CFP BOARD RELEASES FINAL PROCEDURAL RULES FOR CODE OF ETHICS AND STANDARDS OF CONDUCT FOR CFP® PROFESSIONALS
Today, the Board of Directors of Certified Financial Planner Board of Standards, Inc. (CFP Board) announced the adoption of new Procedural Rules, strengthening the processes for enforcement of the ethical and practice standards for CERTIFIED FINANCIAL PLANNER™ professionals.
“CFP® professionals have committed to the high standards of competency and ethics that are set forth in the Code of Ethics and Standards of Conduct. CFP Board’s new Procedural Rules are aligned with the new Code and Standards and outline a process designed to be credible to the public and fair to those whose conduct CFP Board is evaluating,” said Jack Brod, CFP®, 2020 Chair of CFP Board’s Board of Directors. “The new Procedural Rules clarify important information for CFP® professionals and further strengthen CFP Board’s enforcement process.”
New Procedural Rules Effective June 30, 2020
The final Procedural Rules consolidate and replace the Disciplinary Rules and Procedures and the Appeal Rules and Procedures and will become effective on June 30, 2020, when CFP Board begins enforcement of the new Code of Ethics and Standards of Conduct (Code and Standards).
CFP Board intends for the Procedural Rules to improve the process that governs those who are subject to CFP Board’s enforcement function. CFP Board first released proposed Procedural Rules for public comment in November 2018, and a revised version was released for a second public comment period in March 2020.
The new Procedural Rules strengthen CFP Board’s enforcement process with a number of important changes, including:
- Presenting the information in a manner more accessible to CFP® professionals.
- Consolidating enforcement process-related rules previously contained in multiple documents –
including the previous Disciplinary Rules and Procedures, Appeal Rules and Procedures, Fitness Standards for Candidates for CFP® Certification and Former CFP® Professionals Seeking Reinstatement (Fitness Standards), and bankruptcy disclosure guidelines – into a single, comprehensive document.
- Expanding on the ways in which CFP Board may access information during the disciplinary process, including questioning by oral examination.
- Clarifying who may review confidential information.
- Clarifying the duty that a Respondent and a CFP® professional who is not a Respondent has to cooperate with CFP Board during an investigation.
- Establishing an expedited process for complaints involving one bankruptcy that will allow a Respondent to accept a public censure and thereby avoid payment of a hearing fee.
- Providing that a Respondent who is the subject of an adverse final determination by a civil court will be bound by that determination in a CFP Board proceeding.
- Providing that a Respondent must obtain CFP Board staff’s agreement before presenting a settlement offer to the Disciplinary and Ethics Commission (DEC).
- Placing a time limitation on when CFP Board staff may issue a Notice of Investigation, which ordinarily will be seven years after the alleged violation, subject to certain exceptions, and placing a limit on when CFP Board staff may issue a complaint after commencing an investigation.
- Clarifying the standard of review that applies to an appeal of a decision of the DEC to the Appeals Committee of the Board of Directors.
- Requiring CFP Board to provide periodic status notifications to individuals who file a complaint against a CFP® professional.
The final Procedural Rules incorporate several changes in response to comments on the second proposed draft, including but not limited to:
- Language clarifying that Respondent, Respondent’s counsel, witnesses, and experts may appear in person or by telephone or video at any in person oral examination or hearing, and by video or telephone at any video oral examination or hearing.
- Language clarifying that an expert witness may attend a hearing when not testifying.
- Edits to clarify that an examinee may request a copy of the transcript and the exhibits provided by the examinee that were used in the examinee’s oral examination.
- A provision addressing the situation where a Respondent has multiple settled customer complaints but does not produce related documents or information requested by CFP Board Counsel. The existence of the settled customer complaints will constitute grounds for sanction unless a Respondent proves by a preponderance of the evidence that the allegations of misconduct raised in the settled customer complaints are without merit.
- Language affirming that CFP Board Counsel will undertake reasonable efforts to redact confidential information from documents, such as birthdates and social security numbers.
- Language identifying the factors the DEC will consider in evaluating a settlement offer, including with respect to each potential kind of Consent Order, and the information that the Settlement Panel must consider in making its recommendation and the DEC must consider in issuing its final Order.
- Language explicitly stating that relevant hearsay is admissible (consistent with the current practice of the DEC).
- Provisions explicitly limiting the DEC’s right to exclude evidence that is not relevant or that was not provided in accordance with the Procedural Rules, such as information not provided during discovery and information that a party failed to provide to the other party prior to the hearing without good cause (consistent with the current practice of the DEC).
- Updates to the confidentiality Article clarifying that Respondent, Respondent’s counsel, experts, and witnesses must not record any examination or hearing.
- Provisions addressing in more detail how confidentiality applies to a Respondent. Where the same confidentiality exception applies to both CFP Board and Respondent, the exception is addressed collectively. Those that apply to uniquely to CFP Board and Respondent are addressed separately.
- Delaying action on a proposal to allow petitions for the removal of public discipline from CFP Board’s website pending review by a Commission on Sanctions that CFP Board intends to form later in 2020 to evaluate and recommend changes to CFP Board’s Sanction Guidelines and Fitness Standards.
These and other changes are highlighted in a redline version of the new Procedural Rules.
In the second comment period, some commenters asked about the timing of the comment period given the advent of the COVID-19 pandemic. The timing is entirely coincidental. CFP Board had planned to finalize the Procedural Rules so that it would become effective at the same time as the enforcement date of the Code and Standards. In mid-2019, the Board of Directors convened an Independent Task Force on Enforcement and, given the strong possibility that the Task Force’s recommendations would touch on elements of the Procedural Rules, the proposed Procedural Rules were placed on hold until after the Task Force released its recommendations in December 2019. CFP Board appreciates the breadth and depth of the comments, and today is issuing the final version of the Procedural Rules with an effective date of June 30, 2020.
To help CFP® professionals understand the updated enforcement process outlined in the new Procedural Rules, CFP Board has created an Enforcement Process Guide containing five flow charts that describe the investigative, settlement and hearing processes.
Technical Updates to Documents Referencing the Procedural Rules
CFP Board has also updated several documents for consistency with the new Procedural Rules, including the Fitness Standards, the Sanction Guidelines, and the Terms and Conditions of Certification and Trademark License (Terms and Conditions).
In addition to updating references to the Procedural Rules, the Fitness Standards were updated to remove the process explanations now contained within the Procedural Rules. The Terms and Conditions were updated to align with the Code of Ethics and Standards of Conduct and the Procedural Rules, to reference deadlines and requirements now contained in the Procedural Rules, clarification that a CFP® professional was required to comply with, and was bound by, CFP Board’s Standards and Policies from the first date of certification through the date of the Terms and Conditions, and clarification that CFP Board may revoke the certification of any CFP® professional who had not satisfied the certification requirements or Fitness Standards in place at the time the CFP® professional was granted certification. The updated Terms and Conditions also introduce a new requirement that a Respondent file an Arbitration within 60 days of any final decision of the Appeals Committee.
Certified Financial Planner Board of Standards, Inc. is the professional body for personal financial planners in the U.S. CFP Board sets standards for financial planning and administers the prestigious CFP® certification – one of the most respected certifications in financial services – so that the public has access to and benefits from competent and ethical financial planning. CFP Board, along with its Center for Financial Planning, is committed to increasing the public’s awareness of CFP® certification and access to a diverse, ethical and competent financial planning workforce. Widely recognized by firms and consumer groups as the standard for financial planning, CFP® certification is held by more than 90,000 people in the United States.
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