Duties Owed to CFP Board
CFP Board has developed a series of Frequently Asked Questions (FAQs) concerning CFP Board’s Code and Standards as a resource to CFP® professionals and their firms.
The new Code and Standards continues to prohibit a CFP® professional from engaging in conduct that reflects adversely on his or her integrity or fitness as a CFP® professional, upon the CFP® marks, or upon the profession. Standard E.2 provides five examples of such conduct. For example, a personal bankruptcy or business bankruptcy filing or adjudication where the CFP® professional was a Control Person of the business may reflect adversely on the CFP® professional’s integrity or fitness unless the CFP® professional can rebut the presumption that the bankruptcy demonstrates an inability to manage responsibly the CFP® professional’s or the business’s financial affairs.
This presents a significant change to CFP Board’s procedures. Effective July 2012, CFP Board adopted the Bankruptcy Disclosure Procedures, which provided that CFP Board staff would not investigate, and CFP Board’s Disciplinary and Ethics Commission (“DEC”) would not adjudicate, a CFP® professional’s first bankruptcy. Instead, CFP Board noted the bankruptcy filing on the CFP® professional’s public profile on CFP Board’s websites and issued a news release identifying the CFP® professional as having filed for bankruptcy. While this did not result in a formal disciplinary action, the effect was similar to a Public Letter of Admonition.
The new Code and Standards recognizes that in certain limited circumstances, a bankruptcy does not demonstrate a CFP® professional’s inability to manage his or her finances. Therefore, the new Code and Standards restores the process that existed prior to July 2012 whereby a CFP® professional had the right to demonstrate to the DEC that the bankruptcy was not the result of an inability to manage responsibly the CFP® professional’s financial affairs. In those circumstances where the CFP® professional is able to make that showing, the CFP® professional will not be subject to discipline, and CFP Board will not issue a press release announcing the bankruptcy. Regardless of the outcome of the disciplinary proceedings before the DEC, a CFP® professional must provide to the Client the location of all relevant public websites of any authority that sets forth the CFP® professional’s personal bankruptcy or business bankruptcy where the CFP® professional was a Control Person of the business. Relevant public websites could include BrokerCheck, CFP Board’s website, and the federal court website that contains the bankruptcy information.
As set forth in Standard E.3.l., a CFP® professional is now required to provide written notice to CFP Board within 30 calendar days of filing or being the subject of either a personal bankruptcy or a business bankruptcy where the CFP® professional was a Control Person. (Originally Published: November 27, 2018)
Yes, 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 Standards of Professional Conduct that will remain 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. A CFP® professional also is required, when renewing the CFP® professional’s certification every two years, to report a wider range of potentially problematic conduct on the Ethics Profile Questionnaire.
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 the potentially problematic conduct that is listed in Standard E.3. Potentially problematic conduct includes conduct ranging from being charged with, convicted of, or admitted to a program that defers or withholds the entry of a judgment or conviction for a Felony or Relevant Misdemeanor to having a professional license, certification, or membership suspended, revoked, or materially restricted because of a violation of laws, rules, or standards of conduct.
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. (Originally Published: November 27, 2018)
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These FAQs are 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.