Reporting Obligations to CFP Board
The “Focus on Ethics” article series takes a close look at topics important to understanding CFP Board's new Code of Ethics and Standards of Conduct.
CFP Board’s new Code of Ethics and Standards of Conduct (“Code and Standards”), which took effect on October 1, 2019, includes several updates to a CFP® professional’s reporting obligations to CFP Board, both in the types of matters to be reported and the process for reporting.
The current Rules of Conduct (in the Standards of Professional Conduct that remains in effect through September 30, 2019) states that a CFP® professional “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.” Over time, CFP Board’s Disciplinary and Ethics Commission has identified conduct that violates this standard, such as a personal bankruptcy. The new Code and Standards retains this principles-based standard and identifies specific examples of conduct that violates the standard.
The new Reporting Standard
The new Reporting standard expands the number and types of events that a CFP® professional is required to disclose to CFP Board within 30 calendar days. The current Standards of Professional Conduct that remains in effect through September 30, 2019 requires a CFP® professional to notify CFP Board in writing, within 30 calendar days, only when the CFP® professional has been convicted of a crime (other than a minor traffic offense) or has been the subject of a professional disciplinary suspension, bar, or revocation issued by a governmental agency, an industry self-regulatory organization, or a professional association.
The new Reporting standard, which is set forth in Standard E.3 of the new Code and Standards, requires a CFP® professional to provide written notice to CFP Board within 30 calendar days after the CFP® professional or an entity over which the CFP® professional is a Control Person has engaged in conduct that is listed in Standard E.3. You must provide written notice to CFP Board within 30 calendar days if you have:
- Been charged with, convicted of, or admitted into a program that defers or withholds the entry of a judgment or conviction for, a Felony or Relevant Misdemeanor;
- Been named as a subject of, or whose conduct is mentioned adversely in, a Regulatory Investigation or Regulatory Action alleging failure to comply with the laws, rules, or regulations governing Professional Services;
- Had conduct mentioned adversely in a Finding in a Regulatory Action involving failure to comply with the laws, rules, or regulations governing Professional Services (except a Regulatory Action involving a Minor Rule Violation in a Regulatory Action brought by a self-regulatory organization);
- Had conduct mentioned adversely in a Civil Action alleging failure to comply with the laws, rules, or regulations governing Professional Services;
- Become aware of an adverse arbitration award or civil judgment, or a settlement agreement, in a Civil Action alleging failure to comply with the laws, rules, or regulations governing Professional Services, where the conduct of the CFP® professional, or an entity over which the CFP® professional was a Control Person, was mentioned adversely, other than a settlement for an amount less than $15,000;
- Had conduct mentioned adversely in a Civil Action alleging fraud, theft, misrepresentation, or other dishonest conduct;
- Been the subject of a Finding of fraud, theft, misrepresentation, or other dishonest conduct in a Regulatory Action or Civil Action;
- Become aware of an adverse arbitration award or civil judgment, or a settlement agreement in a Civil Action alleging fraud, theft, misrepresentation, or other dishonest conduct, where the conduct of the CFP® professional, or an entity over which the CFP® professional was a Control Person, was mentioned adversely;
- Had a professional license, certification, or membership suspended, revoked, or materially restricted because of a violation of rules or standards of conduct;
- Been terminated for cause from employment or permitted to resign in lieu of termination when the cause of the termination or resignation involved allegations of dishonesty, unethical conduct, or compliance failures;
- Been named as the subject of, or been identified as the broker/adviser of record in, any written, customer-initiated complaint that alleged the CFP® professional was involved in:
- Forgery, theft, misappropriation, or conversion of Financial Assets;
- Sales practice violations and contained a claim for compensation of $5,000 or more; or
- Sales practice violations and settled for an amount of $15,000 or more.
- Filed for or been the subject of a personal bankruptcy or business bankruptcy where the CFP®professional was a Control Person;
- Received notice of a federal tax lien on property owned by the CFP® professional; or
- Failed to satisfy a non-federal tax lien, judgment lien, or civil judgment within one year of its date of entry, unless payment arrangements have been agreed upon by all parties.
The written notice to CFP Board must include a narrative statement that accurately and completely describes the Material facts and the outcome or status of the reportable matter.
CFP Board’s new reporting requirement generally is based upon the reporting requirements set forth in Form U4 (Uniform Application for Securities Industry Registration or Transfer) without fully adopting or mirroring Form U4’s disclosure requirements. In fact, certain potentially problematic conduct may not need to be disclosed on Form U4, but will need to be disclosed to CFP Board. Reporting of potentially problematic conduct on Form U4 will not relieve CFP® professionals of their separate obligation to disclose conduct to CFP Board. The reporting requirement enables CFP Board to receive information in a timely manner and eliminates any confusion about the reporting timeline.
Access More Guidance Materials
This compliance resource is part of a full library of resources that CFP® professionals can use to comply with the Code and Standards. More guidance materials can be found in our Compliance Resources Library.