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CERTIFIED FINANCIAL PLANNER (“CFP”) ALERT: CFP BOARD RELEASES FINAL PROCEDURAL RULES FOR CODE OF ETHICS AND STANDARDS OF CONDUCT FOR CFP PROFESSIONALS

By Erwin J. Shustak, Partner and Andrew Steiger, Law Clerk of Shustak Reynolds & Partners, P.C. posted on Wednesday, August 12, 2020.

The CFP Board certifies and bestows the CFP designation on professionals who meet rigorous education, training, and ethics standards.  In an average year, the CFP Board conducts 6,900 background checks as part of their dual mission of CFP certification and enforcement of professional standards.

Until recently, the CFP Board primarily relied on self-disclosure by the CFP professionals and applicants when evaluating their experience level, education, and criminal history for awarding or continuing the CFP designation for them.  Some CFP professionals, however, abused the self-disclosure system and misrepresented their qualifications and history. This led to red flags going unnoticed that could have prevented unqualified financial professionals from receiving or continuing to enjoy the CFP designation and all its benefits. 

In response to criticism of its self-disclosure, self-policing policy by The Wall Street JournalForbes and other publications, the CFP Board recently adopted a new practice of independently reviewing public records of those seeking to obtain or renew a CFP certification.  Prior to awarding the CFP certification, the CFP Board now references the Financial Industry Regulatory Authority’s (FINRA) BrokerCheck database, and the U.S. Securities and Exchange Commission’s (SEC) Investment Adviser Public Disclosure database.  To further enhance accountability, the CFP Board also created an independent task force to examine the existing enforcement program and recommend improvements.

Effective June 30, 2020, the new Procedural Rules follow from recommendations of the independent task force, and replace both the Disciplinary Rules and Procedures and the Appeals Rules and Procedures.  These new rules align with the October 2019 Code of Ethics and Standards of Conduct, and describe the updated enforcement procedures. In an effort to make the updated rules more accessible to CFP professionals, the Board also released a companion Enforcement Process Guide containing flow charts describing the investigative, settlement, and hearing sub-processes.  Other related documents that the CFP Board updated to match the new rules include: Fitness StandardsSanction Guidelines, and Terms and Conditions of Certification and Trademark License.  Some highlights of the new CFP procedural rules are:

  • There is a new time limitation requiring the CFP Board to issue a Notice of Investigation within 7 years after the alleged violation or forfeit the option to do so.
  • There is a new time limitation for filing an arbitration when a CFP professional wishes to challenge a final decision made by the Appeals Committee on a disciplinary order.  The CFP must file the arbitration within 60 days from the final decision or forfeit the option to do so.
  • There is a new expedited process for complaints against CFP professionals involving a single bankruptcy, either of a personal nature or of a business entity which the CFP controls.  In some cases, the CFP professional now may avoid a Disciplinary and Ethics Commission hearing by accepting public censure.
  • Final determinations by civil courts of any legal or enforcement proceedings affecting a CFP professional are now binding on the CFP Board in their enforcement proceedings.

We greatly appreciate Andrew Steiger's contribution to our firm!  Shustak Reynolds & Partners, P.C. focuses its practice on securities and financial services law and complex business disputes.  We routinely represent broker-dealers and financial advisors in arbitrations, financial advisor transitions, broker protocol disputes and related matters.  Please direct any questions to our managing partner, Erwin J. Shustak, Esq. and contact us today for a confidential, complimentary consultation.

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