial professional license (e.g. real estate,
attorney) or certification, unless the revocation is administrative in nature, i.e. the
result of the individual’s determining not to renew the license by not paying the
required fees.
Code of Ethics Rule 606(a): In all professional activities a CFP Board designee shall
perform services in accordance with Applicable laws, rules and regulations of
governmental agencies and other applicable authorities
Rules of Conduct Rule 4.3: A certificant shall be in compliance with applicable
regulatory requirements governing professional services provided to the client.
Disciplinary Rules Article 3(d): Grounds For Discipline: Misconduct by a certificant or
registrant, individually, or in concert with others, including the following acts or
omissions, shall constitute grounds for discipline, whether or not the act or omission
occurred in the course of a client relationship: (d) Any act which is the proper basis for
professional suspension, as defined herein, provided
Revocation
Public Letter of Admonition
Bar or Revocation of a CFP® certification only applies
when the revocation or suspension of a non-financial professional license involves
one or more of the “financial planning subject areas” (see Terminology, Standards of
Professional Conduct, rev. Jan 2010)
Public Letter of Admonition of a CFP® certification applies when the revocation or
suspension of a non-financial professional license does not involve any of the “financial
planning subject areas.”
Conduct / Underlying Rule Violation Sanction Guideline Policy Notes
professional suspension shall not be a prerequisite to the institution of disciplinary
proceedings, and provided further, that dismissal of charges in a professional suspension
proceeding shall not necessarily bar a disciplinary action.
Disciplinary Rules Article 13.1: Proof of Conviction or Professional Discipline: Except
as otherwise provided in these Disciplinary Rules, a certificate from the clerk of any
court of criminal jurisdiction indicating that a Respondent has been convicted of
a crime in that court or a letter or other writing from a governmental or industry selfregulatory authority to the effect that a Respondent has been the subject of an order of
professional discipline (as hereinafter defined) by such authority, shall conclusively
establish the existence of such conviction or such professional discipline for
purposes of disciplinary proceedings and shall be conclusive proof of the commission of
that crime or of the basis for such suspension, by the Respondent.
30. Securities Law Violation
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Code of Ethics Rule 606(a): In all professional activities a CFP Board designee shall
perform services in accordance with Applicable laws, rules and regulations of
governmental agencies and other applicable authorities
Code of Ethics Rule 607: A CFP Board designee shall not engage in any conduct which
reflects adversely on his or her integrity or fitness as a CFP Board designee, upon the
marks, or upon the profession.
Rules of Conduct Rule 4.3: A certificant shall be in compliance with applicable
regulatory requirements governing professional services provided to the client.
Rules of Conduct Rule 6.5: A certificant shall not engage in conduct which reflects
adversely on his or her integrity or fitness as a certificant, upon the CFP® marks, or upon
the profession.
Public Letter of Admonition
Inquire whether the CFP® professional knowingly violated the securities laws or whether
it was his/her negligence that led to a violation of securities laws. Intentional acts should
be treated more seriously than negligent acts. "Private securities transaction" means any
securities transaction outside the regular course or scope of an associated person's
employment with a member, including, though not limited to, new offerings of securities
which are not registered with the SEC, provided however that transactions subject to
FINRA notification requirements , transactions
Conduct / Underlying Rule Violation Sanction Guideline Policy Notes
Disciplinary Rules Article 13.1: Proof of Conviction or Professional Discipline: Except
as otherwise provided in these Disciplinary Rules, a certificate from the clerk of any
court of criminal jurisdiction indicating that a Respondent has been convicted of
a crime in that court or a letter or other writing from a governmental or industry selfregulatory authority to the effect that a Respondent has been the subject of an order of
professional discipline (as hereinafter defined) by such authority, shall conclusively
establish the existence of such conviction or such professional discipline for purposes of
disciplinary proceedings and shall be conclusive proof of the commission of that crime or
of the basis for such suspension, by the Respondent.
Examples of Violations:
Best Execution Churning or Excessive Trading
Conversion Fair Dealing Fraudulent, Deceptive or Manipulative Practices Free-riding and
Withholding Violations Front-running Insider Trading Outside Business Activities
Selling Away (Private Securities Transactions) Settlement – Unreported Private
Settlement of Client Complaints Trading Ahead Transactions with Associated
Persons/Related Persons among immediate family members, for which no associated
person receives any selling compensation, and personal transactions in investment
company and variable annuity securities, shall be excluded.
Conduct / Underlying Rule Violation Sanction Guideline Policy Notes
Unauthorized transactions Unlawful Credit Extension Unregistered Securities – Sale of
31. Suitability Violation
Code of Ethics Rule 703: A financial planning practitioner shall make and/or implement
only recommendations which are suitable for the client.
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Rules of Conduct Rule 4.5: In addition to the requirements of Rule 1.4, a certificant shall
make and/or implement only recommendations that are suitable for the client.
Suspension for one year. The following should be considered additional aggravating or
mitigating factors in determining the appropriate sanction:
(1) What was the extent of the fact-finding done by the CFP® professional?
(2) What was the CFP® professional’s level of experience at the time of the
recommendation?
(3) What was the CFP® professional’s intent when making the recommendation?
In cases where there are significant aggravating factors, consider a suspension for up to
five years.
32. Professional Discipline as defined in Article
13.6 involving a suspension for up to one
calendar month (30 days)
Code of Ethics Rule 606(a): In all professional activities a CFP Board designee shall
perform services in accordance with Applicable laws, rules and regulations of
governmental agencies and other applicable authorities
Rules of Conduct Rule 4.3: A certificant shall be in compliance with applicable
regulatory requirements governing professional services provided to the client.
Public Letter of Admonition
Conduct / Underlying Rule Violation Sanction Guideline Policy Notes
Disciplinary Rules Article 3(d): Grounds For Discipline: Misconduct by a certificant or
registrant, individually, or in concert with others, including the following acts or
omissions, shall constitute grounds for discipline, whether or not the act or omission
occurred in the course of a client relationship: (d)Any act which is the proper basis for
professional suspension, as defined herein, provided professional suspension shall not be
a prerequisite to the institution of disciplinary proceedings, and provided further, that
dismissal of charges in a professional suspension proceeding shall not necessarily bar a
disciplinary action.
Disciplinary Rules Article 13.1: Proof of Conviction or Professional Discipline
Except as otherwise provided in these Disciplinary Rules, a certificate from the clerk of
any court of criminal jurisdiction indicating that a Respondent has been convicted of a
crime in that court or a letter or other writing from a governmental or industry selfregulatory authority to the effect that a Respondent has been the subject of an order of
professional discipline (as hereinafter defined) by such authority, shall conclusively
establish the existence of such conviction or such professional discipline for purposes of
disciplinary proceedings and shall be conclusive proof of the commission of that crime or
of the basis for such suspension, by the Respondent.
33. Professional discipline as defined in Article 13.6 involving a suspension for more
than one calendar month (30 days) and less than three calendar months (90 days)
Code of Ethics Rule 606(a): In all professional activities a CFP Board designee shall
perform services in accordance with Applicable laws, rules and regulations of
governmental agencies and other applicable authorities
Rules of Conduct Rule 4.3: A certificant shall be in compliance with applicable
regulatory requirements governing professional services provided to the
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Suspension for at least an equal length, up to one year
Conduct / Underlying Rule Violation Sanction Guideline Policy Notes
Client.
Disciplinary Rules Article 3(d): Grounds For Discipline: Misconduct by a certificant or
registrant, individually, or in concert with others, including the following acts or
omissions, shall constitute grounds for discipline, whether or not the act or omission
occurred in the course of a client relationship: (d) Any act which is the proper basis for
professional suspension, as defined herein, provided professional suspension shall not be
a prerequisite to the institution of disciplinary proceedings, and provided further, that
dismissal of charges in a professional suspension proceeding shall not
necessarily bar a disciplinary action.
Disciplinary Rules Article 13.1: Proof of Conviction or Professional Discipline: Except
as otherwise provided in these Disciplinary Rules, a certificate from the clerk of any
court of criminal jurisdiction indicating that a Respondent has been convicted of
a crime in that court or a letter or other writing from a governmental or industry selfregulatory authority to the effect that a Respondent has been the subject of an order of
professional discipline (as hereinafter defined) by such authority, shall conclusively
establish the existence of such conviction or such professional discipline for
purposes of disciplinary proceedings and shall be conclusive proof of the commission of
that crime or of the basis for such suspension, by the Respondent.
34. Professional discipline as defined in Article 13.6 involving a suspension for more
than three months (90 days)
Code of Ethics Rule 606(a): In all professional activities a CFP Board designee shall
perform services in accordance with Applicable laws, rules and regulations of
governmental agencies and other applicable authorities
Rules of Conduct Rule 4.3: A certificant shall be in compliance with applicable
regulatory requirements governing professional services provided to the
Suspension for at least one year and one day
Conduct / Underlying Rule Violation Sanction Guideline Policy Notes
client.
Disciplinary Rules Article 3(d): Grounds For Discipline: Misconduct by a certificant or
registrant, individually, or in concert with others, including the following acts or
omissions, shall constitute grounds for discipline, whether or not the act or omission
occurred in the course of a client relationship: (d) Any act which is the proper basis for
professional suspension, as defined herein, provided professional suspension shall not be
a prerequisite to the institution of disciplinary proceedings, and provided further, that
dismissal of charges in a professional suspension proceeding shall not necessarily bar a
disciplinary action.
Disciplinary Rules Article 13.1: Proof of Conviction or Professional Suspension: Except
as otherwise provided in these Procedures, a certificate from the clerk of any court of
criminal jurisdiction indicating that a certificant or registrant has been convicted of
a crime in that court or a letter or other writing from a governmental or industry selfregulatory authority to the effect that a certificant or registrant has been the subject of an
order of professional suspension (as hereinafter defined) by such authority, shall
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conclusively establish the existence of such conviction or such professional suspension
for purposes of disciplinary proceedings and shall be conclusive proof of the commission
of that crime or of the basis for such suspension, by the certificant or registrant.
35. Unauthorized Use of Designations
Rules of Conduct Rule 6.5: A certificant shall not engage in conduct which reflects
adversely on his or her integrity or fitness as a certificant, upon the CFP® marks, or upon
the profession.
Public Letter of Admonition
36. Unauthorized Use of the CFP® Marks Code of Ethics Rule 601: A CFP Board
designee shall use the marks in compliance with the rules and Public Letter of
Admonition
Conduct / Underlying Rule Violation Sanction Guideline Policy Notes
regulations of CFP Board, as established and amended from time to time.
Rules of Conduct Rule 6.1: A certificant shall abide by the terms of all agreements with
CFP Board, including, but not limited to, using the CFP® marks properly and
cooperating fully with CFP Board’s trademark and professional review operations and
requirements.
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Section XIII: APPEAL RULES AND PROCEDURES
(as amended November 2012, effective January 1, 2013)
ARTICLE 1: SCOPE OF RULES
These Appeal Rules and Procedures (the Rules) govern the procedure of appeals from
orders of the Disciplinary and Ethics Commission (DEC) of the Certified Financial
Planner Board of Standards, Inc. (CFP Board), and appeals from Administrative Orders.
ARTICLE 2: APPEAL PANEL
2.1 Function and Jurisdiction
The Appeal Panel is charged with the duty of reviewing all appeals from orders of the
DEC and Administrative Orders. The Appeal Panel shall have jurisdiction to review
cases that are appealed in accordance with these Rules, and that involve: (1) any Order
issued by the DEC, except Interim Suspension Orders; or (2) Administrative Orders.
2.2 Composition
The composition of the Appeal Panel and appointment of a Chair shall be as set forth in
CFP Board’s Bylaws, Policy Governance Manual and/or Appeal Panel Charter, as
amended from time to time. No member of the Appeal Panel may serve simultaneously
as a member of the DEC.
2.3 Functions of the Appeal Panel Chair
The Appeal Panel Chair shall rule on all motions, objections, and other matters
presented in the course of the hearing. The Chair shall also have the authority to rule
on preliminary motions or matters raised prior to the hearing.
2.4 Disqualification
Appeal Panel members shall not participate in any appeal proceeding that would result
in, or cause, a conflict of interest or would give the appearance of impropriety.
ARTICLE 3: STANDARD OF REVIEW
3.1 Appeals from Orders of the DEC
In appeals from orders of the DEC, except interim suspension orders, the Appeal Panel
shall affirm the findings of fact and disposition of the proceedings, unless Appellant
establishes or the Appeal Panel finds that the findings of fact, rule violation(s) and/or the
disposition of the proceedings is, clearly erroneous.
3.2 Appeals from Administrative Orders
In appeals from administrative orders, the Appeal Panel shall affirm the order of
Certified Financial Planner Board of Standards (CFP Board), unless Appellant
establishes: (a) excusable neglect for failing to respond to the Complaint, or (b) that the
issuance of the order was clearly erroneous.
ARTICLE 4: RIGHT TO APPEAL AND REPRESENTATION
CFP Board Counsel may appeal any Order of the DEC, except an order in which the
DEC declines to impose an interim suspension, to the Appeal Panel, provided he or she
complies with all other provisions of these Rules. In the event that CFP Board Counsel
appeals an Order of the DEC, the Respondent shall not be assessed an appeal fee. A
Respondent may appeal any Order of the DEC, except an interim suspension order,
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and an Administrative Order issued by CFP Board Counsel to the Appeal Panel,
provided he or she complies with all other provisions of these Rules. Additionally, a
Respondent has the right to be represented by counsel. Respondent’s Counsel, if any,
shall be identified to CFP Board in his or her Petition for Appeal or Response to Petition
for Appeal. When Respondent’s Counsel is identified, the Respondent shall provide the
counsel’s contact information as well as whether the counsel will appear in person or via
telephone. Respondent’s counsel must be an active member in good standing of the bar
of a United States state, jurisdiction, possession, territory or dependency
ARTICLE 5: APPEAL PROCEDURES
5.1 Initiation of Appeal
(a) Initiation Deadline. An Appellant’s Petition for Appeal must be filed within 30
calendar days from the date the DEC’s or CFP Board’s order is mailed to respondent.
(b) Motion for More Time. In the event Appellant fails to satisfy the provisions of
this section within the time allotted in subsection (a) above, the Appeal Panel
may extend the time for initiating the appeal upon motion by Appellant. Said
motion must be filed by Appellant no later than 30 calendar days after the
expiration of the time prescribed in subsection (a) and must demonstrate
excusable neglect for Appellant’s failure to submit a Notice of Appeal and/or
costs within the time allotted under subsection (a).
5.2 Petition for Appeal
(a) Filing. Filing shall be accomplished by depositing the Petition for Appeal in
the U.S. Mail, by Certified Mail, return receipt requested, properly addressed
to CFP Board headquarters.
(b) Content.
(1) Appeals from Orders issued by the DEC. The Petition for Appeal from
an Order issued by the DEC must specify the party filing the appeal,
shall identify the DEC’s order, and shall state clearly and concisely the
grounds upon which the Appellant seeks a modification or remand of
the Order. The contents of the Petition for Appeal shall be limited to
the evidence contained in the record. The Appeal Panel shall not
consider new evidence or hear testimony from any witnesses.
However, a party can raise new “arguments” (as distinguished from a
new “claim”) on appeal. Once a claim is properly presented, a party
can make any argument in support of that claim; parties are not
limited to the precise arguments they made below. See, Yee v. City
of Escondido, 503 U.S. 519, 534-535 (U.S. 1992).
(2) Appeals from Administrative Orders. The Petition for Appeal from
administrative orders shall specify the party filing the appeal and must
identify the Administrative Order. The content of the Petition for
Appeal must be limited to the circumstances and evidence
surrounding Appellant’s failure to respond to CFP Board’s Complaint.
The Appeal Panel must not consider any evidence with regard to the
allegations in the Complaint, except those allegations relating to
Appellant’s failure to respond.
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(3) Length. The aggregate length of a Petition for Appeal shall not
exceed 10 single-spaced pages, excluding any attachments, and shall
be submitted on 8 ½ x 11 inch paper, with a minimum font size of 11
points. Attachments shall not exceed 20 pages.
(c) Appearance. An Appellant appealing an Order issued by the DEC has the
right to appear, either telephonically or in person, but must request such an
appearance in the Petition for Appeal. Failure to request an appearance in
the Petition for Appeal will result in a waiver of the Appellant’s right to
appear.
(d) Costs.
(1) All costs for an appellate review, including all costs from the
underlying hearing, if any, must be received by CFP Board within the
time allotted under subsection (a) above and are nonrefundable.
Appellant may request a reduction or waiver of the appeal hearing
costs due to financial hardship. Such request must be submitted in
writing with the Petition for Appeal. Upon receipt and review of the
request, CFP Board Advisory Counsel shall have the discretion to
reduce or waive the required appeal hearing costs.
(2) If CFP Board Counsel initiates the appeal of an Order, the Appellee
will not be assessed a hearing fee.
5.3 Answer
(a) Filing. Appellee must file an Answer within 30 calendar days after CFP
Board receives the Petition for Appeal. The Answer must be filed at least 30
calendar days prior to the hearing, unless Appellant expressly waives his or
her right, in writing, to the 30 day notice. Filing must be accomplished by
depositing the Answer in the U.S. Mail, by Certified Mail, return receipt
requested, and shall be sent to the Appellant and/or Appellant’s counsel’s
last known address.
(b) Content. The Answer must specify the party filing the Answer, respond to
the issues raised in the Petition for Appeal, and state clearly and concisely
the grounds upon which the DEC’s order should be affirmed, modified or
remanded.
(c) Length. The aggregate length of the Answer must not exceed 10 single spaced
pages, excluding any attachments, and must be submitted on 8 ½ x 11 inch paper, with a
minimum font size of 11 points. Attachments must not exceed 20 pages.
5.4 Rebuttal
(a) Filing. An Appellant may file a rebuttal under the following circumstances:
(1) if Appellant has waived the right to appear at the appeal hearing; or (2) if
Appellant is appealing an administrative order. Appellant must file a rebuttal
within 10 calendar days of receipt of the Answer. A rebuttal must be filed at
least 20 calendar days prior to the appeal hearing, unless Appellee expressly
waives his or her right, in writing, to this 20 day notice. Filing is
accomplished by depositing the rebuttal in the U.S. Mail, by Certified Mail,
return receipt requested, properly addressed to Appellant and/or Appellant’s
counsel’s last known address.
(b) Content. The content of the rebuttal is limited to those issues raised in the
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Petition for Appeal and the Answer.
(c) Length. Rebuttals must not exceed two single-spaced pages and shall be
submitted on 8 ½ x 11 inch paper, with a minimum font size of 11 points. No
attachments are permitted.
ARTICLE 6: MOTIONS
6.1 Filing
An Appellant or Appellee may file a written motion (exclusive of motions in Articles
5.1b and 9.3b) regarding procedural matters. The motion must be filed no later than 30
days prior to the appeal hearing. Filing is accomplished by depositing the motion in the
U.S. Mail, by Certified Mail, return receipt requested, properly addressed to the
Appellant’s or Appellee’s and/or Appellant’s or Appellee’s counsel’s last known address.
6.2 Content
The motion must state with reasonable particularity the grounds for the motion and the
relief sought. If the motion pertains to a specific rule or rules, the motion must identify
the rules.
6.3 Response
An Appellant or Appellee may file a written response to any motion filed by another
party. Any response must be filed no later than 10 days after the filing of the motion.
The content of a response to a motion is governed by Article 6.2. Filing is accomplished
by depositing the response in the U.S. Mail, by Certified Mail, return receipt requested,
properly addressed to the last known address Appellant’s or Appellee’s and/or
Appellant’s or Appellee’s counsel’s last known address. If a response is filed, a rebuttal
is not permitted.
6.4 Length
Motions must not exceed two single-spaced pages and must be submitted on 8 ½ x 11
inch paper, with a minimum font size of 11 points. Attachments must not exceed 10
pages.
6.5 Disposition of a Motion
(a) Appearance Requested. The Appeal Panel Chair must rule on all motions,
either orally or in writing on or before the date of the hearing.
(b) Paper Review. The Appeal Panel Chair must rule on all motions in a written
order mailed to both party’s within 30 days of the Appeal Panel’s decision.
The order must be mailed to each party by U.S. Mail, by Certified Mail, return
receipt requested, to the last known address of each party and/or each
party’s counsel.
ARTICLE 7: AUTOMATIC STAY OF ORDER
Upon successful initiation of an appeal, the order of the DEC shall be stayed pending a
decision by the Appeal Panel.
ARTICLE 8: THE RECORD ON APPEAL
8.1 Composition
(a) Appeals from Orders Issued by the DEC. The record on appeal shall consist
of all evidence provided to the DEC the DEC’s order, the transcript of the
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hearing before the DEC, the Petition for Appeal, the Answer to the Petition
for Appeal, and the rebuttal, if applicable.
(b) Appeals from Administrative Orders. The record on appeal shall consist of
the Notice of Complaint and Hearing, the Complaint, proof of service of the
Complaint upon the Appellant, the Administrative Order of Revocation, all
evidence that relates to Appellant’s failure to respond, the Petition for
Appeal, the Answer to the Petition for Appeal, along with a timeline of
events, and the rebuttal, if any.
8.2 Omission from or Misstatement in the Record
If anything material to any party is omitted from the record created from the hearing
before the DEC or is misstated therein, either party may, at any time, supply the
omission or correct the misstatement by stipulation. In the event there is no stipulation,
the parties may submit the matter to the Appeal Panel Chair, who may, at any time,
direct the omission or misstatement be remedied and, if necessary, that a supplemental
record be prepared and filed.
ARTICLE 9: APPEAL HEARING
9.1 Notice of Hearing
Not less than 30 calendar days prior to the date set for an appeal hearing, written notice
of such hearing shall be sent to the each party, designating the date and place of the
hearing. The notice shall be deposited in the U.S. Mail, by Certified Mail, return receipt
requested, to each party’s last known address.
9.2 Review of the Record
The Appeal Panel shall review the record on appeal (see Article 7.1).
9.3 Presentations
(a) Right to Presentation.
(1) Appellant.
Appeals from Orders Issued by the DEC. If Appellant requests an
appearance pursuant to Article 5.3(d), he/she will have the right to
make an oral presentation. If Appellant has waived his/her right to
appear pursuant to Article 5.3(d) of these Rules, the Appeal Panel will
make its decision based on the record and neither the Appellant nor
the DEC will have the right to make an oral presentation.
Appeals from Administrative Orders. Neither Appellant nor Appellee
will have the right to appear if Appellant is appealing an administrative
Order of Revocation.
(2) Appellee.
The Appellee will have the right to make an oral presentation in all
cases on appeal where the Appellant has exercised his/her right to
appear pursuant to Article 5.3(d) of these Rules.
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(b) Affirmative Presentation.
(1) Content. Affirmative presentations shall be concise, shall address
only those issues raised in the Petition for Appeal and Answer, and
may be terminated by the Appeal Panel if either Appellant or Appellee
exceeds the time limits prescribed below.
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(2) Time Allotted and Order of Presentations. Appellant and Appellee
each have 20 minutes to make an oral presentation. Appellant shall
present first.
(3) Motion for More Time. The Appeal Panel may consider motions from
the Appellant or Appellee requesting additional time for oral
presentations and may grant such motions upon a showing of good
cause.
(c) Rebuttal. Following the presentation of the Appellee, Appellant shall be
permitted five minutes for rebuttal. The rebuttal must address only those
issues raised in the Petition for Appeal and Answer or the affirmative
presentations.
(d) Questioning. The Appeal Panel may ask questions at any time during or
after the presentations. In the event the Appeal Panel exercises its right to
ask questions, the time allotted for presentation will not be extended.
9.4 Transcript of Appeal Hearing
If either party wishes to have a transcript of the appeal hearing, the party is responsible
for securing, making all necessary arrangements with, and paying the cost of, the
transcriptionist.
ARTICLE 10: DECISIONS
10.1 Order of the Appeal Panel
Decisions shall be rendered as set forth below.
(a) Order issued by the DEC. The Appeal Panel shall: (i) affirm the DEC’s
findings of fact, rule violation(s) and the disposition of the proceedings if the
Appeal Panel finds no clear error; (ii) affirm the DEC’s findings of fact and
modify the rule violation(s) and/or disposition of the proceedings if the
Appeal Panel finds clear error as to the rule violation(s) and/or disposition of
the proceedings; or (iii) remand the matter to the DEC with instructions for
further proceedings if the Appeal Panel finds clear error as to the DEC’s
findings of fact. A finding is ‘clear error’ when the Appeal Panel, after
considering all the evidence, is left with the definite and firm conviction that a
mistake has been committed regarding the support of one or more factual
findings by the evidence or the application of the Rule(s).
(b) Administrative Orders. The Appeal Panel shall: (i) affirm CFP Board’s
administrative order; or (ii) remand the matter to the DEC for a disciplinary
hearing. In order to impose (ii) above, the Appeal Panel must find Appellant
has established excusable neglect for failing to respond to the Complaint, or
that the issuance of the order was clearly erroneous.
10.2 Service of the Order of the Appeal Panel
A written order must be mailed to both parties within 30 days after the review by CFP
Board’s Board of Directors as provided in Article 11. The order must be mailed to the
Appellant or the Appellant’s counsel by U.S. Mail, by Certified Mail, return receipt
requested, to the last known address of each party and/or each party’s counsel.
ARTICLE 11: REVIEW BY THE APPEALS COMMITTEEE OF THE BOARD
OF DIRECTORS OF CFP BOARD
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11.1 Presentation to Appeals Committee
The Managing Director of Professional Standards and Legal (“Managing Director”) must
present every decision issued by the Appeal Panel to the Appeals Committee of the
Board of Directors. The Board of Directors may: (i) affirm the Appeal Panel’s decision;
or (ii) call the matter for review at the next scheduled Appeals Committee meeting. The
Appeals Committee’s decision is the final decision of CFP Board.
11.2 Call for Review by the Appeals Committee
After receiving the presentation from the Managing Director, the Appeals Committee
may, if it wants further details of the Appeal Panel’s determination, call the case for
review at the Appeals Committee’s next scheduled meeting. At the Appeals
Committee’s next scheduled meeting, the Managing Director must present a detailed
review of the Appeal Panel’s determinations. Neither Appellant nor Appellee will have
the right to appear during this review by the Appeals Committee.
11.3 Decision After Review
After review of the matter under Article 11.2, the Appeals Committee may: (i) affirm the
Appeal Panel’s decision; or (ii) if it finds clear error, remand the matter to the Appeal
Panel with instructions for further proceedings.
DEFINITIONS
Administrative Orders. CFP Board Counsel issues an Administrative Order of Denial
or an Administrative Order of Revocation in instances where a CFP Board designee
fails to file a timely Answer to the Complaint within the required 20 calendar days from
the date of service of the Complaint, as provided in Article 7.3 of the Disciplinary Rules
and Procedures. Such orders are referred to as “administrative” because they do not
involve a hearing before the Disciplinary and Ethics DEC.
10
Appellant. The party who appeals an Order issued by the Commission and/or an
Administrative Order.
Appellee. The party against whom an appeal is taken and whose role is to respond to
the Petition for Appeal.
Clear Error / Clearly Erroneous. A finding is “clearly erroneous” when the Appeal
Panel, after considering the entire evidence, is left with the definite and firm conviction
that a finding of fact, rule violation and/or the disposition of the proceedings is
unsupported by substantial evidence.
Excusable Neglect. A legal standard of review which generally means a failure to take
proper steps at a proper time, which were not a consequence of carelessness, but
rather resulted from some unavoidable hindrance or occurrence. In determining
whether excusable neglect exists, relevant circumstances include: (1) the danger of
prejudice to the Disciplinary and Ethics Commission; (2) the length of the delay and its
potential impact on the proceedings of either the Disciplinary and Ethics Commission or
the Appeal Panel; (3) the reason for the delay, including whether it was within the
respondent’s control; and (4) whether the respondent acted in good faith.
Preponderance of the Evidence. A legal standard of review which generally means
“more probable than not,” i.e., evidence which shows that, as a whole, the fact sought to
be proved is more probable than not to have occurred.
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