ethics ce for cfp practitioners star's cfp ethics class 2016... · 2018-08-08 · ethics ce...

Ethics CE for CFP® Practitioners In order to receive 2 hours of CFP® Board approved Ethics CE the practitioner will need to complete all of the following steps:

1) Attend the 50 minute class on 10/28/2016, including signing in and out. 2) Read the self-study case studies (ACH 18767, 26612, 27406 & 29235) 3) Complete the online 40 question quiz by 11/15/16 (including an attestation that the self-study material was reviewed) with a

passing grade of 80% or better. Electronic copies of the self-study material & 40 question quiz are available at www.ns-ag.com/cfp

CFP® Learning Objective How it will be covered

In Class Self-Study 1. Define and discuss a financial planning engagement, material elements of financial

planning, and the financial planning process. Case Study #1 in class – 5 minutes

2. Analyze specific fact patterns to determine if a financial planning relationship exists. Case Study #1 in class – 5 minutes

3. Differentiate between the standards of care set forth in Rules 1.4 and 4.5 of the Rules of Conduct, and apply each standard of care to specific factual situations.

ACH 27406 – 1.4 & 4.5 ACH 26612 – 1.4, 6.5

4. Apply each Practice Standard set forth in the Financial Planning Practice Standards to a hypothetical financial planning engagement.

100 Series: Establishing and Defining the Relationship with the Client 200 Series: Gathering Client Data 300 Series: Analyzing and Evaluating the Client's Financial Status 400 Series: Developing and Presenting the Financial Planning Recommendation 500 Series: Implementing the Financial Planning Recommendation(s) 600 Series: Monitoring

200: Case Study #1 in class – 5 minutes 300: Case Study #1 in class – 5 minutes 400: Case Study #1 in class – 10 minutes 500: Case Study #1 in class – 10 minutes 600: Case Study #1 in class – 5 minutes

100: ACH 18767 & 26612 200: ACH 18767 & 26612 400: ACH 18767 500: ACH 26612 600: ACH 18767 & 26612

5. Identify the information that must be disclosed to the client in writing by a CFP® professional who is engaged in a financial planning relationship or providing material elements of financial planning.

Case Study #1 in class – 5 minutes

6. Define the required information that must be disclosed to clients and prospective clients, when that information must be disclosed, and apply each disclosure requirement to specific factual situations. (This includes but is not limited to the compensation and conflict-of-interest disclosure requirements set forth in Rule 2.2 of the Rules of Conduct and Practice Standards 100-1, 400-3, and 500-1.)

ACH 26612 – 100, 200, 500, 600 ACH 26612 – 2.1, 2.2, 6.5

Summary of material provided 50 minutes 50 Minutes ACH 18767 –2,471 words ACH 26612 – 6,568 words ACH 27406 – 3,834 words ACH 29235 – 1,266 words

+ 40 question quiz

Additional Supplemental Material ERISA Fiduciary – 2,677 words CFP® Code of Ethics CFP® CFP® Blue Book

ACH #18767 - Standard(s) Violated: 607; Article 3(a); 701; 406; Article 3(e); Article 3(d); 606(a); 606(b); 102; 201; 202; 405

ACH #26612 - Standard(s) Violated: 606(b); 102; 607; 1.4; 501; 202; 6.5; 401(a); 103(d)

ACH #27406 - Standard(s) Violated: Article 3(a); 4.3; 4.4; 4.5; 1.4; 2.1; Article 3(b); 6.5

ACH # 29235 - Standard(s) Violated: 6.5; 2.2(a); 2.1

http://www.ns-ag.com/cfp

Breakdown of material required for 2 hours of CFP Board approved Ethics CE.

50 minute class………………………………………………………………………….. 10/28/2016

40 question self-study quiz………………………………………………………………

Quiz must be completed by 11/15/2016

www.ns-ag.com/cfp

North Star's CFP Ethics Class 2016 - Self Study Material.……….. …………………… www.ns-ag.com/cfp

Are Investment Providers Finally Stepping up to the Plate as Plan Fiduciaries.…… 6 pages

CFP Board Anonymous Case Histories #18767…………………………………… 9 pages




Code of Ethics and Professional Responsibility…………………………………… 32 pages

Standards of Professional Conduct………………………………………………… 29 pages

Mark Kangas, CFP® CEO, Investment Advisor Representative 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. Copyright Notice: Copyright © 2016 Certified Financial Planner Board of Standard, Inc. All right reserved. Reproduced with permission.

(216) 202-0202 | www.ns-ag.com | 2000 Auburn Drive Suite 415, Beachwood, OH 44122 | [email protected] North Star Advisory Group, LLC is a registered investment advisor. A more detailed description of the company, its management and practices

are contained in its Disclosure Brochure, Form ADV, Part 2A. A copy of this form may be received by contacting the company.




THORNBURG INVESTMENTS

ARE INVESTMENT PROVIDERS FINALLY STEPPING UP TO THE PLATE AS PLAN FIDUCIARIES?

Investment providers have historically resisted characterization as retirement plan fiduciaries even when it was clear that their activities cast them in that role. To this end, investment contracts contained elaborate denials of fiduciary status. Recently, a counter trend has emerged which entails an apparent acknowledgement of fiduciary responsibility with respect to the selection of investment menus for 401(k) plans. This is certainly a welcome development. But is it a real change or merely a sophisticated attempt to limit liability? In this white paper, we will examine some of the new programs and attempt to identify their advantages and disadvantages.

GENERAL FIDUCIARY STANDARDS The Employee Retirement Income Security Act (“ERISA”) establishes comprehensive standards governing fiduciary conduct in the management of retirement plan assets. Thus, a fiduciary, such as a plan sponsor, must discharge its duties solely in the interest of the plan’s participants and beneficiaries and for the exclusive purpose of providing benefits to plan participants and beneficiaries and defraying the reasonable expenses of administering the plan.1 In essence, a fiduciary must be completely loyal to the plan and its participants.

In addition, ERISA requires plan fiduciaries to act with the care, skill, prudence and diligence that a prudent person acting in a like capacity and familiar with such matters would use in the conduct of an enterprise of a like character and with like aims.2 In a plan that permits participants to direct investments, plan sponsors are responsible not only for the prudent selection and monitoring of the plan’s investment offerings but also for the prudent utilization of those investments by participants. The standard of care is very high and requires a level of expertise beyond that of a prudent lay person.

Fiduciary responsibility goes beyond matters of loyalty and prudence. For example, the

investment of plan assets must be diversified so as to minimize the risk of large losses.3 Fiduciaries must also avoid conflicts of interest and acts of self-dealing that are known as prohibited transactions.4 Finally, a plan fiduciary must discharge its duties in accordance with the plan and trust documents insofar as they are consistent with the law.5

A fiduciary that violates any of the duties discussed above is liable to the plan for any

losses resulting from such a breach and for the restoration of profits made by the fiduciary

1 ERISA Sections 403(c) and 404(a)(1)(A). 2 ERISA Section 404(a)(1)(B). 3 ERISA Section 404(a)(1)(C). 4 ERISA Section 406. 5 ERISA Section 404(a)(1)(D).

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through the use of plan assets.6 Such violations can also bring hefty statutory penalties imposed on fiduciaries.7

HOW FIDUCIARIES ARE IDENTIFIED Given the responsibilities and liability exposure described above, the question naturally arises as to what makes a person a fiduciary. As described below, ERISA fiduciaries are either named in the plan document or are identified by the function they perform for the plan.

Named Fiduciary. The term, “named fiduciary” refers to a person who has the ultimate control or management power over plan assets. The named fiduciary is something like a fiduciary-in-chief and has the authority to appoint and give instructions to the plan trustee.8 The named fiduciary is either specified in the plan document or identified pursuant to a procedure specified in the plan document.9 Thus, there is generally no question as to the named fiduciary’s identity. Frequently, the named fiduciary will be the employer or an officer of the employer.

Investment Advice Fiduciary (ERISA § 3(21)). ERISA’s definition of a fiduciary includes any person who exercises any authority or control respecting the management or disposition of plan assets.10 Assuming that an investment provider lacks such control, it could also be a fiduciary as a result of rendering investment advice for a fee or other compensation with respect to any moneys or other property of a plan, or if the provider has any authority or responsibility to do so.11 Thus, fiduciary status may be based on a person’s conduct rather than his title and without regard to whether the person acknowledges or accepts such status. Accordingly, it is possible to be a fiduciary without being aware of it.

Department of Labor (“DOL”) regulations amplify the statutory definition of an

investment advice fiduciary by stating that a person will be viewed as rendering investment advice if both of the following conditions are met:

(1) the advice relates to the value of securities or other property or constitutes a

recommendation as to the advisability of investing in, purchasing, or selling securities or other property, and

(2) either (a) the person has discretionary authority or control with respect to

purchasing or selling securities or other property for the plan, or (b) the person renders advice to the plan on a regular basis under an agreement or understanding (written or

6 ERISA Section 409(a). 7 See ERISA Section 502(l) requiring the DOL to assess a 20% civil penalty on recovered amounts in fiduciary breach cases. 8 ERISA Sections 402(c) and 403(a). 9 ERISA Section 402(a)(2) 10 ERISA Section 3(21)(A)(i). 11 ERISA Section 3(21)(A)(ii). The statute indicates that it does not matter whether the fee is received directly or indirectly. The receipt by a broker of a commission may be sufficient for this purpose, even though no payment has been specifically allocated to the provision of investment advice. Indirect forms of compensation, such as soft-dollar arrangements and revenue sharing, pursuant to which an adviser receives something of value from an investment provider are likely to be taken into account for purposes of determining fiduciary status.

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otherwise) that the advice will be a primary basis for investment decisions with respect to plan assets, and that it will consist of individualized investment advice to the plan based on its particular needs.

The particularized needs of the plan include such matters as investment policies or

strategy, overall portfolio composition, and diversification of investments but would not necessarily cover advice of a more general nature, such as which asset classes are consistent with long-term investing.12 The Department of Labor takes the view that providing investment advice to a participant in an individual account plan that allows participants to direct the investment of their accounts (as opposed to providing plan level advice) may also come within this definition.13

Registered Investment Advisers (RIAs). The primary role of most registered investment

advisers is to provide guidance as to how plan assets should be invested or as to what investment alternatives should be made available to participants in a self-directed plan. An adviser that assists a plan in selecting an investment menu from the numerous investment options available from the plan’s vendor will generally be providing individualized advice. Activities such as this will result in the adviser’s legal classification as an investment advice fiduciary.

Brokers. On the other hand, a broker-dealer or its registered representative performing

services in the ordinary course of its business is generally paid for executing a purchase or sale of securities, not for providing advice. Given this fact, a broker will not be an investment advice fiduciary merely because it receives a commission, although the receipt of asset-based fees may be another matter.14

Rendering investment advice tailored to a plan will make it difficult to contest fiduciary

status. An example of a broker-dealer whose pattern of conduct crossed the threshold that made it investment advice occurred in the recent case of Ellis v. Rycenga Homes, Inc., No. 1:04-cv-694, 2007 WL 837224 (W.D. Mich. 2007). In that case, periodic meetings between a broker and a plan trustee over the course of a 20 year relationship for the purpose of reviewing plan investments led to the court’s holding that the broker and its broker-dealer were fiduciaries where the meetings were the plan’s only source of investment advice and resulted in the plan consistently following the broker’s suggestions. The Rycenga case illustrates that if it is important to avoid fiduciary status, care should be taken to avoid providing individualized services to a plan, particularly where a relationship of trust and reliance has been formed with plan representatives.

Mutual Funds and Other Investment Providers – Programs Providing Fiduciary

Assistance. Having applied the definition of an investment advice fiduciary to RIAs and brokers, the question then arises as to whether it can also apply to a mutual fund company. Initially, the answer is that a statutory exemption relieves the mutual fund and its investment adviser from

12 DOL Regulation Section 2510.3-21(c)(1). 13 DOL Regulation Section 2509.96-1(c), ERISA Advisory Opinion 2005-23A. 14 DOL Regulation Section 2510.3-21(d) provides a safe harbor under which a broker does not become a fiduciary merely because it executes securities transactions on behalf of a plan pursuant to directions that limit its discretion.

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fiduciary status.15 The exemption could be lost if the mutual fund were to do more than accept money from the plan. Since mutual fund companies have been very reluctant to relinquish the benefits of the exemption, they have generally declined to provide help in selecting investment options or to acknowledge any kind of fiduciary responsibility. Despite initial appearances, this has not changed, even under new programs ostensibly designed to assist plan sponsors with their fiduciary duties.

FIDUCIARY RELIEF MADE AVAILABLE BY INVESTMENT PROVIDERS

Analysis of Guarantees. New programs offered by investment providers purporting to

share or relieve fiduciary responsibilities of a plan sponsor focus on guiding a plan sponsor in choosing an investment line-up for a participant-directed 401(k) plan and generally take one of two approaches. The first approach is to utilize the services of a well-known, independent investment management or consulting firm that prepares a “suggested” or “premier” list of funds culled from the investment platform maintained by the mutual fund company or other investment provider. Provided that the plan sponsor selects the plan’s investment menu from this restricted list, the investment management or consulting firm either agrees to be a co-fiduciary or otherwise acknowledges its fiduciary status with respect to the funds on the list. This is probably unnecessary, since the investment management or consulting firm has, in effect, recommended the funds on the restricted list to the plan sponsor for which it is paid by the mutual fund house or other investment provider. The investment management/consulting firm has, therefore, met the requirements for being an investment advice fiduciary under the DOL regulations.

The fine print in such arrangements should be examined closely, because, in some cases,

the inclusion of a single investment option not appearing on the approved list (or the deletion of a recommended investment option) purportedly renders the benefits of the program inapplicable. Further, even when all the requirements of the arrangement are met, the plan sponsor or other plan fiduciary may continue to bear exclusive responsibility for other fiduciary issues, including the determination as to whether the adoption of the program itself is well-suited to the plan. The program documentation may include a vaguely worded indemnification for claims arising out of a fiduciary breach, but the enforcement of such an indemnity may prove problematic. Moreover, some of the agreements provide for a cross-indemnity under which the plan sponsor could find itself indemnifying the investment management or consulting firm.

The other approach to assisting plan sponsors with their fiduciary duties also involves

providing a model list of investment options that includes investment vehicles from a broad range of investment categories. If the plan sponsor selects an investment line-up with representative investment vehicles from each of the recommended categories, the investment provider will guarantee that the plan sponsor’s choice meets certain (but not all) aspects of

15 ERISA §3(21)(B) states: “If any money or other property of an employee benefit plan is invested in securities issued by an investment company registered under the Investment Company Act of 1940 [i.e., a mutual fund], such investment shall not by itself cause such investment company or such investment company’s investment adviser or principal underwriter to be deemed to be a fiduciary …” Italics added.

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ERISA’s prudence requirement. The appropriate balance of risk and potential return, the exclusive benefit rule, diversification and numerous other fiduciary matters are not covered. These programs may also guarantee that the plan meets the broad range of investments requirement necessary to assert the Section 404(c) defense which relieves fiduciaries of liability where loss results from a participant’s exercise of direction and control of the investment of his own account. This guarantee is very limited and does not apply to other structural conditions of the 404(c) defense or to its numerous operational requirements.

In the end, the new programs provide some assurance that if the recommendations are

followed, a plan sponsor will have constructed a well balanced menu of investment options. Further, since the investment management or consulting firm, periodically monitors the funds on the approved list and reports its findings on a website, the plan sponsor receives assistance in meeting its ongoing fiduciary responsibilities. However, the transfer or sharing of fiduciary responsibility is somewhat illusory. As has been noted, fiduciary status depends on what the investment firm does, not on what it says. In that sense, the promises of the new programs do not add to the rights that a plan already possesses with respect to an investment provider. Moreover, the documentation of the new programs could actually have the effect of limiting liability resulting from the actions of an investment firm in recommending plan investment options.

Questions to Ask with Regard to Fiduciary Relief Programs. In light of their restrictions

and the less than fully transparent nature of how they are paid for, plan sponsors and their advisers should consider asking the following questions of those offering guarantees of a fiduciary nature:

• Can you explain the standards by which your conduct will be governed when you state

that you will act as a fiduciary? • Please specify those aspects of ERISA’s prudence requirement that are not covered by

this program. • Will you reimburse the plan for investment losses incurred as a result of the imprudent

inclusion of an investment option on the recommended list? Are there any other circumstances under which you would assume liability for a fiduciary breach?

• Are there any circumstances under which you will assert the right to be indemnified by

the plan or plan sponsor? • Explain how your fees for providing services under this program are determined? • What fees do you or your affiliates receive with respect to investment products that are

included on the recommended list? • What arrangements have been made to notify the plan sponsor between quarterly

reporting periods that events have occurred warranting the removal of an investment option from a plan’s investment line-up?

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THE ROLE OF INVESTMENT MANAGERS (ERISA § 3(38)) Appointment of Investment Managers. If a plan so provides, ERISA authorizes the

plan’s named fiduciary to appoint an investment manager that will have responsibility for investment matters, including the power to acquire and dispose of plan assets.16 If an investment manager is properly appointed and duly monitored by the named fiduciary, ERISA provides that the plan trustee, the party that normally has direct responsibility for managing plan assets, will not be liable for the acts or omissions of the investment manager and will not be required to invest or otherwise manage any asset of the plan which is subject to the authority of the investment manager.17 When such a delegation has occurred, the investment manager becomes responsible for all aspects of the investment process and is required to act prudently when it decides to buy or sell securities on behalf of a plan. The investment manager is also responsible for related investment matters such as the designation of the party that will execute a transaction (i.e., picking brokers).

Unlike an investment advice fiduciary whose actions control its status as a fiduciary and determine its responsibility, an investment manager must be formally appointed. Further, the investment manager must satisfy certain substantive and procedural requirements in order to qualify as an investment manager. Thus, an investment manager must be a registered investment adviser under federal or state law, a bank as defined under the Investment Advisers Act of 1940, or an insurance company that is qualified to perform investment services under the laws of more than one state.18 Finally, the investment manager must acknowledge, in writing, that it is a fiduciary with respect to the plan in question.19

Only those persons who meet each of these requirements will qualify as an investment

manager. Where a plan retains the services of a person who fails to qualify as an investment manager, the appointing party may be held responsible for imprudent investment decisions that result in loss to the plan. This is not to say that a defectively designated investment manager will not be a plan fiduciary. However, other plan fiduciaries will not be protected from the consequences of such an investment manager’s actions.20 While the named fiduciary of a plan that has appointed the investment manager is not liable for the particular acts or omissions of the manager, such an appointing fiduciary always retains oversight responsibility and, therefore, must periodically review the investment manager's performance including, but not limited to, evaluating whether the investment manager’s fees are reasonable.

16 ERISA Section 402(c)(3). 17 ERISA Section 405(d)(1). 18 ERISA Section 3(38)(B). 19 ERISA Section 3(38)(C). 20 In Whitfield v. Cohen, 682 F. Supp. 188 (SDNY 1988), the president of a plan sponsor who served as a co-trustee as well as named fiduciary of the plan acquiesced in the appointment of an investment manager that was not registered under the Investment Advisers Act of 1940 and that also failed to provide written acknowledgement that it was a plan fiduciary. When the plan suffered investment losses, the DOL successfully sued the president for breach of fiduciary duty. The court deciding the case noted that, as a result of the failed appointment, the president was not shielded from fiduciary liability.

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Services Rendered by Investment Managers. The basic duty of an investment manager is to manage plan assets which includes providing direction as to the acquisition and disposition of investment securities. It includes the selection of appropriate investments that have a level of risk commensurate with the anticipated return, monitoring investments and investment providers, seeing to it that risk is minimized through diversification, and ensuring that a plan has sufficient liquidity to meet its cash flow requirements. These duties may cover the plan’s entire portfolio or be restricted to only a portion of the portfolio. For example, separate investment managers could be appointed for a plan’s fixed income and equity investments.

The nature of the plan will also determine the character of the services rendered by an

investment manager. Under a defined benefit plan, the investment manager’s duties may require giving consideration to the demographic profile of the plan’s participants. Liquidity and projected return on investments relative to anticipated cash flow are likely to play a larger role in a defined benefit plan than they would in the typical defined contribution plan. Defined benefit plans, in particular, may seek to establish investment policies and guidelines that, among other things, define investment return objectives, allocate plan assets among investment classes, and establish percentage limits for particular kinds of investments.

Under the typical 401(k) plan, there is less need for an investment manager since

participants direct the investment of their accounts. However, an investment manager may be called on to select the particular funds that are to be made available as investment options. An investment manager may also be hired to run one or more funds that are made available as plan investment options and that consist entirely of the assets of a single 401(k) plan. For example, an investment manager may be in charge of a plan’s in-house bond fund. As discussed below, the Pension Protection Act of 2006 QDIA rules added a new dimension to this role.

Management of QDIAs. Section 404(c) of ERISA provides an affirmative defense to

claims for investment losses under an individual account plan resulting from fiduciary breach, provided that extensive regulatory requirements are met. This defense may be asserted only where a participant has exercised control over his or her plan account.21 However, before 2006, there was no explicit protection for plan a fiduciary with respect to such investment losses where a participant did not exercise control over the investment of his account. The Pension Protection Act of 2006 amended ERISA to authorize the issuance of regulations by the DOL providing that participants who fail to make affirmative investment elections will be treated as exercising such control if certain requirements entailing the investment of the participants’ account in qualified

21 Under ERISA Section 404(c), if a plan is properly structured and a fiduciary, such as an investment manager fulfills its responsibility to choose investment options in a manner consistent with the duties of prudence and loyalty, the fiduciary will be relieved from responsibility for a participant’s exercise of authority over his or her own account. However, the Department of Labor takes the position that the act of selecting investment alternatives is a fiduciary function to which this relief does not apply. Thus, even though a participant makes the final choice as to how to invest his or her account, an investment manager or other fiduciary has a duty not only to prudently select investment options, but also to evaluate their performance to determine whether they should continue to be made available as investment options. The Department has stated that this duty includes ensuring that the fees charged to the plan by those investments are reasonable. See Preamble to DOL Regulation Section 2550.404c-1 at 57 Fed. Reg. 46922 (Oct. 13, 1992) and Amended Brief of the Secretary of Labor, Elaine L. Chao, As Amicus Curiae in Support of Plaintiffs-Appellants in Hecker v. Deere & Company.

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default investment alternatives (“QDIAs”) are met.22 The scope of this relief is the same as that provided by Section 404(c).

While QDIA relief primarily affects plans that provide for automatic enrollment, it also

applies to a plan’s default investment provisions that become operative when an investment election is determined by the plan administrator to be ineffective. This may happen if a participant has failed to complete an investment election form, the form is illegible or the participant does not provide the information necessary for an effective election.23

Apart from certain grandfathered and short-term investment alternatives, QDIAs made

available by a plan must generally consist of one of three types of investment products or investment allocation services. The three basic QDIA forms are: (i) age-based funds or models (e.g., lifecycle or target date mutual funds), (ii) balanced or risk-based funds or models (e.g., a lifestyle fund), and (iii) managed accounts under which allocation of assets consisting of investment alternatives already available under the plan is based on an employee’s age, target retirement date or life expectancy.

In addition, the DOL regulations provide that if a QDIA is not a mutual fund, it must be

managed by certain specified parties. There are three forms of management that are acceptable. The first of these requires the services of an investment manager meeting the requirements discussed above. Thus, the potential role of an investment manager has been expanded and the manager may be called on to manage a QDIA that, in essence, is an in-house fund. However, this category limits fund management to investment advisers registered under the 1940 Act or under state law, banks as defined in that Act and insurance companies. A broker would ordinarily be excluded from acting as an investment manager in these circumstances. Nevertheless, as explained below, brokers and other advisers that do not qualify as investment managers have a potential role in advising employers that are willing to retain fiduciary responsibility with regard to the management of a QDIA.

An investment management service or product may also be managed by a plan trustee

that would otherwise meet the requirements for being an investment manager. This opens the way for banks and insurance companies that acknowledge their fiduciary status to manage a QDIA without the need to be specifically appointed as an investment manager by a plan’s named fiduciary. However, they are at somewhat of a competitive disadvantage compared to a mutual fund which is not required to make such an acknowledgment.

Lastly, a plan sponsor that is a named fiduciary identified by the plan may manage a

QDIA. One would expect that most plan sponsors willing to assume this responsibility would arrange to receive advice from an investment adviser or broker. DOL regulations do not contain any rules regarding such an adviser and there do not appear to be any qualifications for this role as there are in the case of an investment manager. However, since the advice rendered would, of

22 ERISA Section 404(c)(5). 23 Other examples of situations where default investments may be appropriate include the failure of a participant to provide investment direction following the elimination of an investment option or a change in a service provider, and the failure of a participant to provide investment instruction following a rollover. See preamble to final regulations on default investment alternatives at 72 Fed. Reg. 60453 (2007).

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necessity, be geared to the needs of the plan, the adviser would be an investment advice fiduciary for purposes of ERISA. The adviser, as well as the plan sponsor, would be subject to all of ERISA’s fiduciary duties in managing the QDIA. According to the DOL, such a “fiduciary must engage in an objective, thorough, and analytical process that involves consideration of the quality of competing providers and investment products, as appropriate.”24 QUESTIONS TO ASK WITH REGARD TO QDIA SUITABILITY

An adviser charged with determining the suitability of a QDIA for a particular plan should consider asking the provider or manager to respond to certain questions. The topics covered should include the following matters: Cost. Ask for the estimated annual cost of the QDIA for a plan similar in size to the plan which proposes to make the QDIA available to its participants. Ask whether any indirect expenses will be charged against investment results. Availability of Transfers. In order to comply with operational requirements for QDIAs which condition fiduciary relief on transferability of the investment, ask what process is in place to elect another investment option in place of the QDIA. Also, can the QDIA be transferred as frequently as other plan investments and are there any restrictions or fees to transfer out of the QDIA? Notice to Employees. Ask for a sample of the notice that will be used to inform employees of the QDIA as well as information about the process for delivering such notices. Make sure that the notice can be understood by the ordinary employee and that it explains the circumstances in which the QDIA will be used. Characteristics of the QDIA. What is the generally accepted investment theory used by the QDIA and is it diversified so as to minimize the risk of large losses? Also ask for a recent listing of the QDIAs portfolio and an explanation of its investment objectives and risk vs. return characteristics. Type of Management. Does the QDIA manager qualify as a registered investment company (i.e., a mutual fund) or an ERISA Section 3(38) manager? CONCLUSION We have posed the question whether investment providers that are involved in selecting plan investment line-ups or offering default investment in the form of QDIAs have assumed fiduciary responsibility in any meaningful way. We believe that progress is being made and that services are being made available to plan sponsors that help them to meet their fiduciary duties. However, promises to share fiduciary responsibility are more apparent than real, and in that regard there is a long way to go.

24 Preamble to the final QDIA regulations at 72 Fed. Reg. 60453 (2007).

ACH 18767

- 1 - Copyright © 2011 Certified Financial Planner Board of Standards, Inc. All rights reserved.

CERTIFIED FINANCIAL PLANNER BOARD OF STANDARDS, INC.

ANONYMOUS CASE HISTORIES

NUMBER 18767

This is a summary of a Settlement Agreement entered into at the February 2011 hearings of the

Disciplinary and Ethics Commission (“Commission”) of Certified Financial Planner Board of

Standards, Inc. (“CFP Board”). The conduct at issue in this case occurred prior to January 1,

2009. The Rules in effect at that time under the Code of Ethics and Professional Responsibility

(“Code of Ethics”) were Rules 101 through 705.

I. Issues Presented

Whether a CFP®

professional (“Respondent”) violated CFP Board’s Standards of Professional

Conduct when he violated: 1) sections of the State Securities Act by selling unregistered

securities; 2) the 2004 State Securities Board (“SSB”) Undertaking and 2005 SSB Order

regarding supervision; 3) the 2004 SSB Undertaking and sections of the State Securities Act by

failing to fully complete forms before obtaining client signatures; 4) sections of the State

Securities Act by failing to disclose required information on his Form U4 and making material

misrepresentations to the State Commissioner; 5) the 2004 SSB Undertaking and 2005 SSB

Order by engaging in unsuitable transactions; and 6) National Association of Securities Dealers

(“NASD,” now known as the Financial Industry Regulatory Authority or “FINRA”) Conduct

Rules by accepting a gift and/or gratuity in excess of $100 and charging clients both investment

advisory fees and prohibited commissions.

II. Findings of Fact

On his April 17, 2006 Renewal Application, Respondent disclosed his involvement in an NASD

arbitration filed by Client 1 (“2005 Client 1 Arbitration”).

2005 State Securities Board Suspension

According to the 2005 SSB Order, in September 2004, Respondent applied for registration in the

state as an investment adviser representative of Firm A. In October 2004, Respondent applied

for registration in the State as an agent of Firm B.

The SSB found that:

1) Respondent violated sections of the State Securities Act by selling unregistered securities

when he, individually or through other registered representatives under his direction and

control through Firm C, sold limited partnership units of Fund I and units of Fund II

between 2002 and 2004, while registered as an agent of Firm D; and

2) Respondent violated SSB Rules and made material misrepresentations to the State

Securities Commissioner (“State Commissioner”) when he initially failed to disclose his

other business engagements on his Form U4. Respondent did not disclose his

ACH 18767


involvement with Firm C until July 2003. Respondent did not disclose his involvement

in Fund I and Fund II until October 2004. Respondent did not disclose his prior

engagement in Firm E, Firm F, and Firm G until October 2004.

The SSB: 1) granted Respondent’s registrations as an agent and investment adviser

representative of Firm A but suspended the registrations for 15 days; 2) reprimanded

Respondent; 3) placed Respondent on probation for two years as an agent and investment adviser

representative pursuant to a 2004 Undertaking (“2004 SSB Undertaking”); 4) fined Respondent

$50,000; and 5) ordered that Respondent comply with the terms of the SSB Undertaking.

Respondent consented to the entry of the 2005 SSB Order in December 2004.

Pursuant to the 2004 SSB Undertaking, Respondent, Firm A, Firm B and a Firm A registered

representative agreed, among other provisions, that:

1) Respondent would not engage in any unauthorized or unsuitable transaction in the

account of any Firm A or Firm B customer;

2) Respondent would not recommend the sale of a product on which a client had already

paid a commission or penalty, in order to purchase another product for which Respondent

would receive a commission, without a signed acknowledgement from the client

regarding commissions and fees;

3) Respondent would not act in any supervisory capacity in the state and would be directly

supervised by the Firm A registered representative, with none of the Firm A registered

representative’s supervisory activity to be under Respondent’s control, influence or

direction;

4) Any temporary delegation of supervisory duties over Respondent would be in writing, for

a specified period of time, and would not be granted to Respondent;

5) Respondent would not exercise discretionary authority over any Firm A or Firm D

customer’s account for two years after his registrations were granted; and

6) All forms or documents signed by a client would be fully completed prior to obtaining

the client’s signature.

2010 SSB Suspension

In April 2010, the SSB issued a disciplinary order (“2010 SSB Order”) in which it found that:

1) Respondent and Firm B violated the 2004 SSB Undertaking and 2005 SSB Order by

failing to have Respondent directly supervised by a Firm A registered representative and

put in writing delegation of the Firm A registered representative’s supervisory duties.

The SSB found that Respondent determined the Firm A registered representative’s salary,

suspended the Firm A registered representative from activities between February 2006

and March 2006, and requested the Firm A registered representative resign in May 2006;

2) Respondent violated the 2004 SSB Undertaking and sections of the State Securities Act

by failing to have all forms and documents completed prior to obtaining a client’s

signature. The SSB found that between December 2004 and December 2006, blank

forms and documents, including new account forms, were sent to Respondent’s

customers with a request that the customers sign and return the forms for completion by

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Respondent’s employees. Other forms filled out in meetings with Respondent were not

completed in full prior to client signature;

3) Respondent violated sections of the State Securities Act by failing to comply with Firm

A’s written supervisory procedures;

4) Respondent violated sections of the State Securities Act by failing to disclose required

information on his Form U4; and

5) Respondent violated the 2004 SSB Undertaking and 2005 SSB Order by engaging in

unsuitable transactions.

The SSB also found that Respondent and Firm A engaged in inequitable practices when they: 1)

assessed commissions prohibited in an investment’s prospectus; and 2) assessed excessive

investment advisory fees and failed to fully disclose such fees.

The SSB reprimanded Respondent, Firm A and Firm B, and: 1) suspended Respondent’s

registrations as an agent for Firm B and investment adviser representative for Firm A for nine

months; and 2) ordered Respondent to pay an administrative fine of $25,000.

Respondent consented to the entry of the 2010 SSB Order in March 2010. Pursuant to the

Undertaking contained in the 2010 SSB Order, Respondent agreed to refund commissions

totaling approximately $413,000 to investors who were charged both a commission and an

investment advisory fee. Firm A agreed to refund an additional amount of approximately

$21,900 to the investors and to guarantee payment of the remaining commissions in the event of

a default by Respondent.

2010 FINRA Suspension

In August 2010, Respondent disclosed to CFP Board his entry into a Letter of Acceptance,

Waiver and Consent (“AWC”) with FINRA that resulted in a suspension.

In July 2010, Registered Representative B, Firm B and Respondent entered into the AWC, in

which they consented to violations of NASD Rules 2110, 2310(a) and 3060. According to the

AWC, Respondent and his associate accepted a gift and/or gratuity in excess of $100 from the

president and general partner of an entity that offered an alternative investment product.

Respondent sold nearly $6,000,000 of the product to clients at a branch office of Firm B.

According to the AWC, Respondent charged customers commissions of approximately $435,000

and an annual percentage-based advisory fee on transactions in alternative investment products

although the products’ offering documents specifically prohibited such conduct. Respondent

also made unsuitable recommendations to customers without a reasonable basis for believing that

they were suitable. Pursuant to the AWC, Respondent was fined $25,000, ordered to pay

restitution of approximately $413,000 plus interest and suspended in all capacities for nine

months, from August 2010 through May 2011.

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III. Rule Violations

A. 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.

Respondent engaged in conduct involving dishonesty, fraud, deceit and misrepresentation, or

knowingly made false or misleading statements when he: 1) failed to disclose other business

engagements as required on his Form U4, which the SSB determined amounted to material

misrepresentations to the State Commissioner; and 2) charged clients both investment advisory

fees and prohibited commissions. Thus, Respondent violated Rule 102.

B. Rule 201 – A CFP Board designee shall exercise reasonable and prudent professional

judgment in providing professional services.

Respondent failed to exercise reasonable and prudent professional judgment in providing

professional services when he: 1) sold unregistered securities; 2) made material

misrepresentations to the State Commissioner by failing to disclose other business engagements

as required on his Form U4; 3) violated the 2004 SSB Undertaking and 2005 SSB Order

regarding supervision; 4) failed to fully complete forms before obtaining client signatures; 5)

engaged in unsuitable transactions; and 6) accepted a gift and/or gratuity in excess of $100 and

charged clients both investment advisory fees and prohibited commissions. Thus, Respondent

violated Rule 201.

C. Rule 202 – A financial planning practitioner shall act in the interest of the client.

Respondent failed to act in the interest of his clients when he: 1) sold unregistered securities to

clients; 2) failed to fully complete forms before obtaining client signatures; 3) engaged in

unsuitable transactions; and 4) charged clients both investment advisory fees and commissions

on the sale of products whose offering documents specifically prohibited such conduct. Thus,

Respondent violated Rule 202.

D. Rule 405 – A CFP Board designee’s compensation shall be fair and reasonable.

Respondent received compensation that was not fair and reasonable when he charged clients

both excessive investment advisory fees and commissions on the sale of products whose offering

documents specifically prohibited such conduct. Thus, Respondent violated Rule 405.

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E. Rule 406 – A CFP Board designee who is an employee shall perform professional

services with dedication to the lawful objectives of the employer and/or in accordance

with the Code of Ethics.

Respondent failed to perform professional services with dedication to the lawful objectives of his

employer when he violated: 1) sections of the State Securities Act by selling unregistered

securities; 2) the 2004 SSB Undertaking and 2005 SSB Order regarding supervision; 3) the 2004

SSB Undertaking and sections of the State Securities Act by failing to fully complete forms

before obtaining client signatures; 4) the 2004 SSB Undertaking and 2005 SSB Order by

engaging in unsuitable transactions; and 5) NASD Conduct Rules by accepting a gift and/or

gratuity in excess of $100 and charging clients both investment advisory fees and prohibited

commissions. Thus, Respondent violated Rule 406.

F. 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.

Respondent failed to perform services in accordance with applicable laws, rules and regulations

of governmental agencies and other applicable authorities when he violated: 1) sections of the

State Securities Act by selling unregistered securities; 2) the 2004 SSB Undertaking and 2005

SSB Order by violating provisions related to supervision and engaging in unsuitable transactions;

3) the 2004 SSB Undertaking and sections of the State Securities Act by failing to fully complete

forms before obtaining client signatures; 4) sections of the State Securities Act by failing to

disclose required information on his U4; and 5) NASD Conduct Rules by accepting a gift and/or

gratuity in excess of $100 and charging clients both investment advisory fees and prohibited

commissions. Thus, Respondent violated Rule 606(a).

G. Rule 606(b) – In all professional activities a CFP Board designee shall perform services

in accordance with applicable rules, regulations and other established policies of CFP

Board.

Respondent failed to perform services in accordance with applicable rules, regulations and other

established policies of CFP Board when he violated Rules 102, 201, 202, 405, 406, 606(a), 607

and 701 of the Code of Ethics. Thus, Respondent violated Rule 606(b).

H. 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.

Respondent engaged in conduct that reflects adversely on his integrity and fitness as a CFP

Board designee, upon the marks and upon the profession when he violated: 1) sections of the

State Securities Act by selling unregistered securities; 2) the 2004 SSB Undertaking and 2005

SSB Order regarding supervision; 3) the 2004 SSB Undertaking and sections of the State

Securities Act by failing to fully complete forms before obtaining client signatures; 4) sections of

the State Securities Act by failing to disclose required information on his Form U4 and by

ACH 18767


making material misrepresentations to the State Commissioner; 5) the 2004 SSB Undertaking

and 2005 SSB Order by engaging in unsuitable transactions; and 6) NASD Conduct Rules by

accepting a gift and/or gratuity in excess of $100 and charging clients both investment advisory

fees and prohibited commissions. Thus, Respondent violated Rule 607.

I. Rule 701 – A CFP Board designee shall provide services diligently.

Respondent failed to provide services diligently when he sold unregistered securities, engaged in

unsuitable transactions, failed to disclose required information on his Form U4 and failed to fully

complete forms before obtaining client signatures on the forms. Thus, Respondent violated Rule

701.

IV. Discipline Imposed

Article 3(a) of CFP Board’s Disciplinary Rules and Procedures (“Disciplinary Rules”) provides

grounds for discipline for any act or omission that violates the Code of Ethics. The Commission

found grounds for discipline under Article 3(a) because Respondent violated Rules 102, 201,

202, 405, 406, 606(a), 606(b), 607 and 701 of the Code of Ethics. The Commission and

Respondent entered into a Settlement Agreement in which Respondent consented to the Findings

of Fact and Rule Violations. Based on the terms of the Settlement Agreement, the Commission

issued to Respondent a Suspension for three years of Respondent’s right to use the CFP®

marks,

pursuant to Article 4.3 of the Disciplinary Rules.

The Commission considered no mitigating factors.

The Commission considered the following aggravating factors:

1. CFP Board cautioned Respondent prior to the conduct at issue; and

2. The multiple SSB actions taken against Respondent.


ANONYMOUS CASE HISTORIES NUMBER 26612

This is a summary of a Settlement Agreement entered into at the June 2014 hearings of the Disciplinary and Ethics Commission (“Commission”) of Certified Financial Planner Board of Standards, Inc. (“CFP Board”). The conduct at issue in this case occurred before and after January 1, 2009. The Rules in effect for conduct occurring before January 1, 2009 were Rules 101 through 705 of CFP Board’s Code of Ethics and Professional Responsibility (“Code of Ethics”). The Rules in effect for conduct occurring after January 1, 2009 were Rules 1.1 through 6.5 of CFP Board’s Rules of Conduct.

I. Issue Presented Whether a CFP® professional (“Respondent”) violated CFP Board’s Standards of Professional Conduct when he made a series of misrepresentations to financial planning clients related to a loan used to purchase bank stock on behalf of the clients.

II. Findings of Fact On his May 2011 Renewal Application, Respondent disclosed to CFP Board that he was a defendant in a Federal Deposit Insurance Corporation (“FDIC”) civil action (“2010 FDIC Civil Suit”), filed in the United States District Court (“U.S. District Court”), concerning a failed bank in State 1. Respondent also disclosed his involvement in a related civil suit (“2010 Client Civil Suit”) filed by husband and wife AT and NT, Respondent’s former clients, in State 1 Superior Court. In June 2011, CFP Board mailed a Notice of Investigation (“NOI”) to Respondent requesting documents related to the 2010 FDIC Civil Suit and the 2010 Client Civil Suit. Respondent submitted documents in response to CFP Board’s NOI in July 2011. CFP Board discovered that Respondent was also a defendant in two other civil suits related to the 2010 FDIC Civil Suit: the 2009 FC Bank Civil Suit and a 2009 Client Civil Suit filed in State 1. In December 2011, Respondent became involved in another civil action when he filed a voluntary petition for Chapter 7 Bankruptcy in the U.S. Bankruptcy Court, District of State 2 (“Bankruptcy Court”). In his July 2011 response to CFP Board’s NOI, Respondent requested a stay of the investigation until the civil actions were resolved. Respondent stated that he was asserting his Fifth Amendment privilege against self-incrimination under advice of counsel. In August 2011, CFP Board sent a request for additional information (“RFAI”) to Respondent and he responded to the RFAI on the same day. When asked by CFP Board to identify the source of the criminal investigation on which he based his assertion of his Fifth Amendment privilege, Respondent stated that he had no knowledge of any criminal authority investigating him or his actions. In response to the question of why he asserted his Fifth Amendment privilege in the absence of a criminal investigation, Respondent stated that the answer to the question was a matter of privilege, which he could not discuss because any communication with CFP Board was discoverable with regard to the civil litigation. In July 2013, JH, Esq. of Law Firm forwarded a copy of a July 2013 Bankruptcy Court Order. The July 2013 Order was based on the Clients’ amended complaint in Bankruptcy Court seeking a determination that Respondent’s debt to them was non-dischargeable pursuant to 11 U.S.C. Section 523(a)(2)(A), (a)(4) and (a)(6). In August 2013, CFP Board sent an email to JH requesting a telephone call to discuss the information contained in the Order. LC, Esq., contacted CFP Board via telephone in response to its August 2013 email to JH. LC is the managing partner of the Law Firm. In August 2013, CFP Board sent a RFAI to LC regarding additional documents mentioned in the July 2013 Order. In his August 2013 response to the RFAI, LC stated that he could not provide CFP Board with any

ACH 26612


information that is not a matter of public record on the docket. However, LC stated that most of the information we requested was part of the public record. LC stated that his firm had already provided CFP Board with a copy of an Order from a Federal Court conclusively determining all of the issues. CFP Board was able to download some of the requested documents from the Public Access to Court Electronic Records (“PACER”). Respondent appealed the July 2013 Order to the U.S. District Court for the District of State 2, and that appeal was pending at the time of the hearing. In October 2013, CFP Board sent an RFAI to Respondent requesting copies of documents referenced in the July 2013 Order. After requesting and receiving an extension of time to respond, Respondent stated that CFP Board should be aware that the U.S. Bankruptcy Court had provided previously inaccessible information in the Court's computer records that indisputably confirmed material perjury by counsel for the FDIC in the underlying case. Respondent provided copies of some of the documents CFP Board requested, but stated that he could not provide copies of the transcript documents because they would cost thousands of dollars to transcribe. In his response, Respondent requested a stay in CFP Board’s investigation pending a final resolution in the underlying case. CFP Board informed Respondent that its responsibility was to refer matters to the Disciplinary and Ethics Commission (“Commission”) after a finding of probable cause for discipline. In light of the uncertainty of the length of time it will take to resolve Respondent’s litigation, CFP Board determined that it was not feasible to hold the case in abeyance pending final resolution. CFP Board, however, informed Respondent that pursuant to Article 9 of the Disciplinary Rules, after he receives CFP Board’s Complaint, he may file a motion for a stay directly with the Commission. In February 2014, Respondent sent an emailed request for a continuance of his hearing until June 2014 to CFP Board. Respondent stated that he was unable to attend his February 2014 Commission Hearing because he had a U.S. Department of Homeland Security meeting on the same date at 7:45a.m. In February 2014, CFP Board agreed to grant Respondent a continuance to the June 2014 Commission Hearings provided he returned a signed copy of the letter acknowledging that there would be no more continuances granted. In the letter, CFP Board informed Respondent that if he failed to appear at the June 2014 Hearing for any reason, the Commission would conduct a paper review of the matter with no appearances by Respondent or CFP Board. In February 2014, Respondent returned a signed copy of the letter agreeing to the terms of the continuance.

Respondent’s Relationship with the Clients

The Clients met Respondent in 2001 when he served as a groomsman in their daughter’s wedding. Respondent was best friends with the Clients’ son-in-law, DF. DF informed the Clients that Respondent was a financial planner and recommended him as a trustworthy individual who could assist them in managing their finances and planning for retirement. The Clients subsequently developed a close personal relationship with Respondent and utilized his services in connection with various financial issues including drafting wills, paying monthly bills, creating a non-profit foundation and general retirement and investment planning advice. During his February 2012 Interim Suspension Hearing before the Commission, Respondent testified that the Clients were financial planning clients.

G Bank Stock Deal

In May 2008, Respondent informed the Clients that he had an opportunity to purchase a large block of G Bank stock and was offering the opportunity to his clients. During a May 2008 meeting, Respondent informed the Clients that he had an exclusive opportunity to obtain a limited number of G Bank shares due to his close relationship with GT, Chairman, President and CEO of G Bank. G Bank was a small closely-held bank in State 1.

ACH 26612


Respondent informed the Clients that the G Bank stock had just been made available for purchase by a wealthy stockholder. Respondent stated that, in his opinion, the stock would double or triple in value. Respondent recommended that the Clients invest $1 million in G Bank, which represented 20% of their net worth at the time. According to the Clients, Respondent informed them that the investment was safe and would provide them with a substantial profit, but failed to disclose to them any risks associated with the stock purchase. In Respondent’s May 2008 emailed summary to Mr. Client, Respondent stated that the distressed sale of the large block of G Bank stock, valued at $11.2 million, was totally unrelated to the performance of the bank. Respondent also stated that two G Bank board members had already committed to purchase portions of the block of stock in excess of $2 million dollars each. As the Clients were considering the G Bank stock purchase, they received several emails from Respondent assuring them that it was a wise investment and that such deals were rare. Respondent stated that, in his opinion, there was no better investment opportunity available at the time. Initially, Respondent informed the Clients that the stock would be purchased in their names. However, Respondent later informed them that because of the exclusive access given to him and the limited timeframe within which the stock had to be purchased, Respondent would set up a corporation, I Capital, a single-purpose company, to serve as the purchaser of the stock in one large block purchase. Respondent informed the Clients that he had several investors that were interested in the G Bank stock purchase opportunity and that, in order to make sure he could purchase the stock before his exclusive access terminated, he was going to obtain a loan from G Bank to purchase a very large block of the stock. Respondent would then distribute shares to the investors upon their providing him with the respective amounts for their individual stock purchases. In order to facilitate the purchase of the stock, I Capital obtained a $5,027,022 loan from G Bank. Mrs. Client stated that, since she and her husband were providing Respondent with $950,000 in cash to purchase their share of the G Bank stock, they understood that they would play no part in the loan arrangement between Respondent, or I Capital and G Bank. Respondent specifically informed the Clients that once the group purchase of the large block of stock was completed, he would provide them with $950,000 worth of G Bank stock. The Clients trusted Respondent as their financial planner and family friend, and did not question the transactional details or the implications of the stock being purchased in I Capital’s name instead of theirs. Although Respondent had informed the Clients that I Capital would obtain the $5,027,022 loan to facilitate the purchase of the G Bank block of shares, I Capital was not the ultimate purchaser of the shares. Instead, Respondent created AGBC, another single-purpose company, for the purpose of purchasing the stock from G Bank. Respondent informed the Clients that in order to close the stock deal, they would need to sign certain documents. Respondent stated that these documents would allow him to use monies from their investment accounts to purchase the G Bank stock and to authorize him to purchase the G Bank stock on their behalf. The loan was evidenced by a promissory note dated May 2008, payable by I Capital to G Bank in August 2008 (“May Note”). The May Note was secured by personal continuing guaranties purportedly executed by Respondent, the Clients and TF. According to Respondent’s June 11th email to the Clients in which he enclosed documents for the Clients to read regarding AGBC, Respondent informed the Clients that he had to close the purchase in the Clients’ absence on May 30th, using a G Bank loan, but that they would be billed for their proportionate share. Respondent’s June 11th email appears to be evidence that the Clients could not have signed the May Note guaranties because they were still considering the purchase in June 2008. The Clients’ purchase payments for the G Bank stock were made with wire transfer authorizations and checks, beginning in June 2008 and ending in September 2008.

ACH 26612


Mrs. Client testified she understood that AGBC 2008 was a temporary holding entity for depositing funds from all the investors so the loan, which was temporary, could be paid off. After the loan was paid off, each investor was to receive their proportionate share of G Bank stock. Mrs. Client stated that her understanding was based on Respondent’s May 2008 email. She believed she and her husband were buying G Bank stock and would consequently receive G Bank stock certificates in their names. Mr. Client testified that the money they gave Respondent was for the purchase of the G Bank stock.

I Capital Default re G Bank Loan

In July 2009, G Bank sent each of the Clients notices in the mail regarding an approximate $14,000 of interest due on the G Bank loan. Mrs. Client contacted Respondent via email because she did not believe that they had executed a loan with G Bank. Respondent responded that the Clients should not have received the notices and they should not be concerned because he would take care of it. During the bankruptcy adversary hearing, Respondent testified that the mistake he was referring to was that AGBC had not made payment on the loan, not that the Clients should not have received the notices about the missed payment. However, in Respondent’s response to Mr. Client’s August 2009 email, Respondent stated that the bank had agreed to split up the loan and remove investors from the loan, and Respondent was prepared to be the one ultimately responsible for the loan. In his testimony during the bankruptcy hearing, Respondent testified that, aside from approximately $1,000 that he put into the transaction, the Clients were the only people who invested money in the G Bank transaction. I Capital did not pay the May Note by the due date and executed another promissory note in August 2008 (“August Note”) agreeing to pay G Bank $5,032,049. The August Note was secured by personal continuing guaranties purportedly executed by Respondent, the Clients and TF. The August Note was due in September 2009. I Capital failed to pay all principal and interest owed under the August Note at maturity and FC Bank made a demand for the full amount owed. TF testified in a deposition that he either did not sign or unknowingly signed the commercial guaranty. In September 2009, Mr. Client emailed Respondent after receiving another bill from G Bank as guarantors of the $5 million loan, and stated that they could survive the loss of their $950,000 investment, but would be bankrupt if they were responsible for the $5 million loan. Mr. Client requested copies of the loan guaranties that they had purportedly signed and asked Respondent about his promise that he would restructure the loan so that the Clients were no longer guarantors. Respondent responded that he was working with the bank to substitute AGBC and ATSF as guarantors of the loan. Respondent also stated that the loan payments were current and the refinance would be completed by the end of September with AGBC and ATSF as guarantors. In a September 2009 email, Respondent apologized to the Clients for the situation and informed them of his efforts to have them released as guarantors on the loan.

G Bank Failure and FC Bank Acquisition In September 2009, G Bank was closed by the State 1 Department of Banking and Finance, and the FDIC was named Receiver. On the same date, the FDIC and FC Bank entered into a Purchase and Assumption Agreement whereby FC Bank acquired certain assets and liabilities of G Bank, including the August Note. FC Bank also acquired the guaranties executed by Respondent, the Clients and others.

2009 FC Bank Civil Suit

In October 2009, FC Bank, as successor to G Bank, filed a civil suit against Respondent, the Clients and other defendants in the State 1 Superior Court to recover the amount owed to G Bank under the promissory note. In

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November 2009, the Clients filed their answer to the 2009 FC Bank Civil Suit in which they admitted to executing the loan guaranties. In July 2010, the Clients amended their answer to the 2009 FC Bank Civil Suit to deny executing the guaranties. In July 2010, the Clients filed a Statement of Material Facts in the 2009 FC Bank Civil Suit. According to the Clients’ Statement of Material Facts, during Respondent’s deposition, when asked about the theft of the Clients’ funds that were to be used to fund the G Bank stock purchase, Respondent asserted his Fifth Amendment privilege against self-incrimination. In June 2010, FC Bank conveyed its interest in the promissory note and the guaranties to the FDIC and, in August 2010, the Superior Court judge issued an order substituting the FDIC as the plaintiff in place of FC Bank. In August 2010, the FDIC, as assignee of FC Bank, removed the case from the State 1 Superior Court to the U.S. District Court. In September 2010, the U.S. District Court judge issued an order granting the FDIC’s motion to stay the 2009 FC Bank Civil Suit in the State 1 Superior Court. The action in the U.S. District Court became the 2010 FDIC Civil Suit. In November 2011, the Clients were dismissed without prejudice from the FDIC action.

2009 Client Civil Suit In October 2009, the Clients retained LC as their legal counsel and began investigating Respondent and considering legal action. In October 2009, Respondent sent emails to the Clients expressing concerns about LC’s investigation and describing Respondent’s efforts to resolve the loan situation. In October 2009, the Clients filed suit against Respondent and others in State 1 (“2009 Client Civil Suit”). In October 2009, Respondent sent an email to the Clients entitled, “The Latest from LC – Stop it or I Quit.” Respondent, concerned about LC’s discovery efforts, threatened the Clients that if they did not withdraw the 2009 suit, he would stop all his efforts to have them removed as guarantors on the G Bank loan. Respondent stated that he would help the bank to go after the Clients because LC was destroying any ability he had to raise money by requesting all bank information for which Respondent has signatory authority. In November 2009, the Clients voluntarily dismissed the 2009 Client Civil Suit without prejudice. Mrs. Client testified that they dismissed the 2009 Client Civil Suit because she felt overwhelmed and because Respondent wanted the lawsuit out of the equation before he would continue his efforts to resolve the situation through other means.

2010 Client Civil Suit In April 2010, after Respondent failed to keep his promise to the Clients to have them removed as guarantors on the G Bank loan, the Clients filed the 2010 Client Civil Suit against Respondent and other corporate and individual defendants. The Clients alleged that their signatures on the guaranties were forged. In an affidavit in support of his request to withdraw his admission, Mr. Client stated that, at the time he made the admissions, he mistakenly assumed that he had executed the guaranties based on the multiple documents he signed at Respondent’s request and based on Respondent’s representations to him. Mr. Client stated that he had not examined the signatures prior to making the admissions because he trusted Respondent and never doubted Respondent’s affirmations that he had executed the guaranties. Mr. Client also stated that he was unaware that there were two sets of guaranties allegedly executed on two different dates. Respondent was out of the country when the second guaranty was signed. The Clients stated that they did not know what a commercial guaranty was, never discussed any guaranties with Respondent and did not recall signing any guaranty in connection with the I Capital loan from G Bank. The Clients’ expert witness testified during a deposition that Mr. Client’s signatures on the guaranties are “simulations” and Mrs. Client’s signatures are forgeries.

Respondent’s 2011 Bankruptcy Filing

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Copyright © 2014 Certified Financial Planner Board of Standards, Inc. All rights reserved.

After the Clients filed the 2010 civil suit against Respondent, he subsequently moved to State 2 where he filed a Chapter 7 Bankruptcy petition in December 2011. Respondent’s bankruptcy filing stayed the 2010 Client Civil Suit. Respondent stated that, after the Clients began alleging that he forged documents, he essentially quit working and closed his businesses because they were illiquid. In October 2012, Respondent filed a civil suit against the Clients and LC in the United States District Court in State 2 and alleged $25 million in damages for defamation, slander and libel.

Bankruptcy Court Order Denying Dischargeability of Respondent’s Debt to the Clients As mentioned above, Respondent filed for Chapter 7 Bankruptcy in State 2 in December 2011. The Bankruptcy Court discharged Respondent’s bankruptcy in October 2012, but the discharge did not apply to debts the Bankruptcy Court determined were excepted from discharge. The U.S. Bankruptcy Code states that debts obtained by false pretenses, false representations or actual fraud, other than a statement respecting the debtor’s financial condition, are not dischargeable. The Bankruptcy Court found that the debt Respondent owes to the Clients is non-dischargeable under section 523(a)(2)(A) based both on a false representation and a false pretense. With regard to the false representation, the Bankruptcy Court cited Respondent’s June 11th email in which he stated:

We had to go ahead and close the purchase on May 30th (using a loan from the bank in order to close it fast as you know), so we will end up having to “bill” folks a small/proportional share of their interest calculated from 5/30 to the time they deposit their purchase price into the account so we can pay down the loan. We are also asking people to sign (with us) for their portion of the note as a sign of good faith.

The Bankruptcy Court stated that Respondent knew the statement he made was false. Respondent testified that he appeared on behalf of the Clients when obtaining the loan from G Bank and provided the Clients’ financial information to obtain the loan. Respondent did this although the Clients never gave him express authorization to obtain the loan. Respondent also testified that it was his idea to obtain the loan to purchase the G Bank stock and he was the only person who approached G Bank about the loan. Therefore, Respondent knew that he and the Clients were signing guaranties for the whole $5 million loan as part of the May 2008 note. However, he stated in the June 11th email that the Clients were signing only for their portion of the note as a sign of good faith. According to the Bankruptcy Court, Respondent also made additional misrepresentations regarding billing the Clients for a proportional share of their interest when the evidence clearly showed that Respondent used approximately $250,000 of the $950,000 provided by the Clients to pay interest on the entire $5 million loan, not just the Clients’ portion of the loan. Furthermore, the remaining $700,000 was commingled in Respondent’s personal accounts and used for his business or personal expenses. The Bankruptcy Court determined that Respondent knowingly made false statements in his June 11th email about the Clients’ liability on the loan and his intended use the Clients’ money. The Bankruptcy Court determined that Respondent defrauded the Clients: 1) by using their funds for his personal expenses, his businesses and interest on the entire $5 million loan; 2) by misrepresenting their potential liability on the loan, which he structured less than two weeks before the June 11th email; and 3) because out of the four people who purportedly guaranteed the May 2008 note, the Clients were the only ones with assets sufficient to pay a $5 million loan. After Respondent informed the Clients of the $5 million loan, the Clients believed their

ACH 26612


liability on the loan was restricted to their $1 million investment. Respondent structured the $5 million loan to have the Clients serve as guarantors for the full amount. Although Respondent was one of the biggest beneficiaries of the G Bank shares and loan, his investment was limited to $1,000. With regard to false pretense, the Bankruptcy Court stated that a false representation is an express misrepresentation, while a false pretense refers to an implied misrepresentation or conduct intended to create and foster a false impression. According to the Bankruptcy Court, Respondent was required to act in a fiduciary capacity to the Clients during the events in question because: 1) Respondent prepared a will for the Clients while he was employed at his previous firm, S Advisors; 2) the A Companies had access to the Clients’ financial accounts and could pay bills from those accounts with the Clients’ authorization; 3) A Companies also had access to the Clients’ IRA accounts and could withdraw fees for A Companies’ services from those accounts with the Clients’ authorization; 4) the Clients repeatedly testified they trusted Respondent’s recommendation to invest in the G Bank, including trusting statements that Respondent made in his May 2008 email; and 5) Respondent testified that he appeared on the Clients’ behalf when obtaining the loan from G Bank and provided the Clients’ financial information without the Clients’ express authorization to use a loan to purchase the stock. The Bankruptcy Court found that: 1) Respondent created a false impression with intent to deceive for the same reasons discussed in connection with the false representations Respondent made in the June 11th email, and based on the inconsistency between the June 11th email and Respondent’s testimony that the guaranties were taken to the Clients for their signatures; and 2) the Clients were justified in believing Respondent would disclose important details of the transaction to them, including that they would be guarantors of a $5 million loan. The Bankruptcy Court further found that the debt owed to the Clients is non-dischargeable under section 523(a)(4) based on embezzlement. The Clients entrusted $950,000 to Defendant with the understanding that it would go towards paying down the loan used to purchase the Clients’ share of the G Bank stock. Respondent used the Clients’ funds to pay interest on the entire $5 million loan, for his businesses and for personal expenses. Additionally, the circumstances under which the Clients agreed to participate in the G Bank stock purchase and transfer $950,000 to AGBC 2008 indicated fraud. Therefore, each element of embezzlement is met, and the debt is excepted from discharge under section 523(a)(4). The Bankruptcy Court determined that Respondent owed the Clients a debt that is non-dischargeable under 11 U.S.C. §§ 523(a)(2)(A), (a)(4), and (a)(6).

CFP Board’s Interim Suspension Hearing and Order In December 2011, pursuant to Article 5 of its Disciplinary Rules, CFP Board staff counsel directed Respondent to show cause why his right to use the CFP® marks should not be placed on Interim Suspension pending the completion of CFP Board’s investigation. Respondent acknowledged receipt of the Order to Show Cause in January 2012 by filing a response as required under Article 5.3 of the Disciplinary Rules. In February 2012, the Commission conducted a Show Cause Hearing. During Respondent’s testimony before the Commission at the Order to Show Cause hearing, panel members asked Respondent whether he signed the Clients’ names on any of the G Bank loan documents and Respondent asserted his Fifth Amendment privilege against self-incrimination. When asked whether anyone in his employ signed the Clients’ names to any of the documents, Respondent asserted his Fifth Amendment privilege against self-incrimination. When asked what happened to the Clients’ $950,000 investment, Respondent asserted his Fifth Amendment privilege against self-incrimination and stated that he could not answer beyond what was in the record. Respondent had previously asserted his Fifth Amendment privilege against self-incrimination during his December 2011 deposition in the FDIC Action.

ACH 26612


After considering the evidence presented during the show cause hearing, the hearing panel determined that Respondent failed to meet his burden of proof to demonstrate that he does not pose an immediate threat to the public and that the gravity of the nature of his conduct does not impinge upon the stature and reputation of the CFP® marks. The Commission based its determination on Respondent’s assertion of his Fifth Amendment privilege against self-incrimination when responding to direct questions from the hearing panel concerning the allegations in the Order to Show Cause. Therefore, pursuant to Article 5.6 of the Disciplinary Rules, the Commission ordered an Interim Suspension because it found that Respondent posed an immediate threat to the public and the gravity of the nature of Respondent’s conduct impinged upon the stature and reputation of the CFP® marks. Respondent’s right to use the marks was suspended pending the outcome of CFP Board’s investigation. Pursuant to Article 13.4 of the Disciplinary Rules, the fact of Respondent’s interim suspension was published in a press release.

III. Rule Violations A. 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.

The Commission found that Respondent engaged in conduct involving dishonesty, fraud, deceit and misrepresentation, and knowingly made false and misleading statements to his clients when he: 1) told the Clients that they were purchasing G Bank stock and failed to tell them about their $5 million liability on a commercial guaranty; and 2) told the Clients their $950,000 was being used to purchase G Bank stock when Respondent used it to pay interest on the loan and for business and personal expenses. Thus, Respondent violated Code of Ethics Rule 102.

B. 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.

The Commission found that Respondent commingled the Clients’ funds with his personal and business funds when he: 1) used approximately $250,000 of the $950,000 provided by the Clients to pay interest on the entire $5 million loan, not just the Clients’ portion of the loan; and 2) placed the remaining $700,000 in his personal and business accounts, and used it for his personal and personal expenses. Thus, Respondent violated Code of Ethics Rule 103(d).

C. Rule 202 – A financial planning practitioner shall act in the interest of the client. The Commission found that Respondent failed to act in the interest of the Clients when he: 1) told the Clients that they were purchasing G Bank stock and failed to tell them about their $5 million liability on a commercial guaranty; and 2) told the Clients their $950,000 was being used to purchase G Bank stock when Respondent used it to pay interest on the loan and for business and personal expenses. Thus, Respondent violated Code of Ethics Rule 202.

D. Rule 401(a) – In rendering professional services, a CFP Board designee shall disclose to the client 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.

ACH 26612


The Commission found that Respondent failed to disclose to the clients material information relevant to the professional relationship when he: 1) told the Clients that they were purchasing G Bank stock and failed to tell them about their $5 million liability on a commercial guaranty; and 2) told the Clients their $950,000 was being used to purchase G Bank stock when Respondent used it to pay interest on the loan and for business and personal expenses. Thus, Respondent violated Code of Ethics Rule 401(a).

E. Rule 501 – A CFP Board designee shall not reveal, or use for his or her own benefit, without the client’s consent, any personally identifiable information relating to the client relationship or the affairs of the client.

The Commission found that Respondent revealed or used for his own benefit, without the clients consent, the clients’ personally identifiable information when he provided the Clients’ financial information to G Bank without the Clients’ express authorization to use a loan to purchase the stock. Thus, Respondent violated Code of Ethics Rule 501.

F. Rule 606(b) – A CFP Board designee shall perform services in accordance with applicable rules, regulations and other established policies of CFP Board.

The Commission found that Respondent failed to perform services in accordance with applicable rules, regulations and other established policies of CFP Board when he violated Rules 102, 103(d), 202, 401(a), 501 and 607. Thus, Respondent violated Code of Ethics Rule 606(b).

G. 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.

The Commission found that Respondent engaged in conduct that reflects adversely on his integrity and fitness as a CFP Board designee, upon the CFP® marks and upon the profession when he: 1) told the Clients that they were purchasing G Bank stock and failed to tell them about their $5 million liability on a commercial guaranty; and 2) told the Clients their $950,000 was being used to purchase G Bank stock when Respondent used it to pay interest on the loan and for business and personal expenses. Thus, Respondent violated Code of Ethics Rule 607.

H. 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.

The Commission found that Respondent failed to place the interest of the clients ahead of his own and act as a fiduciary when he: 1) informed the Clients that the loan payments were current, when they were not; and 2) filed Chapter 7 Bankruptcy after promising to have the Clients released as guarantors on the $5 million loan. Thus, Respondent violated Rules of Conduct Rule 1.4.

I. 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 Commission found that Respondent engaged in conduct that reflects adversely on his integrity and fitness as a CFP® professional, upon the CFP® marks and upon the profession when he: 1) informed the Clients that he was working with G Bank to substitute AGBC and ATSF as guarantors of the loan, when he was not; 2) informed the Clients that the loan payments were current, when they were not; and 3) filed Chapter 7 Bankruptcy after promising to have the Clients released as guarantors on the $5 million loan. Thus, Respondent violated Rules of Conduct Rule 6.5.

ACH 26612


J. Practice Standard 400-3 – 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. The Commission found that Respondent failed to 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 clients’ goals, needs and priorities, and failed to communicate factors critical to the clients’ understanding of the recommendations when he failed to inform the Clients that: 1) the guaranties they purportedly signed were for the entire $5 million loan, yet he stated in his June 11th email that the Clients were only signing for their portion of the note; 2) the $5 million loan benefited himself and others, but Clients were guarantors for the full amount of the loan; and 3) out of the four people who purportedly guaranteed the May 2008 note, the Clients were the only ones with assets sufficient to pay a $5 million loan. Thus, Respondent violated Practice Standard 400-3.

K. Practice Standard 500-2 – The financial planning practitioner shall select appropriate products and services that are consistent with the client’s goals, needs and priorities.

The Commission found that Respondent failed to select appropriate products and services that were consistent with the Clients’ retirement needs when he: 1) recommended that the clients invest in G Bank stock that failed to reasonably address the clients’ needs and 2) failed to investigate the viability of the bank itself, which went into receivership shortly after the Clients purchased the stock. Thus, Respondent violated Practice Standard 500-2.


The Commission found grounds for discipline under Articles 3(a) and 3(b) of CFP Board’s Disciplinary Rules and Procedures (“Disciplinary Rules”). Article 3(a) of CFP Board’s Disciplinary Rules provides grounds for discipline for any act or omission that violates the Code of Ethics and/or Rules of Conduct. The Commission found grounds for discipline under Article 3(a) because Respondent violated Code of Ethics Rules 102, 103(d), 202, 401(a), 501, 606(b) and 607, and Rules 1.4 and 6.5 of the Rules of Conduct. Article 3(b) establishes grounds for discipline for any act or omission that fails to comply with the Practice Standards. The Commission found grounds for discipline under Article 3(b) because Respondent violated Practice Standards 400-3 and 500-2. CFP Board and Respondent entered into a Settlement Agreement in which Respondent consented to the Findings of Fact and Rule Violations. Based on the terms of the Settlement Agreement, the Commission issued to Respondent a Permanent Revocation of Respondent’s CFP® Certification, pursuant to Article 4.4 of the Disciplinary Rules. The Commission noted the record clearly established that Respondent was in a financial planning relationship with his client, yet failed to act with the level of care of a fiduciary. Respondent also admitted, under oath, that he borrowed money from a client. Based on the evidence contained in the record, Respondent did not act in the best interest of his clients, did not hold to the fiduciary duty required in a financial planning relationship, acted with a conflict of interest, and did not disclose to clients the ramifications of their actions in signing loan agreements. The Commission identified as an aggravating factor that Respondent borrowed money from a client, commingled client funds with his personal funds, failed to disclose conflicts of interest and other material information to the client, violated the securities laws, and breached his fiduciary duty to his clients. These constitute multiple violations of CFP Board’s Standards of Professional Conduct. The Commission did not identify any mitigating factors. The Commission consulted Anonymous Case Histories 21725 and 21787.

ACH 26612


ACH 27406

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ANONYMOUS CASE HISTORIES

NUMBER 27406

This is a summary of a decision issued following the June 2013 hearings of the Disciplinary and Ethics

Commission (“Commission”) of Certified Financial Planner Board of Standards, Inc. (“CFP Board”).

The conduct at issue in this case occurred after January 1, 2009. The Rules in effect at that time under the

Rules of Conduct were Rules 1.1 through 6.5.

I. Issues Presented

Whether a CFP® professional (“Respondent”) violated CFP Board’s Standards of Professional Conduct

when he: 1) relied on a non-guaranteed 12% gross rate of return in a Variable Universal Life (“VUL”)

Insurance policy illustration to determine how long the product would remain in force; 2) recommended

that his client purchase a VUL with a limited no lapse period when the client’s goal was life insurance

paid up for life; and 3) told a client that a VUL would almost triple her money.

II. Findings of Fact Relevant to the Commission’s Decision

On October 15, 2009, Respondent met with LE, a 77-year-old widow who had questions regarding an

existing approximately $27,000 insurance policy. According to Respondent’s meeting notes, LE wanted

a life insurance policy that would last until she turned 100, if possible. An account statement from

October 2009, indicated that Respondent managed approximately $200,000 of LE’s assets. The assets

were in IRA’s and trusts and allocated in equities including Putnam Emerging Equities, American Funds

(“AF”) New Perspective Fund, and AF New World Fund. At the bottom of the statement, Respondent

indicated that LE had assets at other companies. Respondent did not indicate the value or investment type

of LE’s other assets.

Respondent recommended that LE purchase a VUL policy from WRL. In November 2009, LE completed

a VUL New Account Application. LE indicated that she had both a net worth excluding her primary

residence and investable/liquid assets between approximately $100,001 and $500,000. LE’s stated

objectives were capital appreciation and speculation with a moderate risk tolerance and a long-term time

horizon. The application also indicated that 100% of LE’s assets were in mutual funds. In November

2009, LE also completed a WRL Individual Life Insurance Application. LE indicated that she had an

approximately $450,000 net worth and a $40,000 annual gross income. The application indicated that LE

was going to fund the new policy through a 1035 exchange of the approximately $27,000 in her existing

insurance policy and the addition of $9,000.

In March 2010, WRL issued the VUL policy to LE with an approximately $28,000 initial premium and a

planned additional premium of $9,000. In March 2010, LE sent a check to WRL to add approximately

$5,000 to the VUL.

Respondent presented LE with an illustration of the VUL dated March 2010. The illustration used a

hypothetical gross rate of return of 12.00% and indicated that an initial premium of approximately

$33,000 and a premium of $3,500 in year two would fund that policy through LE’s 100th birthday. The

illustration also stated that, at a 0.00% gross rate of return and guaranteed charges, the policy would lapse

in year seven. The VUL annual statement indicated that the no lapse date was March 2015, five years

after LE purchased the policy.

ACH 27406

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In May 2011, LE filed a complaint with WRL. In the letter she stated that she received a premium notice

for $9,000 while she believed she had an insurance policy paid up for her lifetime. LE stated that

Respondent misled her into believing that she would not have to pay future premiums for lifetime

coverage.

In May 2011, Respondent sent a letter to LE in response to her complaint. Respondent attached a copy of

the illustration he previously provided to her. Respondent told LE that the premium notice could be

ignored and that to retain the policy Respondent and LE would have to take immediate action to

counteract her complaint letter. In support of the policy, Respondent stated: “There isn’t anything that

you could invest this amount of money in and almost triple the value.”

In June 2011, WRL sent a letter to LE in which it denied LE’s request to cancel the policy and refund her

initial premiums. In an August 2011 letter to the State Insurance Division, Respondent stated that the

WRL VUL looked like it would last LE until age 100.

In September 2011, the State Insurance Division sent a letter to WRL regarding LE’s complaint. The

State Insurance Division stated that while LE requested a “single pay policy,” Respondent recommended

a VUL, which is never “paid up.” The State Insurance Division concluded that Respondent did not

provide “information that would allow the client to understand the product being offered.” Additionally,

the State Insurance Division found that Respondent’s statement that LE could triple her money was not

factual, misleading, and a misrepresentation as supported by the Code of State. The State Insurance

Division questioned the suitability of selling a 78-year-old client a variable product. Finally, the State

Insurance Division stated its belief that WRL should void the VUL and refund LE’s premiums.

In September 2011, WRL sent a letter to LE and the State Insurance Division informing them of WRL’s

decision to cancel the VUL and refund LE’s premium in the amount of approximately $33,000.

In November 2011, Respondent sent a letter to his broker-dealer explaining the complaint. Respondent

stated: “The illustration indicated that she could probably put approximately $36,000 of premium into this

policy and end up with an ultimate Death Value of $100,000. This is just about triple the amount of

premium she would have submitted to this policy. It is shown clearly in the illustration.”

In October 2012, Respondent wrote an unaddressed letter where he stated that LE’s objective was to

provide the greatest benefit to her beneficiaries at her death.

In his January 2013 response to CFP Board, Respondent stated that LE’s objective was to put a single

premium in a policy that would be in existence until she died. Respondent stated that he relied on the

illustrations for guidance that the premium and 1035 exchange money would support the VUL without

additional premiums.

Financial Planning

In determining whether a CFP® professional is providing financial planning or material elements of

financial planning, factors that may be considered include, but are not limited to: the client’s

understanding and intent in engaging the CFP® professional, the degree to which multiple financial

planning subject areas are involved, the comprehensiveness of the data gathering, and the depth and

breadth of the recommendations.

Respondent stated in his January 2013 letter to CFP Board that LE was a client of his for over 30 years.

Respondent advised LE on her investment in mutual funds, health plans, and life insurance. Based on

ACH 27406

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LE’s age, the length of the relationship, and breadth of the relationship; LE had a reasonable belief that

Respondent was providing her with comprehensive financial planning services.

Respondent involved investment planning by managing LE’s IRA and trust accounts. Respondent

involved retirement planning by considering LE’s retirement income needs. Respondent involved estate

planning by discussing with, and ultimately selling, LE a VUL for its death benefit. According to

meeting notes, Respondent also helped LE with Medicare Part D. Therefore, Respondent involved

multiple financial planning subject areas in his relationship with the client.

Respondent had LE complete multiple applications and had data gathering from 30 years of working with

LE. Therefore, Respondent engaged in comprehensive data gathering.

Respondent’s recommendations and management covered approximately half of the client’s net worth.

Respondent’s recommendation of the VUL was designed to last the duration of the client’s life.

Therefore, Respondent’s recommendations spanned the breadth and depth of the client’s financial life.

Based on these four factors, the client had a reasonable belief that Respondent was providing her with

financial planning services.

III. Commission’s Analysis and Conclusions Regarding Rule Violations

A. Rule 1.4 Violation – A certificant shall at all times place the interest of the client ahead of his or

her own and 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.

The Commission determined that Respondent failed to place LE’s interest ahead of his own and failed to

act with the duty of care of a fiduciary when he: 1) relied on a 12.00% gross rate of return in a VUL

illustration to determine how long the product would remain in force; 2) recommended that LE purchase a

VUL with a limited no lapse period when LE’s goal was life insurance paid up for life; and 3) told LE

that a VUL would almost triple her money.

LE was in, and had a good faith belief that she was in, a financial planning relationship. Respondent had

completed financial plans for LE in the past, maintained a 30-year relationship with LE and managed a

significant portion of her assets. The Commission did not find Respondent’s statement that he was

simply engaged in the sale of an insurance product to have any merit or support in the record. The

Commission relied on the insurance illustration demonstrating the hypothetical 12% return and the

findings of the State Insurance Division to support its finding that Respondent failed to act in the best

interest of LE. Thus, Respondent violated Rule 1.4 of the Rules of Conduct.

B. Rule 2.1 Violation – 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.

The Commission determined that Respondent communicated false and misleading information to LE

when he told her that her investment could almost triple in value. The State Insurance Division

considered Respondent’s statement not factual, misleading, and a misrepresentation as supported the

Code of State.

ACH 27406

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The Commission determined that the 12% rate of return in the illustration was not realistic, which was

supported by the State Insurance Division findings. Given LE’s advanced age, Respondent should have

illustrated a more conservative return and considered a smaller face value or a smaller whole life policy.

Finally, Respondent’s statement that LE would triple her money was unrealistic given the unrealistic rate

of return that she would have had to earn to do so. Thus, Respondent violated Rule 2.1 of the Rules of

Conduct.

C. Rule 4.3 Violation – A certificant shall comply with applicable regulatory requirements

governing professional services provided to the client.

The Commission determined that Respondent failed to comply with applicable regulatory requirements

governing professional services provided to the client when he made a statement to LE that was not

factual, misleading, and a misrepresentation as supported by the Code of State. The Commission

determined that the findings by State Insurance Division were credible and supported by the record.

Thus, Respondent violated Rule 4.3 of the Rules of Conduct.

D. Rule 4.4 Violation – A certificant shall exercise reasonable and prudent professional judgment in

providing professional services to clients.

The Commission determined that Respondent failed to exercise reasonable and prudent professional

judgment when he: 1) relied on a 12% gross rate of return in a VUL illustration to determine how long the

product would remain in force; 2) recommended that LE purchase a VUL with a limited no lapse period

when LE’s goal was life insurance paid up for life; and 3) told LE that a VUL would almost triple her

money.






Conduct.

E. Rule 4.5 Violation – A certificant shall make and/or implement only recommendations that are

suitable for the client.

The Commission determined that Respondent failed to make and implement only suitable

recommendations when he sold LE a VUL with a limited no lapse period when the client’s goal was life

insurance paid up for life.




Respondent’s statement that LE would triple her money was unrealistic given the unrealistic rate of return

that she would have had to earn to do so. Additionally, given LE’s advanced age, the complexity of the

VUL and the risk involved if the VUL failed to perform, Respondent should have ensured that LE had an

understanding over and above providing an illustration. Respondent should have known whether LE

could afford additional premiums, if necessary. Thus, Respondent violated Rule 4.5 of the Rules of

Conduct.

F. Rule 6.5 Violation – 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

ACH 27406

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The Commission determined that Respondent engaged in conduct that reflects adversely on his integrity

and fitness as a CFP® professional, upon the CFP

® marks and the profession when he: 1) relied on a 12%

gross rate of return in a VUL illustration to determine how long the product would remain in force; 2)

recommended that his client purchase a VUL with a limited no lapse period when the client’s goal was

life insurance paid up for life; and 3) told a client that a VUL would almost triple her money.






Conduct.

G. Practice Standard 300-1 Violation – The 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.

The Commission determined that Respondent failed to use client-specified, mutually-agreed-upon, and/or

other reasonable assumptions to analyze and evaluate LE’s situation and goals. Respondent used an

unreasonable assumption when he relied on a VUL illustration that had a 12% gross rate of return.




simply engaged in the sale of an insurance product to have any merit or support in the record. The 12%

rate of return in the illustration was not realistic, which was supported by the State Insurance Division

findings. Given LE’s advanced age, Respondent should have illustrated a more conservative return and

considered a smaller face value or a smaller whole life policy. Finally, Respondent’s statement that LE

would triple her money was unrealistic given the unrealistic rate of return that she would have had to earn

to do so. Thus, Respondent violated Practice Standard 300-1.

H. Practice Standard 400-2 Violation – 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.

The Commission determined that LE’s goal was to purchase an insurance policy that would be effective

until she turned 100 years old without premiums other than what she planned to pay in the first two years.

Respondent failed to develop a recommendation that was reasonably designed to meet LE’s goal when he

recommended that LE purchase a VUL with a 5-year no lapse period.




simply engaged in the sale of an insurance product to have any merit or support in the record.

Respondent failed to present any documentation to support the alleged rationale for purchasing the VUL

rather than maintaining the current policy. In addition, Respondent had no rationale to support that LE

had a cash flow that would allow her to support any future policy premiums while maintain her current

lifestyle if the VUL failed to increase at 12% per year. Thus, Respondent violated Practice Standard

400-2.

ACH 27406

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I. Practice Standard 400-3 Violation – 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.

The Commission determined that Respondent failed to communicate his recommendation to LE to an

extent reasonably necessary to assist her in making an informed decision when he failed to communicate

that the VUL was not guaranteed for LE’s lifetime and may require additional premiums to remain in

force.









to do so. The record clearly reflected that LE did not understand the policy and her planning needs were

not met by Respondent’s recommendations. Thus, Respondent violated Practice Standard 400-3.

J. Practice Standard 500-2 Violation – The financial planning practitioner shall select appropriate

products and services that are consistent with the client’s goals, needs and priorities.

The Commission determined that LE’s goal was to purchase an insurance policy that would be effective

until she turned 100 years old without premiums other than what she planned to pay in the first two years.

Respondent failed to select an appropriate product when he recommended that LE purchase a VUL with a

5-year no lapse period.









to do so. Thus, Respondent violated Practice Standard 500-2.


The Commission found grounds for discipline under Articles 3(a) and 3(b) of CFP Board’s Disciplinary

Rules and Procedures (“Disciplinary Rules”). Article 3(a) of the Disciplinary Rules provides grounds for

discipline for any act or omission that violates the Rules of Conduct. The Commission found grounds for

discipline under Article 3(a) because Respondent violated Rules 1.4, 2.1, 4.3, 4.4, 4.5, and 6.5 of the

Rules of Conduct. Article 3(b) of the Disciplinary Rules provides for grounds for discipline for any act or

omission that violates the Practice Standards. The Commission found grounds for discipline under

Article 3(b) because Respondent violated Practice Standards 300-1, 400-2, 400-3, and 500-2. Pursuant to

Article 4.3 of the Disciplinary Rules, the Commission issued a four-year suspension.

The Commission cited as a mitigating factor that Respondent did not have any prior disciplinary history.

ACH 27406

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The Commission cited as an aggravating factor that:

1. Respondent had substantial experience as a CFP® professional, which meant that he should have

known that the VUL was not suitable for LE;

2. The client was of advanced age;

3. Respondent misrepresented the State Insurance Division findings by stating that the only thing he

did wrong was represent to LE that she would have a $100,000 death benefit by paying 1/3 of that

in a premium. The State Insurance Division order clearly reflected that there were substantial

issues relating to suitability and misrepresentation; and

4. Respondent did not appear to understand the VUL policy, including the fact that the 12% rate of

return was unrealistic and may have forced LE to pay additional premiums. Given Respondent’s

lack of understanding, the Commission was concerned that he will repeat this type of practice of

causing financial harm to clients due to his unsuitable product recommendations

While considering the degree of sanction to impose, the Commission consulted Anonymous Case

Histories 15094, 23352 and 25389. The Commission also consulted Sanction Guidelines 5 (Breach of

Fiduciary Duty), 20(d) (Misrepresentation to Clients or Prospective Clients) and 31 (Suitability). While

each of these categories of conduct when considered individually resulted in sanction less than a four-year

suspension, the Commission determined the aggravating factors listed above warranted a more severe

sanction.


ANONYMOUS CASE HISTORIES NUMBER 29235

This is a summary of a Settlement Agreement entered into at the February 2015 hearings of the Disciplinary and Ethics Commission (“DEC”) of Certified Financial Planner Board of Standards, Inc. (“CFP Board”). The conduct at issue in this case occurred after January 1, 2009. Rules 1.1 through 6.5 of the Rules of Conduct were in effect.

I. Issue Presented Whether a CFP® professional (“Respondent”) violated CFP Board’s Standards of Professional Conduct when he disclosed his compensation structure as “fee-only” on CFP Board’s “Find a CFP® Professional” search function, while registered as a registered representative and while receiving commissions from insurance sales.

II. Findings of Fact

CFP Board’s Fee-Only Definition and Guidance to CFP® Professionals On August 7, 2013, CFP Board mailed every CFP® professional a physical copy of the Notice to CFP® Professionals: Importance of Accurate Compensation Disclosures (“Notice”). The Notice informed CFP® professionals of the following:

The Rules of Conduct require CFP® professionals to disclose to clients and prospective clients certain information concerning the CFP® Professional’s compensation. In the terminology section set forth on page 4 of the Standards of Professional Conduct, CFP Board defines “compensation” as “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.” Therefore, in addition to informing a client or prospective client of the compensation that the CFP® professional receives or is entitled to receive for providing professional activities, a CFP® professional is required to disclose the compensation that a related party, such as the CFP® professional's employer, receives or is entitled to receive for providing professional activities. This includes:

• Compensation that the CFP® professional receives or is entitled to receive from a client or prospective client for providing professional activities;

• Compensation that related parties, such as the CFP® professional’s employer, receives

or is entitled to receive from a client, prospective client, or other source for providing professional activities; and

• Compensation the CFP® professional receives or is entitled to receive from related

parties, such as the CFP® professional’s employer or other sources, for providing professional activities.

Note that as set forth in the “compensation” definition, compensation includes “any non-trivial economic benefit, whether monetary or non-monetary.” As a general rule, CFP Board considers as non-trivial any consideration received in exchange for providing professional activities.

ACH 29235 - 1 -


Additionally, on August 7, 2013, CFP Board presented an online webinar entitled “How to Avoid Misleading Compensation Disclosures.” The webinar was available for all CFP® professionals to view live. CFP Board then posted both the Notice and the webinar on CFP Board’s Web site, www.cfp.net, for public access. CFP Board allows CFP® professionals to create a profile that is searchable by the public through CFP Board’s “Find a CFP® Professional” search tool. On September 19, 2013, CFP Board removed the term “fee-only” from the profiles of every CFP® professional who listed “fee-only” as their compensation method on the “Find a CFP® Professional” search tool. On September 20, 2013, CFP Board sent an email to the CFP® professionals who were affected by the “fee-only” removal. The email stated:

ACTION REQUIRED: Because you have identified your compensation as “fee-only” in our “Find” search tool, we are asking you to carefully review CFP Board’s compensation disclosure rules and definitions and to update your search profile with the description that accurately reflects your compensation. CFP Board recently mailed to you and other CFP® professionals a notice on the importance of accurate compensation disclosures. As set forth in that notice, “fee only” is strictly defined in CFP Board’s Standards of Professional Conduct as follows: 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. 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.

The September 20, 2013 email provided a link to the Notice and informed each CFP® professional that any subsequent misrepresentation would be referred to CFP Board’s enforcement process.

Respondent’s Use of Fee Only on the “Find a CFP® Professional” Search Tool

Respondent represented his compensation method on CFP Board’s “Find a CFP® Professional” search tool as “fee only” in 2013 until CFP Board removed it in September 2013. The following day, in September 2013, Respondent edited his public profile and re-selected “fee only” as his compensation method. During the relevant time Respondent represented his compensation method as “fee-only,” Respondent was a registered representative of Broker-Dealer and received and/or was entitled to receive insurance commissions as a licensed insurance agent with three active appointments with insurance companies in State. In August 2014, after he received CFP Board’s Notice of Investigation, Respondent removed “fee only” from his profile on the “Find a CFP® Professional” search tool and changed it to “commission and fee”.

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http://www.cfp.net/

http://www.magnetmail1.net/link.cfm?r=384428183&sid=26964451&m=2964766&u=CFPBOARD&j=15145416&s=http://www.cfp.net/docs/for-cfp-pros---professional-standards-enforcement/cfpboard_notice-compensation_disclosure_2013-08-07.pdf?sfvrsn=2

http://www.magnetmail1.net/link.cfm?r=384428183&sid=26964451&m=2964766&u=CFPBOARD&j=15145416&s=http://www.cfp.net/docs/for-cfp-pros---professional-standards-enforcement/cfpboard_notice-compensation_disclosure_2013-08-07.pdf?sfvrsn=2

The record indicated that Respondent claimed he was unaware of how compensation was to be identified. Respondent claimed he believed insurance sales did “not fall under the rubric of financial-advisory services.”

III. Discipline Imposed The Commission found grounds for discipline under Article 3(a) of CFP Board’s Disciplinary Rules and Procedures (“Disciplinary Rules”). Article 3(a) of CFP Board’s Disciplinary Rules provides grounds for discipline for any act or omission that violates the Rules of Conduct. The Commission found grounds for discipline under Article 3(a) because Respondent violated Rules 2.1, 2.2(a) and 6.5 of the Rules of Conduct. The Commission and Respondent entered into a Settlement Agreement in which Respondent consented to the findings of fact and grounds for discipline. Based on the terms of the Settlement Agreement, the Commission issued to Respondent a Public Letter of Admonition, pursuant to Article 4.2 of the Disciplinary Rules. The Commission considered as mitigating factors that:

1. Respondent appeared to be very contrite and indicated that he appreciated the opportunity to correct the error in his compensation method once he gained an understanding of CFP Board’s definition of “Fee-only”; and

2. No clients suffered harm as a result of Respondent’s conduct. The Commission considered in aggravation that:

1. Respondent selected “fee-only” on his profile on CFP Board’s website even after receiving multiple communications regarding CFP Board’s definition of “fee-only”; and

2. CFP Board discovered the error regarding Respondent’s compensation disclosure.

In arriving at its decision, the Commission consulted Anonymous Case Histories (“ACH”) 28295, 29042, 29231 and 29019. The Commission remarked that the facts of 28295 and 29231 were very similar to this matter in that the respondents received fees for financial advisory work and commissions for insurance sales. The Commission also consulted Sanction Guideline 20(d) (Misrepresentation to Clients and Prospective Clients).

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CERTIFIED FINANCIAL PLANNER

BOARD OF STANDARDS, INC.

C O D E O F E T H I C S A N D P R O F E S S I O N A L R E S P O N S I B I L I T Y

Rev. 07/03

Terminology in this Booklet

“ C l i e n t ” denotes a person, persons, or entity who engages a practitioner and for whom professional services are ren-dered. For purposes of this definition, a practitioner is engaged when an individual, based upon the relevant factsand circumstances, reasonably relies upon information or service provided by that practitioner. Where the servicesof the practitioner are provided to an entity (corporation, trust, partnership, estate, etc.), the client is the entity act-ing through its legally authorized representative.

“CFP Board designee” denotes current certificants, candidates for certification, and individuals that have any entitle-ment, direct or indirect, to the CFP certification marks.

“ C o m m i s s i o n ” denotes the compensation received by an agent or broker when the same is calculated as a percent-age on the amount of his or her sales or purchase transactions.

“ C o m p e n s a t i o n ” is any economic benefit a CFP Board designee or related party receives from performing his or herprofessional activities.

“Conflict(s) of intere s t ” exists when a CFP Board designee’s financial, business, property and/or personal interests, rela-tionships or circumstances reasonably may impair his/her ability to offer objective advice, recommendations or services.

“ F e e - o n l y ” denotes a method of compensation in which compensation is received solely from a client with neither thepersonal financial planning practitioner nor any related party receiving compensation which is contingent upon the pur-chase or sale of any financial product. A “related party” for this purpose shall mean an individual or entity from whomany direct or indirect economic benefit is derived by the personal financial planning practitioner as a result of implement-ing a recommendation made by the personal financial planning practitioner.

A “financial planning engagement” exists when a client, based on the relevant facts and circumstances, reasonablyrelies upon information or services provided by a CFP Board designee using the financial planning process.

“Personal financial planning” or “financial planning” denotes the process of determining whether and how an indi-vidual can meet life goals through the proper management of financial resources.

"Personal financial planning pro c e s s " or "financial planning process" denotes the process which typically includes,but is not limited to, these six elements: establishing and defining the client-planner relationship, gathering clientdata including goals, analyzing and evaluating the client's financial status, developing and presenting financial plan-ning recommendations and/or alternatives, implementing the financial planning recommendations and monitoringthe financial planning recommendations.

“Personal financial planning subject are a s ” or “financial planning subject are a s ” denotes the basic subject fields cov-ered in the financial planning process which typically include, but are not limited to, financial statement preparationand 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, retire-ment planning and estate p l a n n i n g .

“Personal financial planning pro f e s s i o n a l ” or “financial planning pro f e s s i o n a l ” denotes a person who is capable andqualified to offer objective, integrated and comprehensive financial advice to or for the benefit of individuals to helpthem achieve their financial objectives. A financial planning professional must have the ability to provide financialplanning services to clients, using the financial planning process covering the basic financial planning subjects.

“Personal financial planning practitioner” or “financial planning practitioner” denotes a person who is capable andqualified to offer objective, integrated and comprehensive financial advice to or for the benefit of clients to helpthem achieve their financial objectives and who engages in financial planning using the financial planning process inworking with clients.

T E R M I N O L O G Y2

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Code of Ethics and Professional Responsibility

Preamble and Applicability .................................................................................................................. 5Composition and Scope ........................................................................................................................ 5Compliance ............................................................................................................................................. 5Part I – PRINCIPLES

Principle 1 – Integrity .............................................................................................................. 6Principle 2 – Objectivity .......................................................................................................... 6Principle 3 – Competence ....................................................................................................... 6Principle 4 – Fairness ............................................................................................................... 6Principle 5 – Confidentiality ................................................................................................... 7Principle 6 – Professionalism .................................................................................................. 7Principle 7 – Diligence............................................................................................................. 7

Part II – RULES Rules that Relate to the Principle of Integrity..................................................................... 8Rule 101.................................................................................................................................... 8Rule 102.................................................................................................................................... 8Rule 103.................................................................................................................................... 8Rules that Relate to the Principle of Objectivity................................................................. 9Rule 201.................................................................................................................................... 9Rule 202.................................................................................................................................... 9Rules that Relate to the Principle of Competence .............................................................. 9Rule 301.................................................................................................................................... 9Rule 302.................................................................................................................................... 9Rules that Relate to the Principle of Fairness...................................................................... 9Rule 401.................................................................................................................................... 9Rule 402....................................................................................................................................10Rule 403....................................................................................................................................10Rule 404....................................................................................................................................10Rule 405....................................................................................................................................11Rule 406....................................................................................................................................11Rule 407....................................................................................................................................11Rule 408....................................................................................................................................11Rule 409....................................................................................................................................11Rules that Relate to the Principle of Confidentiality..........................................................11Rule 501....................................................................................................................................11Rule 502....................................................................................................................................11Rule 503....................................................................................................................................12Rules that Relate to the Principle of Professionalism.........................................................12Rule 601....................................................................................................................................12Rule 602....................................................................................................................................12Rule 603....................................................................................................................................12Rule 604....................................................................................................................................12Rule 605....................................................................................................................................12Rule 606....................................................................................................................................13Rule 607....................................................................................................................................13Rule 608....................................................................................................................................13Rule 609....................................................................................................................................13

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Rule 610....................................................................................................................................13Rule 611....................................................................................................................................13Rule 612....................................................................................................................................13Rules that Relate to the Principle of Diligence ...................................................................14Rule 701....................................................................................................................................14Rule 702....................................................................................................................................14Rule 703....................................................................................................................................14Rule 704....................................................................................................................................14Rule 705....................................................................................................................................14

Advisory Opinion 2000-1 .....................................................................................................................15Advisory Opinion 2003-1 .....................................................................................................................18Sample Disclosure Forms ......................................................................................................................21

Form FPE...................................................................................................................................22Form FPE (Sample Filled-In Form)..........................................................................................25Form OPS..................................................................................................................................28Form OPS (Sample Filled-In Form) .........................................................................................30

Copyright © 1986-2003, Certified Financial Planner Board of Standards Inc. All rights reserved.

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PREAMBLE AND APPLICABILITY

The Code of Ethics and Professional Responsibility (Code of Ethics) has been adopted by Certified FinancialPlanner Board of Standards Inc. (CFP Board) to provide principles and rules to all persons whom it has recog-nized and certified to use the CFP®, CERTIFIED FINANCIAL PLANNER™ and certification marks (collectively “themarks”). CFP Board determines who is certified and thus authorized to use the marks. Implicit in the accept-ance of this authorization is an obligation not only to comply with the mandates and requirements of allapplicable laws and regulations but also to take responsibility to act in an ethical and professionally responsi-ble manner in all professional services and activities.

For purposes of this Code of Ethics, a person recognized and certified by CFP Board to use the marks is calleda CFP Board designee. This Code of Ethics applies to CFP Board designees actively involved in the practice ofpersonal financial planning, in other areas of financial services, in industry, in related professions, in govern-ment, in education or in any other professional activity in which the marks are used in the performance ofprofessional responsibilities. This Code of Ethics also applies to candidates for the CFP® certification who areregistered as such with CFP Board. For purposes of this Code of Ethics, the term CFP Board designee shall bedeemed to include current certificants, candidates and individuals who have been certified in the past andretain the right to reinstate their CFP certification without passing the current CFP® Certification Examination.

COMPOSITION AND SCOPE

The Code of Ethics consists of two parts: Part I – Principles and Part II – Rules. The Principles are statementsexpressing in general terms the ethical and professional ideals that CFP Board designees are expected to dis-play in their professional activities. As such, the Principles are aspirational in character but are intended toprovide a source of guidance for CFP Board designees. The comments following each Principle further explainthe meaning of the Principle. The Rules in Part II provide practical guidelines derived from the tenets embod-ied in the Principles. As such, the Rules describe the standards of ethical and professionally responsibleconduct expected of CFP Board designees in particular situations. This Code of Ethics does not undertake todefine standards of professional conduct of CFP Board designees for purposes of civil liability.

Due to the nature of a CFP Board designee’s particular field of endeavor, certain Rules may not be applicableto that CFP Board designee’s activities. For example, a CFP Board designee who is engaged solely in the saleof securities as a registered representative is not subject to the written disclosure requirements of Rule 402(applicable to CFP Board designees engaged in personal financial planning) although he or she may have dis-closure responsibilities under Rule 401. A CFP Board designee is obligated to determine what responsibilitieshe or she has in each professional relationship including, for example, duties that arise in particularcircumstances from a position of trust or confidence that a CFP Board designee may have. The CFP Boarddesignee is obligated to meet those responsibilities.

The Code of Ethics is structured so that the presentation of the Rules parallels the presentation of thePrinciples. For example, the Rules which relate to Principle 1 – Integrity are numbered in the 100 to 199 series,while those Rules relating to Principle 2 – Objectivity are numbered in the 200 to 299 series.

COMPLIANCE

CFP Board requires adherence to this Code of Ethics by all CFP Board designees. Compliance with the Code ofEthics, individually and by the profession as a whole, depends on each CFP Board designee’s knowledge ofand voluntary compliance with the Principles and applicable Rules, on the influence of fellow professionalsand public opinion, and on disciplinary proceedings, when necessary, involving CFP Board designees who failto comply with the applicable provisions of the Code of Ethics.


®

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PA RT I – PRINCIPLES

These Code of Ethics’ Principles express the profession’s recognition of its responsibilities to the public, toclients, to colleagues and to employers. They apply to all CFP Board designees and provide guidance tothem in the performance of their professional services.

Principle 1 – Integrity

A CFP Board designee shall offer and provide professional services with integrity.

As discussed in “Composition and Scope,” CFP Board designees may be placed by clients inpositions of trust and confidence. The ultimate source of such public trust is the CFP Boardd e s i g n e e ’s personal integrity. In deciding what is right and just, a CFP Board designee shouldrely on his or her integrity as the appropriate touchstone. Integrity demands honesty andcandor which must not be subordinated to personal gain and advantage. Within the charac-teristic of integrity, allowance can be made for innocent error and legitimate difference ofopinion; but integrity cannot co-exist with deceit or subordination of one’s principles.Integrity requires a CFP Board designee to observe not only the letter but also the spirit ofthis Code of Ethics.

Principle 2 – Objectivity

A CFP Board designee shall be objective in providing professional services to clients.

Objectivity requires intellectual honesty and impartiality. It is an essential quality for any pro-fessional. Regardless of the particular service rendered or the capacity in which a CFP Boarddesignee functions, a CFP Board designee should protect the integrity of his or her work,maintain objectivity, and avoid subordination of his or her judgment that would be inviolation of this Code of Ethics.

Principle 3 – Competence

A CFP Board designee shall provide services to clients competently and maintain thenecessary knowledge and skill to continue to do so in those areas in which the CFP B o a r ddesignee is e n g a g e d .

One is competent only when he or she has attained and maintained an adequate level ofknowledge and skill, and applies that knowledge effectively in providing services to clients.Competence also includes the wisdom to recognize the limitations of that knowledge andwhen consultation or client referral is appropriate. A CFP Board designee, by virtue of havingearned the CFP® certification, is deemed to be qualified to practice financial planning.H o w e v e r, in addition to assimilating the common body of knowledge required and acquiringthe necessary experience for certification, a CFP Board designee shall make a continuingcommitment to learning and professional improvement.

Principle 4 – Fairn e s s

A CFP Board designee shall perform professional services in a manner that is fair and reason-able to clients, principals, partners and employers, and shall disclose conflict(s) of interest inproviding such services.

Fairness requires impartiality, intellectual honesty and disclosure of conflict(s) of interest. Itinvolves a subordination of one’s own feelings, prejudices and desires so as to achieve aproper balance of conflicting interests. Fairness is treating others in the same fashion thatyou would want to be treated and is an essential trait of any professional.

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Principle 5 – Confidentiality

A CFP Board designee shall not disclose any confidential client information without the spe-cific consent of the client unless in response to proper legal process, to defend againstcharges of wrongdoing by the CFP Board designee or in connection with a civil disputebetween the CFP Board designee and client.

A client, by seeking the services of a CFP Board designee, may be interested in creating arelationship of personal trust and confidence with the CFP Board designee. This type of rela-tionship can only be built upon the understanding that information supplied to the CFPBoard designee will be confidential. In order to provide the contemplated services eff e c t i v e l yand to protect the client’s privacy, the CFP Board designee shall safeguard the confidentialityof such information.

Principle 6 – Pro f e s s i o n a l i s m

A CFP Board designee’s conduct in all matters shall reflect credit upon the profession.

Because of the importance of the professional services rendered by CFP Board designees,there are attendant responsibilities to behave with dignity and courtesy to all those who usethose services, fellow professionals, and those in related professions. A CFP Board designeealso has an obligation to cooperate with fellow CFP Board designees to enhance and main-tain the profession’s public image and to work jointly with other CFP Board designees toimprove the quality of services. It is only through the combined efforts of all CFP Boarddesignees, in cooperation with other professionals, that this vision can be realized.

Principle 7 – Diligence

A CFP Board designee shall act diligently in providing professional services.

Diligence is the provision of services in a reasonably prompt and thorough manner. Diligencealso includes proper planning for, and supervision of, the rendering of professional services.

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PA RT II – RULES

As stated in Part I – Principles, the Principles apply to all CFP Board designees. However, due to the natureof a CFP Board designee’s particular field of endeavor, certain Rules may not be applicable to that CFPBoard designee’s activities. The universe of activities engaged in by a CFP Board designee is indeed diverseand a particular CFP Board designee may be performing all, some or none of the typical services providedby financial planning professionals. As a result, in considering the following Rules, a CFP Board designeemust first recognize what specific services he or she is rendering and then determine whether or not a spe-cific Rule is applicable to those services. To assist the CFP Board designee in making these determinations,the Standards of Professional Conduct includes a series of definitions of terminology (see page 2) usedthroughout the Code of Ethics. Based upon these definitions, a CFP Board designee should be able to deter-mine which services he or she provides and, therefore, which Rules are applicable to those services.

Rules that Relate to the Principle of Integrity

Rule 101

A CFP Board designee shall not solicit clients through false or misleading communications or a d v e r t i s e m e n t s :

( a ) Misleading Advertising: A CFP Board designee shall not make a false or misleadingcommunication about the size, scope or areas of competence of the CFP Boardd e s i g n e e ’s practice or of any organization with which the CFP Board designee is associ-ated; and

( b ) Promotional Activities: In promotional activities, a CFP Board designee shall not make materially false or misleading communications to the public or create unjustified expec-tations regarding matters relating to financial planning or the professional activities andcompetence of the CFP Board designee. The term “promotional activities” includes, butis not limited to, speeches, interviews, books and/or printed publications, seminars, radioand television shows, and video cassettes; and

( c ) Representation of Authority: A CFP Board designee shall not give the impression that aCFP Board designee is representing the views of CFP Board or any other group unlessthe CFP Board designee has been authorized to do so. Personal opinions shall be clearlyidentified as such.

Rule 102

In the course of professional activities, a CFP Board designee shall not engage in conductinvolving dishonesty, fraud, deceit or misrepresentation, or knowingly make a false or mis-leading statement to a client, employer, employee, professional colleague, governmental orother regulatory body or official, or any other person or entity.

Rule 103

A CFP Board designee has the following responsibilities regarding funds and/or other propertyof clients:

( a ) In exercising custody of, or discretionary authority over, client funds or other property, aCFP Board designee shall act only in accordance with the authority set forth in the gov-erning legal instrument (e.g., special power of attorney, trust, letters testamentary, etc.);a n d

( b ) A CFP Board designee shall identify and keep complete records of all funds or otherproperty of a client in the custody, or under the discretionary authority, of the CFP

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Board designee; and( c ) Upon receiving funds or other property of a client, a CFP Board designee shall promptly

or as otherwise permitted by law or provided by agreement with the client, deliver to theclient or third party any funds or other property which the client or third party is entitledto receive and, upon request by the client, render a full accounting regarding such fundsor other property; and

( d ) A CFP Board designee shall not commingle client funds or other property with a CFPBoard designee’s personal funds and/or other property or the funds and/or otherproperty of a CFP Board designee’s firm. Commingling one or more clients’ funds orother property together is permitted, subject to compliance with applicable legalrequirements and provided accurate records are maintained for each client’s funds orother property; and

( e ) A CFP Board designee who takes custody of all or any part of a client’s assets forinvestment purposes, shall do so with the care required of a fiduciary.

Rules that Relate to the Principle of Objectivity

Rule 201

A CFP Board designee shall exercise reasonable and prudent professional judgment in provid-ing professional services.

Rule 202

A financial planning practitioner shall act in the interest of the client.

Rules that Relate to the Principle of Competence

Rule 301

A CFP Board designee shall keep informed of developments in the field of financial planningand participate in continuing education throughout the CFP Board designee’s professionalcareer in order to improve professional competence in all areas in which the CFP Boarddesignee is engaged. As a distinct part of this requirement, a CFP Board designee shall satisfyall minimum continuing education requirements established for CFP Board designees by CFPB o a r d .

Rule 302

A CFP Board designee shall offer advice only in those areas in which the CFP Board designeehas competence. In areas where the CFP Board designee is not professionally competent, theCFP Board designee shall seek the counsel of qualified individuals and/or refer clients to suchp a r t i e s .

Rules that Relate to the Principle of Fairn e s s

Rule 401

In rendering professional services, a CFP Board designee shall disclose to the client:

( a ) Material information relevant to the professional relationship, including, conflict(s) ofinterest, the CFP Board designee's business affiliation, address, telephone number, cre-dentials, qualifications, licenses, compensation structure and any agency relationships,and the scope of the CFP Board designee's authority in that capacity; and


Rev. 72/03

( b ) The information required by all laws applicable to the relationship in a manner comply-ing with such laws.

Rule 402

A CFP Board designee in a financial planning engagement shall make timely written disclo-sure of all material information relative to the professional relationship. In all circumstancesand prior to the engagement, a CFP Board designee shall, in writing:

( a ) Disclose conflict(s) of interest and sources of compensation; and( b ) Inform the client or prospective client of his/her right to ask at any time for information

about the compensation of the CFP Board designee.

As a guideline, a CFP Board designee who provides a client or prospective client with the fol-lowing written disclosures, using Form ADV, a CFP Board Disclosure Form or an equivalentdocument, will be considered to be in compliance with this Rule:

● The basic philosophy of the CFP Board designee (or firm) in working with clients. Thisincludes the philosophy, theory and/or principles of financial planning which will be uti-lized by the CFP Board designee; and

● Résumés of principals and employees of a firm who are expected to provide financialplanning services to the client and a description of those services. Such disclosures shallinclude educational background, professional/employment history, professional designa-tions and licenses held; and

● A statement that in reasonable detail discloses (as applicable) conflict(s) of interest andsource(s) of, and any contingencies or other aspects material to, the CFP Boardd e s i g n e e ’s compensation; and

● A statement describing material agency or employment relationships a CFP Boarddesignee (or firm) has with third parties and the nature of compensation resulting fromsuch relationships; and

● A statement informing the client or prospective client of his/her right to ask at any timefor information about the compensation of the CFP Board designee.

Rule 403

Upon request by a client or prospective client, the CFP Board designee in a financial planningengagement shall communicate in reasonable detail the requested compensation informa-tion related to the financial planning engagement, including compensation derived fromimplementation. The disclosure may express compensation as an approximate dollar amountor percentage or as a range of dollar amounts or percentages. The disclosure shall be madeat a time and to the extent that the requested compensation information can be reasonablyascertained. Any estimates shall be clearly identified as such and based on reasonableassumptions. If a CFP Board designee becomes aware that a compensation disclosure pro-vided pursuant to this rule has become significantly inaccurate, he/she shall provide the clientwith corrected information in a timely manner.

Rule 404

The disclosures required of a CFP Board designee in a financial planning engagementdescribed under Rule 402 shall be offered at least annually for current clients, and providedif requested.

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1 1C O D E O F E T H I C S

Rule 405

A CFP Board designee's compensation shall be fair and reasonable.

Rule 406

A CFP Board designee who is an employee shall perform professional services with dedicationto the lawful objectives of the employer and in accordance with this Code of Ethics.

Rule 407

A CFP Board designee shall:

( a ) Advise his/her employer of outside affiliations which reasonably may compromise serviceto an employer;

( b ) Provide timely notice to his/her employer and clients about change of CFP® c e r t i f i c a t i o nstatus; and

( c ) Provide timely notice to clients, unless precluded by contractual obligations, aboutchange of employment.

Rule 408

A CFP Board designee shall inform his/her employer, partners or co-owners of compensationor other benefit arrangements in connection with his or her services to clients, which are inaddition to compensation from the employer, partners or co-owners for such services.

Rule 409

If a CFP Board designee enters into a personal business transaction with a client, separatefrom regular professional services provided to that client, the transaction shall be on termswhich are fair and reasonable to the client and the CFP Board designee shall disclose, in writ-ing, the risks of the transaction, conflict(s) of interest of the CFP Board designee, and otherrelevant information, if any, necessary to make the transaction fair to the client.

Rules that Relate to the Principle of Confidentiality

Rule 501

A CFP Board designee shall not reveal — or use for his or her own benefit — without thec l i e n t ’s consent, any personally identifiable information relating to the client relationship orthe affairs of the client, except and to the extent disclosure or use is reasonably necessary:

( a ) To establish an advisory or brokerage account, to effect a transaction for the client, or asotherwise impliedly authorized in order to carry out the client engagement; or

( b ) To comply with legal requirements or legal process; or( c ) To defend the CFP Board designee against charges of wrongdoing; or( d ) In connection with a civil dispute between the CFP Board designee and the client.

For purposes of this rule, the proscribed use of client information is improper whether or notit actually causes harm to the client.

Rule 502

A CFP Board designee shall maintain the same standards of confidentiality to employers ast o c l i e n t s .

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Rule 503

A CFP Board designee doing business as a partner or principal of a financial services firmowes the CFP Board designee’s partners or co-owners a responsibility to act in good faith.This includes, but is not limited to, adherence to reasonable expectations of confidentialityboth while in business together and thereafter.

Rules that Relate to the Principle of Pro f e s s i o n a l i s m

Rule 601

A CFP Board designee shall use the marks in compliance with the rules and regulations ofCFP Board, as established and amended from time to time.

Rule 602

A CFP Board designee shall show respect for other financial planning professionals, andrelated occupational groups, by engaging in fair and honorable competitive practices.Collegiality among CFP Board designees shall not, however, impede enforcement of thisCode of Ethics.

Rule 603

A CFP Board designee who has knowledge, which is not required to be kept confidentialunder this Code of Ethics, that another CFP Board designee has committed a violation of thisCode of Ethics which raises substantial questions as to the designee’s honesty, trustworthinessor fitness as a CFP Board designee in other respects, shall promptly inform CFP Board. Thisrule does not require disclosure of information or reporting based on knowledge gained as aconsultant or expert witness in anticipation of, or related to, litigation or other dispute reso-lution mechanisms. For purposes of this rule, knowledge means no substantial doubt.

Rule 604

A CFP Board designee who has knowledge, which is not required under this Code of Ethics t obe kept confidential, and which raises a substantial question of unprofessional, fraudulent orillegal conduct by a CFP Board designee or other financial professional, shall promptly informthe appropriate regulatory and/or professional disciplinary body. This rule does not requiredisclosure or reporting of information gained as a consultant or expert witness in anticipa-tion of, or related to, litigation or other dispute resolution mechanisms. For purposes of thisRule, knowledge means no substantial doubt.

Rule 605

A CFP Board designee who has reason to suspect illegal conduct within the CFP Boardd e s i g n e e ’s organization shall make timely disclosure of the available evidence to the CFPBoard designee’s immediate supervisor and/or partners or co-owners. If the CFP Boarddesignee is convinced that illegal conduct exists within the CFP Board designee’s organiza-tion, and that appropriate measures are not taken to remedy the situation, the CFP Boarddesignee shall, where appropriate, alert the appropriate regulatory authorities, including CFPBoard, in a timely manner.

C O D E O F E T HI C S1 2

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1 3C O D E O F E T H I C S

Rule 606

In all professional activities a CFP Board designee shall perform services in accordance with:

( a ) Applicable laws, rules and regulations of governmental agencies and other applicableauthorities; and

( b ) Applicable rules, regulations and other established policies of CFP Board.

Rule 607

A CFP Board designee shall not engage in any conduct which reflects adversely on his or herintegrity or fitness as a CFP Board designee, upon the marks, or upon the profession.

Rule 608

The Investment Advisers Act of 1940 requires registration of investment advisers with theU.S. Securities and Exchange Commission and similar state statutes may require registrationwith state securities agencies. CFP Board designees shall disclose to clients their firms’ statusas registered investment advisers. Under present standards of acceptable business conduct, itis proper to use registered investment adviser if the CFP Board designee is registered individ-u a l l y. If the CFP Board designee is registered through his or her firm, then the CFP Boarddesignee is not a registered investment adviser but a person associated with an investmenta d v i s e r. The firm is the registered investment adviser. Moreover, RIA or R.I.A. following a CFPBoard designee’s name in advertising, letterhead stationery, and business cards may be mis-leading and is not permitted either by this Code of Ethics or by SEC regulations.

Rule 609

A CFP Board designee shall not practice any other profession or offer to provide such servicesunless the CFP Board designee is qualified to practice in those fields and is licensed asrequired by state law.

Rule 610

A CFP Board designee shall return the client’s original records in a timely manner after theirreturn has been requested by a client.

Rule 611

A CFP Board designee shall not bring or threaten to bring a disciplinary proceeding underthis Code of Ethics, or report or threaten to report information to CFP Board pursuant toRules 603 and/or 604, or make or threaten to make use of this Code of Ethics for no substan-tial purpose other than to harass, maliciously injure, embarrass and/or unfairly burdenanother CFP Board designee.

Rule 612

A CFP Board designee shall comply with all applicable renewal requirements established byCFP Board including, but not limited to, payment of the biennial CFP Board designee fee aswell as signing and returning the Terms and Conditions of Certification in connection withthe certification renewal process.

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Rules that Relate to the Principle of Diligence

Rule 701

A CFP Board designee shall provide services diligently.

Rule 702

A financial planning practitioner shall enter into an engagement only after securing suff i-cient information to satisfy the CFP Board designee that:

( a ) The relationship is warranted by the individual’s needs and objectives; and( b ) The CFP Board designee has the ability to either provide requisite competent services or

to involve other professionals who can provide such services.

Rule 703

A financial planning practitioner shall make and/or implement only recommendations whichare suitable for the client.

Rule 704

Consistent with the nature and scope of the engagement, a CFP Board designee shall make areasonable investigation regarding the financial products recommended to clients. Such aninvestigation may be made by the CFP Board designee or by others provided the CFP Boarddesignee acts reasonably in relying upon such investigation.

Rule 705

A CFP Board designee shall properly supervise subordinates with regard to their delivery offinancial planning services, and shall not accept or condone conduct in violation of this C o d eof Ethics.

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A D V I S ORY OPINION 2001-1

Loans between CFP Board designees and their clients should be avoided in the client-planner relationship.

B a c k g ro u n d

The Board of Professional Review (the “BOPR”) has generally viewed loans between CFPBoard designees and their clients unfavorably and, in the majority of cases, to be a violationof the Code of Ethics and Professional Responsibility (Code of Ethics). Since the Code of Ethicsdoes not have a rule that specifically prohibits such transactions, however, the BOPR hasaddressed the issue under various rules, depending upon the facts and circumstances of thecase being examined.

Due to an increase in the number of disciplinary cases that involve the issue of loansbetween a CFP Board designee and his or her client, the BOPR is issuing this advisory opinionto clarify its position and to serve as a guide to both CFP Board designees and their clients.

I s s u e

Whether a loan between a CFP Board designee and his or her client(s) violates the Code ofE t h i c s.

A n a l y s i s

Cases involving a loan between a CFP Board designee and a client involve an investigation ofwhether that CFP Board designee has violated the Code of Ethics. The BOPR has evaluatedthese cases under a number of rules, including, but not limited to, Rules 201, 202, 401, 402,606, 607 and 703. To determine which, if any, rules have been violated, the BOPR considers:

● Whether the designee is a financial planning practitioner (as defined by the Code ofE t h i c s) .

● Whether the client is a family member or a financial institution. The degree to whichthe CFP Board designee is related to the client is relevant. (The rationale for consideringthe type of relationship is discussed later in this opinion.)

● Whether the terms and conditions of the loan are fair and reasonable to the client.

While any and/or all of the rules mentioned above, and others, may apply in a particularcase, this advisory opinion focuses on two rules which are implicated in the majority of“loan” cases and are, therefore, most frequently cited by the BOPR: Rules 202 and 607.

Rule 202

Rule 202 of the Code of Ethics requires financial planning practitioners to act in the bestinterest of their clients. Accordingly, this rule applies to CFP Board designees who are actingas financial planning practitioners, defined in the Code of Ethics a s :

“[A] person who is capable and qualified to offer objective, integrated and comprehensivefinancial advice to or for the benefit of clients to help them achieve their financial objectivesand who engages in financial planning using the financial planning process in working withc l i e n t s . ”

B o r rowing from a Client

In cases involving a loan between a financial planning practitioner and a client, where theclient is the lender and the practitioner is the borrower, the BOPR presumes that the practi-tioner is not acting in the best interest of the client.

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BOPR Recognizes Exceptions

There are two exceptions to this presumption:

( 1 ) When the client is a family member; or( 2 ) When the client is a financial institution acting in its normal course of business activity.

The BOPR recognizes that borrowing and/or lending of funds between family members is acommon, generally accepted, practice. Likewise, financial institutions are in the business ofborrowing and lending funds and, as such, often provide loans to individuals, regardless ofwhether they are CFP Board designees. In both instances, loans between these groups canfall outside the scope of the planner-client relationship.

In either of the two situations described above, while the BOPR does not presume that thep l a n n e r ’s borrowing of funds is a violation of Rule 202, it may still find that the transactionwas not in the client’s best interests if the financial planning practitioner is unable to estab-lish that:

● The terms and conditions of the loan were clearly and objectively disclosed to the client,taking into consideration the client’s level of sophistication;

● The terms and conditions of the transaction were fair and reasonable under the circum-stances; and

● The client fully understood (a) the terms and conditions of the transaction and (b) theimpact of the transaction on his/her financial situation.

Lending to a Client

In the more rare case where a financial planning practitioner lends funds to a client, theBOPR will presume that the practitioner is not acting in the best interest of the client, as aclient who borrows funds from his or her planner is likely to be inhibited from ending thep l a n n e r-client relationship, regardless of whether the client’s financial planning needs arebeing met. Even if the financial planning practitioner can demonstrate that a particular loanto a client did not inhibit the client from ending the relationship, the transaction will still bepresumed to be a violation of Rule 202 if (a) the loan was used as an enticement for theclient to make a financial decision, including, but not limited to, purchasing a financial prod-uct, or (b) the loan had a below market interest rate and could be considered a form ofr e b a t e .

The exception to this presumption is when the client is a family member. Even if the client isa family member, however, the BOPR may still find that the transaction was not in the client’sbest interest if the financial planning practitioner is unable to establish that (a) the terms andconditions of the loan were clearly and objectively disclosed to the client, taking into consid-eration the client’s level of sophistication, (b) the terms and conditions of the transactionwere fair and reasonable under the circumstances, and (c) the client fully understood theterms and conditions of the transaction and the impact the transaction may have on his/herfinancial situation.

Rule 607

Rule 607 prohibits a CFP Board designee from engaging “in any conduct which reflectsadversely on his or her integrity or fitness as a CFP Board designee, upon the marks, or uponthe profession.”

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As defined in the Code of Ethics, CFP Board designees include individuals who are currentlycertified, candidates for certification, and individuals who have any entitlement, either director indirect, to use the CFP certification marks. Accordingly, this rule has been interpreted toapply to all CFP Board designees regardless of whether they are practitioners, including can-didates for certification, and individuals who have the right to renew their CFP® c e r t i f i c a t i o nwithout re-taking CFP Board’s CFP® Certification Examination.

Whether the Client is the Borrower or Lender

The BOPR interprets Rule 607 broadly, finding conduct which gives the “appearance ofimpropriety” to be a violation of the rule. Accordingly, the BOPR has taken the position thatmost loans between a CFP Board designee and a client give the appearance of improprietyand, therefore, reflect negatively on the integrity of the designee, the CFP marks and thefinancial planning profession.

BOPR Recognizes Exceptions

The same two exceptions discussed under Rule 202 (i.e., loans between a planner and a fam-ily member or loans between a planner and a financial institution) apply under Rule 607when the planner is the borrower. In cases where the client is the borrower, only the familymember exception applies. Even if one of the exceptions applies, the BOPR may still find thatthe transaction violates Rule 607 if the CFP Board designee fails to establish that:

● The terms and conditions of the loan were clearly and objectively disclosed to the client; ● The terms and conditions of the transaction were fair and reasonable under the circum-

stances; and● The client fully understood (a) the terms and conditions of the transaction and (b) the

impact of the transaction on his/her financial situation.

S u m m a r y

The BOPR urges all CFP Board designees to avoid the practice of borrowing from or lendingto clients. This advisory opinion focuses on the two most frequently cited rules (Rules 202 and607) in cases involving loans between CFP Board designees and their clients. CFP Boarddesignees should remember, however, that the BOPR may find such transactions to be in vio-lation of other rules in the Code of Ethics, as well.

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A D V I S ORY OPINION 2003-1

C F P Board designees must avoid possible misrepresentation when using the term “fee-only. ”

B a c k g ro u n d

The Board of Professional Review (“BOPR”) views misrepresentation of compensationarrangements to be a violation of the Code of Ethics and Professional Responsibility (Code ofE t h i c s ) . The Code of Ethics defines the term “fee-only” as denoting “a method of compensa-tion in which compensation is received solely from a client with neither the personalfinancial planning practitioner nor any related party receiving compensation which is contin-gent upon the purchase or sale of any financial product.” BOPR Advisory Opinions 97-1 and97-2 allowed for a designee to use the term “fee-only” to describe the compensationreceived from a specific client, even if other methods of compensation were used with otherclients, and to offer “fee-only” services to a client, even if the designee also received commis-sions from the same client or other clients for other services. In light of recent regulatorytrends regarding the misrepresentation of methods of compensation, media focus on theissue, and the perceptions of the general public, the BOPR has redefined the appropriate useof the term “fee-only. ”

The purpose of this Advisory Opinion is to reduce confusion on the part of CFP Boarddesignees, their clients, and the public, and to maintain consistency with other organizations’use of the term “fee-only.” Thus, the Board of Governors withdrew Advisory Opinions 97-1and 97-2 in January 2002 and the Code of Ethics definition can no longer be considered anaccurate reflection of the BOPR’s position on this issue.

I s s u e

When may a CFP Board designee use the term “fee-only” to describe the designee as an indi-vidual, the designee’s practice or the designee’s services?

A n a l y s i s

A fee arrangement exists when the CFP Board designee is compensated solely by the client,or another party operating exclusively on behalf of the client, for professional services pro-vided. The BOPR has defined types of compensation arrangements. The following qualify asf e e s :

● H o u r l y, fixed or flat fees;● Percentage fees, which are based on some aspect of the client’s financial profile, such as

assets under management or earned income; and● Performance-based fees, which are tied to the profitability of the client’s invested assets.

There are other compensation arrangements under which a CFP Board designee could becompensated for working with a client. In some of these arrangements, the designee maybe paid by a third party for the recommending, referring or selling of a product and/or serv-ice. These arrangements, including, but not limited to the following, shall not be interpretedas fees under the Code of Ethics:

● C o m m i s s i o n , generated from a product or service. In addition to traditional commis-sions, this includes, 12(b)1 fees, trailing commissions, surrender charges, and contingentdeferred sales charges, even if used to reduce or offset other fees;

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● Referral compensation, providing compensation or other economic benefits to the CFPBoard designee for recommending, introducing or referring a product or service pro-vided by another person or entity, even if used to reduce or offset other fees.

Use of the Term “Fee-Only”

In order for a CFP Board designee to describe his or her compensation as “fee-only”, all com-pensation from all clients must be derived solely from fees. Minimal exceptions may beallowed provided the compensation is inconsequential and independent of the purchase ofany product or service. Likewise, when using terms including, but not limited to, “fee-onlyservices” and “fee-only firm,” the same requirements apply.

Potential Rule Violations

Cases involving misrepresentation of compensation arrangements or failure to disclose com-pensation arrangements warrant investigation of whether that CFP Board designee hasviolated the Code of Ethics. The rules implicated in this analysis include, but are not limitedto, Rules 101(a) and (b), 102, 201, 202, 401, 402, 606, 607 and 702. The BOPR must considerwhether the CFP Board designee is a financial planning practitioner (as defined by the C o d eof Ethics) in determining which, if any, rules have been violated. While any and/or all of therules mentioned above may apply in a particular case, this advisory opinion focuses on threerules that would most often be implicated in a case involving misrepresentation of and/orfailure to disclose compensation arrangements: Rules 101(a) and (b), 401 and 402.

Rule 401

Rule 401 of the Code of Ethics requires CFP Board designees to disclose to the client materialinformation relative to the professional relationship, including compensation structure. TheBOPR urges that disclosures under Rule 401 be clear, straightforward and unambiguous so asto be easily understood by all parties. In cases involving CFP Board designees who representthemselves as “fee-only” to a client but accept compensation not defined as fees by theBOPR from that relationship or other client relationships, the BOPR presumes that the CFPBoard designee has failed to disclose material information relative to the professional rela-tionship.

Rule 402

Rule 402 requires CFP Board designees in a financial planning engagement to make timelywritten disclosure of all material information relative to the professional relationship, in allcircumstances and prior to the relationship, including sources of compensation. Adherence tothe provisions of Rule 402 by CFP Board designees in financial planning engagements allowsthe public to make informed decisions about whether to use the professional services of theCFP Board designee. Rule 402(a) is violated when the CFP Board designee in a financial plan-ning engagement, in the disclosure provided to the client, represents himself or herself as“fee-only” when, in fact, that designee accepts compensation not defined as fees by theBOPR in that relationship or other client relationships.

Rule 101(a) and (b)

Rule 101(a) and (b) prohibit CFP Board designees from soliciting clients through false or mis-leading advertisements and/or promotional activities. The use of the term “fee-only” must beused carefully and only when the CFP Board designee derives all compensation from allclients solely from fees. The BOPR presumes advertisements and/or promotional activities to

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be false or misleading when they contain the term “fee-only” and the CFP Board designeeadvertising or promoting his or her services accepts compensation not defined as fees fromthat client relationship or any other client relationships.

S u m m a r y

The public regards compensation structure as important information when choosing a finan-cial planning professional. The Code of Ethics requires CFP Board designees to act withintegrity and fairness toward the public in all activities. The appropriate use of the term“fee-only” in all public discourse provides a key opportunity for CFP Board designees todemonstrate professionalism by avoiding casual use of the term. The BOPR advises CFP Boarddesignees to avoid using the term “fee-only” except when all compensation from all clients isderived solely from fees. CFP Board designees should also avoid the use of other termsdesigned to induce the public into a distorted belief that the designee receives “fee-only”compensation when in fact the designee receives commissions, referral compensation, or anyother form of compensation not defined as fees by the BOPR.

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SAMPLE DISCLOSURE FOR M S

Following are two sample disclosure forms for use by CFP® certificants in complying with CFP Board’s C o d eof Ethics and Professional Responsibility (Code of Ethics) disclosure requirements. The first form (Form FPE)may be used in financial planning engagements. The second form (Form OPS) is for use when providingother professional services.

These forms provide for certain disclosures to clients (or potential clients) as required by CFP Board’s Code ofE t h i c s, with corresponding Rules in the Code of Ethics referrenced in parantheses. The client acknowledg-ments at the end of each disclosure form are not required by CFP Board’s Code of Ethics, but CFPcertificants may wish to use them for their own purposes. Please note in Part II, section E of Form FPE, a CFPcertificant shall not hold out as a fee-only financial planning practitioner if the CFP certificant receives com-missions or other forms of economic benefit form related parties. (Refer also to Advisory Opinion 2003-1.)Also note that the disclosure of Part II, section B of Form OPS, is not required if the services contemplatedby the client relationship have been completed. CFP certificants may use these forms, SEC Form ADV Part II, ora form of their own design or choosing as long as the required Code of Ethics disclosures are included in what-ever form is used by the CFP certificant.

Compliance with the client disclosure requirements of the Code of Ethics is accomplished only when all materialinformation relevant to the professional relationship (which includes everything required, pertinent and appro-priate to the given client relationship) has been disclosed to the client or prospective client. Such disclosureshould include, if material, (1) information about the financial condition of the CFP certificant and/or his or herfirm which is reasonably likely to impair the ability of the CFP certificant to meet contractual commitments tothe client and (2) any legal or disciplinary event relative to the CFP certificant that is material to a client’s orpotential client’s evaluation of the CFP certificant’s integrity or ability to meet contractual commitments to theclient. Mere completion of a suggested disclosure form does not, in and of itself, constitute full compliance withthe Code of Ethics disclosure requirements.

A blank form of each, in addition to a sample of how the forms might look when they are filled in, isincluded and may be copied for your use. The forms can also be downloaded as Word documents from CFPB o a r d ’s Web site at www. C F P .net/certificants.

2 1S A M P L E D I S C L O S U R E F O R M S

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S A M P L E D I S CL O S U RE F O R M S2 2

SAMPLE CFP® C E RTIFICANT DISCLOSURE FORM (FOR M F P E )

For Use in Financial Planning Engagements

PA RT I . GENERAL INFORMAT I O N :(Code reference - Rule 401)

A . Business aff i l i a t i o n :

B . A d d r e s s :

C . Telephone number:

D . Information required by all laws applicable to the relationship (e.g., if the CFP certificant is aregistered investment adviser, the disclosure document required by laws applicable to suchr e g i s t r a t i o n ) :

PA RT II. M ATERIAL INFORMATION RELEVANT TO THE PROFESSIONAL RELAT I O N S H I P( Written disclosures required to be provided prior to the engagement)(Code reference - Rule 402)

A . Basic philosophy of the CFP certificant (or firm) in working with clients:

B . P h i l o s o p h y, theory and/or principles of financial planning which will be utilized:

C . Attached to this disclosure form, or summarized in the space provided below, are résumés ofprincipals and employees of the CFP certificant’s firm who are expected to provide financialplanning services:

1 . Educational background:

This disclosure form gives information about the CFP® certificant(s) and his/her/their business. This information has not been

reviewed, approved or verified by CFP Board or by any governmental or self-regulatory authority. CFP Board does not warrant the

specific qualifications of individuals certified to use its marks, nor does it warrant the correctness of advice or opinions provided.

Form FPE

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2 . Professional/employment history:

3 . Professional certifications and licenses held:

D . Description of the financial planning services to be provided by the CFP® c e r t i f i c a n t :

E . Conflict(s) of interest and source(s) of compensation:

1 . Conflict(s) of interest:

2 . Source(s) of compensation:

3 . Contingencies or other aspects material to the certificant’s compensation:

F. Agency or employment relationships:

1 . Material agency or employment relationships with third parties:

2 . Compensation resulting from such agency or employment relationships:

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G . Other material information relevant to the professional relationship:

Part III. ADDITIONAL NOTIFICAT I O NA. As a client or prospective client, you have the right to ask me, as a CFP® certificant, at any

time for information about my compensation related to the services I provide you. I will com-municate the requested information in reasonable detail as it relates to our financialplanning engagement, including compensation derived from implementation. This disclosureof compensation:

1 . May be expressed as an approximate dollar amount or percentage or as a range of dollar amounts or percentages;

2 . Shall be made at a time and to the extent that the requested information can be reasonably ascertained;

3 . Will be based on reasonable assumptions, with estimates clearly identified, and;4 . Will be updated in a timely manner if actual compensation significantly differs from any

e s t i m a t e s .(Code reference - Rules 402 and 403)

B . As a CFP certificant’s personal financial planning client, you have the right to receive annuallymy current SEC Form ADV Part II or the current revision of the disclosure you received whenour relationship began. (Code reference - Rule 404)

I hereby acknowledge receipt of this re q u i red disclosure .

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C l i e n t ’s Signature D a t e C l i e n t ’s Signature D a t e

Form FPE

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2 5S A M P L E D I S C L O S U R E F O R M S

C F P® C E RTIFICANT DISCLOSURE FORM (FOR M FPE) – SAMPLE FILLED-IN FOR M

For Use in Financial Planning Engagements

PA RT I . GENERAL INFORMAT I O N :(Code reference - Rule 401)

A . Business aff i l i a t i o n :

B . A d d r e s s :

C . Telephone number:

D . Information required by all laws applicable to the relationship (e.g., if the CFP certificant is aregistered investment adviser, the disclosure document required by laws applicable to suchr e g i s t r a t i o n ) :

PA RT II. M ATERIAL INFORMATION RELEVANT TO THE PROFESSIONAL RELAT I O N S H I P( Written disclosures required to be provided prior to the engagement)(Code reference - Rule 402)

A . Basic philosophy of the CFP certificant (or firm) in working with clients:

Our approach to personal financial planning is to obtain from you significant financial andother information including your attitudes, goals and objectives; to analyze the informationobtained in order to develop alternatives for your consideration; to educate you about theimplications of selecting a particular alternative; to implement the alternative selected byyou; and to periodically update the plan adopted. It is our goal to become your chief finan-cial adviser and to coordinate the efforts of your other advisers in your best interests. Wewant you to be educated about your own financial affairs and to take an active role in man-aging them.

B . P h i l o s o p h y, theory and/or principles of financial planning which will be utilized:

Our philosophy of financial planning is to gather adequate reliable information about ac l i e n t ’s personal financial situation; to determine the client’s goals and objectives, timehorizon, and risk tolerance; to analyze all of the foregoing information in an objectivemanner and to develop recommendations for our clients based upon this thorough analysisand in the interest of rendering disinterested advice. In a personal financial planningengagement, we endeavor to consistently act in the interest of our client and to place his orher interest ahead of our own. Moreover, we believe that a client should be both informedand proactively involved in his or her personal financial affairs. Accordingly, we believe inholding frequent meetings with our clients to educate them about the financial planningprocess and their own financial situation.

Form FPE

This disclosure form gives information about the CFP® certificant(s) and his/her/their business. This information has not been



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C . Attached to this disclosure form, or summarized in the space provided below, are résumés ofprincipals and employees of the CFP® c e r t i f i c a n t ’s firm who are expected to provide financialplanning services:

1 . Educational background:

John Doe:Bachelor of Science degree in accounting from Hofstra University, 1971. Master of Business Administration degree in Financial Services from Golden GateU n i v e r s i t y, 1 9 7 5 .

2 . Professional/employment history:

John Doe:Was employed as a stockbroker for DEF Brokerage for nearly ten years beforebecoming a partner in Comprehensive Financial Planning Services, Inc., in 1986 (seeattached résumé).

3 . Professional certifications and licenses held:

John Doe:CE RT I F I E D FI N A N C I A L PL A N N E RT M p r a c t i t i o n e rNASD Series 7 (General Securities) license - 1974Life & Health insurance licenses - 1978, State of Arkansas

D . Description of the financial planning services to be provided by the CFP certificant:

Example 1:This engagement is limited in scope to retirement planning only. Other types of personalfinancial planning services will not be performed by us, unless they directly affect yourretirement plan, and you give us your express permission prior to performing such addi-tional services.

Example 2:You have expressed interest in asset management services. These services include:• Analysis of your current financial condition, goals and objectives, and development of a

personal financial plan.• Design of an investment portfolio appropriate to your individual circumstances, needs,

goals, risk tolerance, investment experience and time horizon.• Quarterly written reports on the status of your investment portfolio.• Two meetings each year to review and update your objectives and financial status and

provide an evaluation of your investment portfolio.• Ongoing monitoring of your investment portfolio.• Recommendations involving investment repositioning and current opportunities for

new investments.• Availability of our professional staff to answer questions.

E . Conflict(s) of interest and source(s) of compensation:

1 . Conflict(s) of interest:

Example 1:John Doe represents Larry Peters, your business partner.

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Example 2:My broker/dealer permits me to sell only those securities products which it has approved.

2 . Source(s) of compensation:

Example 1: Fees from clients

Example 2: Commissions from third parties

3 . Contingencies or other aspects material to the certificant’s compensation:

I will not receive a commission unless you purchase the financial products recommendedby me.

F. Agency or employment relationships:

1 . Material agency or employment relationships with third parties:Life & Health Insurance Broker for DEF Insurance Company

2 . Compensation resulting from such agency or employment relationships:50% commissions on first year life insurance premiums and 0.25% commission upon annualr e n e w a l .

G . Other material information relevant to the professional relationship:John Doe is licensed only for the sale of mutual funds and variable annuities.

Part III. ADDITIONAL NOTIFICAT I O NA. As a client or prospective client, you have the right to ask me, as a CFP® certificant, at any

time for information about my compensation related to the services I provide you. I will com-municate the requested information in reasonable detail as it relates to our financialplanning engagement, including compensation derived from implementation. This disclosureof compensation:

1 . May be expressed as an approximate dollar amount or percentage or as a range of dollar amounts or percentages;

2 . Shall be made at a time and to the extent that the requested information can be reasonably ascertained;

3 . Will be based on reasonable assumptions, with estimates clearly identified, and;4 . Will be updated in a timely manner if actual compensation significantly differs from any

e s t i m a t e s .(Code reference - Rules 402 and 403)

B . As a CFP certificant’s personal financial planning client, you have the right to receive annuallymy current SEC Form ADV Part II or the current revision of the disclosure you received whenour relationship began. (Code reference - Rule 404)


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Form FPE

SAMPLE CFP® C E RTIFICANT DISCLOSURE FORM (FOR M O P S )

For Use When Providing Other Professional Services

PA RT I. M ATERIAL INFORMATION RELEVANT TO THE PROFESSIONAL RELAT I O N S H I P(Disclosures required to be provided at the time of entering into a client relationship)(Code reference - Rule 401)A . Material information relevant to the professional relationship:

B . Conflict(s) of interest:

C . Information required by all laws applicable to the relationship (e.g., if the CFP certificant is a registered investment adviser, the disclosure document required by laws applicable to such r e g i s t r a t i o n ) :

PA RT II. SUBSEQUENT DISCLOSURES(Disclosures required to be provided subsequent to entering into a client relationship)A . Changes in any of the following information since entering into a client relationship:

(Code reference - Rule 401)

1 . Business aff i l i a t i o n :

2 . A d d r e s s :

3 . Telephone number:


Form OPSRev. 07/03

This disclosure form gives information about the C F P® certificant(s) and his/her/their business. This information has not been



Rev. 07/03

4 . C r e d e n t i a l s :

5 . Q u a l i f i c a t i o n s :

6 . L i c e n s e s :

7 . Compensation structure:

8 . Agency relationships:

9 . Scope of the CFP® c e r t i f i c a n t ’s authority in any agency relationship:


_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ / _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ /_ _ _ _ _ _ _ _ _ _ _ _ _ _ _


S A M P L E D I S C L O S U R E F O R M S 2 9

Form OPS

Rev. 07/03

C F P® C E RTIFICANT DISCLOSURE FORM (FOR M OPS) – SAMPLE FILLED-IN FOR M

For Use When Providing Other Professional Services

PA RT I. M ATERIAL INFORMATION RELEVANT TO THE PROFESSIONAL RELAT I O N S H I P(Disclosures required to be provided at the time of entering into a client relationship)(Code reference - Rule 401)A . Material information relevant to the professional relationship:

I am a sales representative for ABC Securities and I am licensed to sell general securitiesthrough that firm. These products include mutual funds, stocks, bonds and other types ofs e c u r i t i e s .

My compensation is based solely upon the sale of securities. Should you choose to purchase aproduct through us, I will receive a commission payable by a third party.

B . Conflict(s) of interest:

John Doe owns a partnership interest in ABC S e c u r i t i e s .

C . Information required by all laws applicable to the relationship (e.g., if the CFP certificant is a registered investment adviser, the disclosure document required by laws applicable to such r e g i s t r a t i o n ) :

I am required by law to provide you with a copy of the most recent prospectus for any secu-rity that I recommend to you. I am required by law to provide you with a copy of the orderconfirmation for any securities transactions.

PA RT II. SUBSEQUENT DISCLOSURES(Disclosures required to be provided subsequent to entering into a client relationship)A . Changes in any of the following information since entering into a client relationship:

(Code reference - Rule 401)

1 . Business aff i l i a t i o n :

2 . A d d r e s s :

3 . Telephone number:

4 . C r e d e n t i a l s :

5 . Q u a l i f i c a t i o n s :


Form OPS

This disclosure form gives information about the C F P® certificant(s) and his/her/their business. This information has not been



Rev. 07/03

6 . L i c e n s e s :

7 . Compensation structure:

8 . Agency relationships:

9 . Scope of the CFP® c e r t i f i c a n t ’s authority in any agency relationship:


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S A M P L E D I S C L O S U R E F O R M S 3 1

Form OPS

CERTIFIED FINANCIAL PLANNER

BOARD OF STANDARDS, INC.

1425 K Street, NW, Suite 500, Washington, DC 20005

P: 800�487�1497

F: 202�379�2299

E: [email protected]

W: www.CFP.net

The cerTificaTion mark above is owned by cerTified financial Planner board of sTandards, inc. in The UniTed sTaTes and is awarded To individUals who sUccessfUlly comPleTe cfP board’s iniTial and ongoing cerTificaTion reqUiremenTs.

STANDARDS OF PROFESSIONAL CONDUCT

certified financial Planner board of standards, inc. (cfP board) is a certification and standards-setting organization

founded in 1985 that benefits the public by establishing and enforcing education, examination, experience and

ethics requirements for cfP® certificants. cfP board has exclusive authority to determine who may use the cfP®,

cerTified financial Planner™, and certification marks (the cfP® marks) in the United states. cfP

board conditions the permission it grants individuals to use these marks on their agreement to abide by certain

terms and conditions specified by cfP board, including those set forth below.

as part of the cfP® certification process and the terms and conditions imposed upon certificants and Professionals

eligible for reinstatement (Per), cfP board maintains professional standards necessary for competency and

ethics in the financial planning profession. Through its Code of Ethics and Professional Responsibility (Code of

Ethics), cfP board identifies the ethical principles certificants and Pers should meet in all of their professional

activities. Through its Rules of Conduct, cfP board establishes binding professional and ethical norms that protect

the public and advance professionalism. cfP board’s Financial Planning Practice Standards (Practice Standards)

describe the best practices expected of certificants engaged in financial planning and refer to those sections of

the Rules of Conduct that provide ethical guidance. Through its Disciplinary Rules and Procedures (Disciplinary

Rules), cfP board enforces the Code of Ethics, Rules of Conduct, and Practice Standards and establishes a process

for applying the Standards of Professional Conduct to actual professional activities.

cfP board’s predecessor organization, the international board of standards and Practices for certified financial

Planners (ibcfP) introduced the first Code of Ethics in 1985. revisions were made in 1988, including the introduction

of the first Disciplinary Rules and Procedures. The next major revision, in 1993, established the Principles and rules

of the Code of Ethics. The board of Practice standards began work on the Practice Standards in 1995 and the

standards were first published in 1999. The Practice Standards were finalized in 2002. This revision of the Code of

Ethics, Rules of Conduct and Practice Standards began in 2005 and took effect July 1, 2008.

This booklet describes cfP board’s Standards of Professional Conduct, which include the Code of Ethics, Rules

of Conduct, Practice Standards, Disciplinary Rules, Appeals Rules and Procedures, and Fitness Standards for

Candidates and Professionals Eligible for Reinstatement.

Code of ethiCscfP board adopted the Code of Ethics to establish the highest principles and standards. These Principles are

general statements expressing the ethical and professional ideals certificants and Pers are expected to display in

their professional activities. as such, the Principles are aspirational in character and provide a source of guidance

for certificants and Pers. The Principles 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 Pers’

responsibilities to the public, clients, colleagues and employers.

Rules of ConduCtThe 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

INTRODUCTION cfP board’s sTandards

of Professional condUcT

6 7

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 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 certificants to use the cfP® marks. Thus, the Rules

of Conduct are not designed to be a basis for legal liability to any third party.

PRaCtiCe standaRdsThe Practice Standards describe best practices of financial planning professionals providing professional services

related to the six elements of the financial planning process. each standard is a statement relating to an element

of the financial planning process, followed by an explanation of the standard and its relationship to the Code of

Ethics and Rules of Conduct. cfP board developed the Practice Standards to advance professionalism in financial

planning and enhance the value of the financial planning process, for the ultimate benefit of consumers of financial

planning services.

disCiPlinaRy RulesThe Disciplinary Rules describe the procedures followed by cfP board in enforcing the Rules of Conduct. The

Disciplinary Rules provide a fair process pursuant to which certificants are given notice of potential violations and

an opportunity to be heard by a panel of other professionals.

aPPeal RulesThe Appeal Rules and Procedures govern the procedure of appeals from orders of the disciplinary and ethics

commission (dec) of certified financial Planner board of standards, inc. and appeals from administrative orders

issued by cfP board counsel.

fitness standaRds foR Candidates and PRofessionals eligible foR Reinstatement The Fitness Standards describe the specific character and fitness standards for candidates for certification and

Pers to ensure an individual’s conduct does not reflect adversely upon the profession or the cfP® certification

marks.

Table Of CONTeNTs

seCTION 1

8 Terminology in This bookleT

seCTION 2

10 CoDE oF EthiCS AnD PRoFESSionAl RESPonSibility

seCTION 3

12 RulES oF ConDuCt

seCTION 4

18 FinAnCiAl PlAnning PRACtiCE StAnDARDS

seCTION 5

29 DiSCiPlinARy RulES AnD PRoCEDuRES

seCTION 6

45 APPEAl RulES AnD PRoCEDuRES

seCTION 7

53 FitnESS StAnDARDS FoR CAnDiDAtES AnD

PRoFESSionAlS EligiblE FoR REinStAtEmEnt

ReVIsIONs IN THIs eDITION Of CfP bOaRD’s standaRds of PRofessional ConduCt INClUDe:

• amendments to cfP board’s Disciplinary Rules and Procedures adopted in

January 2013. details about the amendments are available on cfP board’s

website at: www.cfP.net/standards

• amendments to cfP board’s Appeal Rules and Procedures adopted in January

2013. details about the amendments are available on cfP board’s website at:

www.cfP.net/standards

• amendments to the Fitness Standards for Candidates and Professionals

Eligible for Reinstatement (formerly Candidate Fitness Standards) adopted

in september 2012. The amendments included granting the disciplinary and

ethics commission the authority to allow a candidate/Professional eligible for

reinstatement to re-apply for cfP® certification at some future date.

INTRODUCTION cfP board’s sTandards

CONTINUeD of Professional condUcT

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• “CFP board” denotes certified financial

Planner 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 an individual who is

currently certified by cfP board.

• “Certificant’s Employer” denotes any person

or entity that employs a certificant or Per

to provide services to a third party on behalf

of the employer, including certificants and

Pers who are retained as independent

contractors or agents.

• “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.

• “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 “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.

• “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.

• a “financial planning engagement” exists

when a certificant performs any type of

mutually agreed upon financial planning

service for a client.

• a “financial planning practitioner” is a

person who provides financial planning

services to clients.

• “Personal financial planning” or “financial

planning” denotes the process of

determining whether and how an individual

can meet life goals through the proper

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 financial planning,

factors that may be considered include, but

are not limited to:

1. The client’s understanding and intent in

engaging the certificant;

2. The degree to which multiple financial

planning subject areas are involved;

3. The comprehensiveness of data

gathering; and

4. The breadth and depth of

recommendations.

financial planning may occur even if the

material 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 steps:

1. establishing and defining the client-

planner relationship;

2. gathering client data including goals;

3. analyzing and evaluating the client’s

current financial status;

4. developing and presenting

recommendations and/or alternatives;

5. implementing the recommendations; and

6. 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:

1. financial statement preparation and

analysis (including cash flow analysis/

planning and budgeting);

2. insurance planning and risk

management;

3. employee benefits planning;

4. investment planning;

5. income tax planning;

6. retirement planning; and

7. estate planning.

• “Professional Eligible for Reinstatement”

(PER) denotes an individual who is not

currently certified but has been certified

by cfP board in the past and has an

entitlement, direct or indirect, to 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 Standards of

Professional Conduct apply to Pers when

the conduct at issue occurred at a time

when the Per was certified; cfP board has

jurisdiction to investigate such conduct.

TERmINOLOgy IN ThIS BOOkLETThIS TERmINOLOgy APPLIES ONLy FOR PURPOSES OF INTERPRETINg AND/OR ENFORCINg CFP BOARD’S Code of ethiCs, Rules of ConduCt, PRaCtiCe standaRds AND disCiPlinaRy Rules.

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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.

CODE OF EThICS AND PROFESSIONAL RESPONSIBILITy

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 OF CONDUCT

1. DefININg THe RelaTIONsHIP wITH THe PROsPeCTIVe ClIeNT OR ClIeNT

13 rUle 1.1

13 rUle 1.2

13 rUle 1.3

14 rUle 1.4

2. INfORmaTION DIsClOseD TO PROsPeCTIVe ClIeNTs aND ClIeNTs

14 rUle 2.1

14 rUle 2.2

3. PROsPeCTIVe ClIeNT aND ClIeNT INfORmaTION aND PROPeRTy

14 rUle 3.1

14 rUle 3.2

14 rUle 3.3

15 rUle 3.4

15 rUle 3.5

15 rUle 3.6

15 rUle 3.7

15 rUle 3.8

15 rUle 3.9

15 rUle 3.10

4. OblIgaTIONs TO PROsPeCTIVe ClIeNTs aND ClIeNTs

15 rUle 4.1

15 rUle 4.2

15 rUle 4.3

15 rUle 4.4

15 rUle 4.5

15 rUle 4.6

15 rUle 4.7

5. OblIgaTIONs TO emPlOyeRs

15 rUle 5.1

15 rUle 5.2

6. OblIgaTIONs TO CfP bOaRD

16 rUle 6.1

16 rUle 6.2

16 rUle 6.3

16 rUle 6.4

16 rUle 6.5

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 Professional Eligible for

Reinstatement (PER) 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

PERs and certificants to use the CFP® marks. thus,

the Rules are not designed to be a basis for legal

liability to any third party.

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 financial planning,

prior to entering into an agreement, the certificant

shall provide written information or discuss with

the prospective client or client the following:

a. The obligations and responsibilities of each

party under the agreement with respect to:

1. defining goals, needs and objectives,

2. gathering and providing appropriate

data,

3. examining the result of the current

course of action without changes,

4. The formulation of any recommended

actions,

5. implementation responsibilities, and

6. 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 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

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the securities and exchange commission’s form

adv or other disclosure documents, 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 financial planning, the certificant

owes to the client the duty of care of a fiduciary

as defined by cfP board.

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:

1. information related to costs and

compensation to the certificant and/or

the certificant’s employer, and

2. 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 financial planning,

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 items 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 the securities and

exchange commission’s 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.

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; as required 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.

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.

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.

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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.

FINANCIAL PLANNINg PRACTICE STANDARDS

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19 sTaTemeNT Of PURPOse fOR finanCial Planning PRaCtiCe standaRds

100 seRIes: esTablIsHINg aND DefININg THe RelaTIONsHIP wITH THe ClIeNT

20 100-1 defining The scoPe of The engagemenT

19 History of PRaCtiCe standaRds

19 description of PRaCtiCe standaRds

20 format of PRaCtiCe standaRds

20 compliance witH PRaCtiCe standaRds

200 seRIes: gaTHeRINg ClIeNT DaTa

21 200-1 deTermining a clienT’s Personal and financial goals,

needs and PrioriTies

22 200-2 obTaining qUanTiTaTive informaTion and docUmenTs

300 seRIes: aNalyzINg aND eValUaTINg THe ClIeNT’s fINaNCIal sTaTUs

23 300-1 analyzing and evalUaTing The clienT’s informaTion

400 seRIes: DeVelOPINg aND PReseNTINg THe fINaNCIal

PlaNNINg ReCOmmeNDaTION(s)

24 Preface To The 400 series

24 400-1 idenTifying and evalUaTing financial Planning alTernaTive(s)

25 400-2 develoPing The financial Planning recommendaTion(s)

25 400-3 PresenTing The financial Planning recommendaTion(s)

500 seRIes: ImPlemeNTINg THe fINaNCIal PlaNNINg ReCOmmeNDaTION(s)

26 500-1 agreeing on imPlemenTaTion resPonsibiliTies

27 500-2 selecTing ProdUcTs and services for imPlemenTaTion

600 seRIes: mONITORINg

28 600-1 defining moniToring resPonsibiliTies

sTaTemeNT Of PURPOse fOR finanCial Planning PRaCtiCe standaRds

Financial Planning Practice Standards are developed

and promulgated by certified financial Planner 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 Planner™

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 certification and standards-

setting 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 financial planning, 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

planner 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:

20 21

fORmaT Of THe PRaCtiCe standaRds

each Practice Standard is a statement regarding one

of the steps of the financial planning process. it is

followed by an explanation of the Practice 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 Standard. The

explanation is not intended to establish a professional

standard or duty beyond what is contained in the

Practice Standard itself.

COmPlIaNCe wITH THe 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 any provision of the Standards of Professional

Conduct has been violated, based on the Disciplinary

Rules established by cfP board.

esTablIsHINg aND DefININg THe RelaTIONsHIP wITH 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.

fINaNCIal PlaNNINg PROCess RelaTeD PRaCtiCe standaRd

1. establishing and defining the relationship with a

client100-1 defining the scope of the engagement

2. gathering client data200-1 determining a client’s Personal and financial

goals, needs and Priorities

3. analyzing and evaluating the client’s financial

status

300-1 analyzing and evaluating the client’s

information

4. developing and presenting financial planning

recommendations

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)

5. implementing the financial planning

recommendations

500-1 agreeing on implementation responsibilities

500-2 selecting Products and services for

implementation

6. monitoring 600-1 defining monitoring responsibilities

exPlaNaTION Of THIs PRaCtiCe standaRdPrior to providing any financial planning service,


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:

1. identifying the service(s) to be provided;

2. disclosing the practitioner’s material

conflict(s) of interest;

3. disclosing the practitioner’s compensation

arrangement(s);

4. determining the client’s and the

practitioner’s responsibilities;

5. establishing the duration of the engagement;

and

6. 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.

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 ConduCtThis 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.


PRaCTITIONeR

a mutually defined scope of the engagement

provides a framework for financial planning by

focusing both the client and the practitioner on

the agreed upon tasks. This Practice Standard

enhances the potential for positive results.

gaTHeRINg ClIeNT DaTa

200-1: DeTeRmININg a ClIeNT’s PeRsONal aND

fINaNCIal gOals, NeeDs aND PRIORITIes


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 standaRdPrior 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

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22 23

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.



effeCTIVe DaTe


January 1, 2002.



of Ethics and Rules of Conduct through Principle 7 –

diligence and rules 3.3, 4.4 and 4.5.


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.


PROfessION

compliance with this Practice Standard

emphasizes to the public that the client’s goals,

needs and priorities are the focus of financial

planning. This encourages the public to seek out

the services of a financial planning practitioner

who uses such an approach.


PRaCTITIONeR

The client’s goals, needs and priorities help

determine the direction of financial planning.

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 standaRdPrior 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.

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.



effeCTIVe DaTe


January 1, 2002.




diligence and rules 3.3, 4.4 and 4.5.


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.


PROfessION

financial planning 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 financial

planning.


PRaCTITIONeR

sufficient and relevant quantitative information

and documents provide the foundation for analysis.

Ultimately, this will facilitate the development of

appropriate recommendations.

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 standaRdPrior 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.

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effeCTIVe DaTe


January 1, 2002.




– objectivity, Principle 3 – competence, Principle 7 -

diligence and rules 1.4, 4.1, 4.4 and 4.5.


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.


PROfessION

objective analysis and evaluation enhances

the public’s recognition of and appreciation for

financial planning and increases the confidence in

financial planning practitioners who provide this

service.


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.

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 financial planning. 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 standaRdafter 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.

effeCTIVe DaTe


January 1, 2002.


CfP bOaRD’s Code of ethiCs aND Rules of ConduCtThis Practice Standards relates to cfP board’s Code


– 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)

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 standaRdafter 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


January 1, 2002.




– objectivity, Principle 3 – competence, Principle 6 –


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.

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exPlaNaTION Of THIs PRaCtiCe standaRdwhen 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 practi-

tioner 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


January 1, 2002.



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.


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 financial planning. The public will seek out

those professionals who embrace these Practice

standards.


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.

ImPlemeNTINg THe fINaNCIal PlaNNINg ReCOmmeNDaTION(s)

500-1: agReeINg ON ImPlemeNTaTION

ResPONsIbIlITIes


shall mutually agree on the implementation

responsibilities consistent with the scope of the

engagement.

exPlaNaTION Of THIs PRaCtiCe standaRdThe 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 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.




3 – competence, Principle 4 – fairness, Principle 6 –


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 standaRdThe 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.

The practitioner shall make all disclosures required by

applicable regulations.

effeCTIVe DaTe

January 1, 2002.


CfP bOaRD’s Code of ethiCs aND Rules of ConduCtThis Practice Standard relates to cfP board’s code


2 – objectivity, Principle 4 – fairness, Principle 6 –


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.

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28 29


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.


PRaCTITIONeR

in the selection of products and services,

putting the interest of the client first benefits the

practitioner over the long-term.

mONITORINg

600-1: DefININg mONITORINg ResPONsIbIlITIes

the financial planning practitioner and client shall

mutually define monitoring responsibilities.

exPlaNaTION Of THIs PRaCtiCe standaRdThe 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.




diligence and rules 1.2, 3.3, 3.4 and 4.1.


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).


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.


PRaCTITIONeR

a mutually defined agreement of the monitoring

responsibilities increases the potential for client

satisfaction and clarifies the practitioner’s

responsibilities.

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DISCIPLINARy RULES AND PROCEDURESEFFECTIvE jANUARy 1, 2013

31 aRTICle 1: INTRODUCTION

aRTICle 2: DIsCIPlINaRy aND eTHICs COmmIssION

32 2.1 fUncTion and JUrisdicTion of The dec

32 2.2 Powers and dUTies of The dec

32 2.3 Powers and dUTies of The ceo of cfP board

32 2.4 hearing Panel

32 2.5 disqUalificaTion

33 2.6 cfP board coUnsel

33 2.7 venUe

33 aRTICle 3: gROUNDs fOR DIsCIPlINe

aRTICle 4: fORms Of DIsCIPlINe

34 4.1 PrivaTe censUre

34 4.2 PUblic leTTer of admoniTion

34 4.3 sUsPension

34 4.4 revocaTion

aRTICle 5: INTeRIm sUsPeNsION sTaTUs

34 5.1 issUance of a show caUse order

34 5.2 service

34 5.3 resPonse

34 5.4 failUre To resPond To The order To show caUse

35 5.5 show caUse hearing

35 5.6 inTerim sUsPension

35 5.7 aUTomaTic inTerim sUsPension

35 5.8 Proceedings sUbseqUenT To inTerim sUsPensions

35 5.9 aUTomaTic reinsTaTemenT UPon reversal of convicTion

or Professional disciPline

aRTICle 6: INVesTIgaTION

36 6.1 commencemenT

36 6.2 ProcedUres for invesTigaTion

36 6.3 Probable caUse deTerminaTion ProcedUres

36 6.4 disPosiTion

37 6.5 relinqUishmenT

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aRTICle 7: COmPlaINT - aNsweR - DefaUlT

37 7.1 comPlainT

37 7.2 service of The comPlainT

37 7.3 answer

37 7.4 defaUlT and adminisTraTive orders of revocaTion

37 7.5 reqUesT for aPPearance

37 7.6 reqUesT for exTension or conTinUance

aRTICle 8: DIsCOVeRy aND eVIDeNCe

8.1 discovery

8.2 docUmenTs

8.3 wiTnesses

8.4 resPondenT’s coUnsel

8.5 adminisTraTive dismissal


38 9.1 moTion

38 9.2 resPonse

38 9.3 lengTh

38 9.4 disPosiTion of a moTion

aRTICle 10: HeaRINgs

39 10.1 noTice

39 10.2 designaTion of a hearing Panel

39 10.3 ProcedUre and Proof

39 10.4 recommendaTion

aRTICle 11: RePORT, fINDINgs Of faCT aND ReCOmmeNDaTION

39 11.1 recommendaTion of The hearing Panel

39 11.2 Power of The dec

39 aRTICle 12: aPPeals

aRTICle 13: CONVICTION Of a CRIme OR PROfessIONal DIsCIPlINe

40 13.1 Proof of convicTion or Professional disciPline

40 13.2 dUTy To rePorT criminal convicTion or Professional disciPline

40 13.3 commencemenT of disciPlinary Proceedings UPon noTice of

convicTion or Professional disciPline

40 13.4 definiTion of Professional disciPline

aRTICle 14: seTTlemeNT PROCeDURe

40 14.1 offer of seTTlemenT

41 14.2 accePTance of offer

41 14.3 reJecTion of offer; coUnTer offer

41 aRTICle 15: ReQUIReD aCTION afTeR ReVOCaTION OR sUsPeNsION

aRTICle 16: ReINsTaTemeNT afTeR DIsCIPlINe

41 16.1 reinsTaTemenT afTer revocaTion

42 16.2 reinsTaTemenT afTer sUsPension

42 16.3 invesTigaTion

42 16.4 sUccessive PeTiTions

42 16.5 reinsTaTemenT fee

aRTICle 17: CONfIDeNTIalITy Of PROCeeDINgs

42 17.1 confidenTialiTy

43 17.2 excePTions To confidenTialiTy

aRTICle 18: geNeRal PROVIsIONs

43 18.1 qUorUm

43 18.2 noTice and service

43 18.3 sUbmissions

43 18.4 cosTs

43 18.5 elecTronic signaTUre

43 18.6 PUblicaTion

44 18.7 anonymoUs case hisTories and sancTion gUidelines

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.”

32 33

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aRTICle 2: DIsCIPlINaRy aND eTHICs COmmIssION

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 as defined in the dec charter.

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 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.

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:

1. conducts any investigation commenced

under article 6.1;

2. makes the probable cause determination

under article 6.3;

3. issues administrative orders of

revocation under article 7.4; and

4. 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 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.

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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,

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, 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 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

non-compliance 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

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.

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.


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

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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.

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.

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


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

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.

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aRTICle 13: CONVICTION Of a CRIme OR PROfessIONal 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 conclusive

proof of the commission 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 self-

regulatory 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 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 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.

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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;

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 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 self-regulatory 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 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

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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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APPEAL RULES AND PROCEDURESEFFECTIvE jANUARy 1, 2013

47 aRTICle 1: sCOPe Of RUles

aRTICle 2: aPPeal PaNel

47 2.1 fUncTion and JUrisdicTion

47 2.2 comPosiTion

47 2.3 fUncTions of The aPPeal Panel chair

47 2.4 disqUalificaTion

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aRTICle 3: sTaNDaRD Of ReVIew

47 3.1 aPPeals from orders of The dec

47 3.2 aPPeals from adminisTraTive orders

aRTICle 4: RIgHT TO aPPeal aND RePReseNTaTION

aRTICle 5: aPPeal PROCeDURes

47 5.1 iniTiaTion of aPPeal

48 5.2 PeTiTion for aPPeal

48 5.3 answer

49 5.4 rebUTTal

aRTICle 6: mOTIONs

49 6.1 filing

49 6.2 conTenT

49 6.3 resPonse

49 6.4 lengTh

49 6.5 disPosiTion of a moTion

50 aRTICle 7: aUTOmaTIC sTay Of ORDeR

aRTICle 8: THe ReCORD ON aPPeal

50 8.1 comPosiTion

50 8.2 omission from or missTaTemenT in The record

.

47 4.1 aPPeals by cfP board coUnsel

47 4.2 aPPeals by resPondenT

46 47

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52 DefINITIONs

aRTICle 9: aPPeal HeaRINg

50 9.1 noTice of hearing

50 9.2 review of The record

50 9.3 PresenTaTions

51 9.4 TranscriPT of aPPeal hearing

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aRTICle 10: DeCIsIONs

51 10.1 order of The aPPeal Panel

51 10.2 service of The order of The aPPeal Panel

aRTICle 11: ReVIew by THe aPPeals COmmITTeee Of

THe bOaRD Of DIReCTORs Of CfP bOaRD

52 11.1 PresenTaTion To aPPeals commiTTee

52 11.2 call for review by The aPPeals commiTTee

52 11.3 decision afTer review

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, rule violation(s) and/or disposition

of the proceedings, unless 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 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

4.1: aPPeals by CfP bOaRD COUNsel

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.

4.2: aPPeals by a ResPONDeNT

a. Right to Appeal. respondent may appeal

any order of the dec, except an interim

suspension order, and any administrative

order issued by cfP board counsel to the

appeal Panel, provided he or she complies

with all other provisions of these rules.

b. Right to counsel. respondent has the

right to be represented by counsel who

must be an active member in good

standing of the bar of a United states

state, jurisdiction, possession, territory, or

dependency. respondent shall identify in

his or her Petition for appeal or response

to Petition for appeal any counsel, the

counsel’s contact information and whether

the counsel will appear in person or via

telephone.

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 order of the dec

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or an administrative 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 shall 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 must specify

the party filing the appeal and must

identify the administrative order. The

content of the Petition for appeal shall

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.

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. 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. 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 (ii) 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 Petition

for appeal and the answer.

c. Length. The rebuttal 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 article 5.1b and 9.3b)

regarding procedural matters. The motion must be

filed no later than 15 days prior to the appeal hearing.

filing is accomplished by depositing the motion in the


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 a 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’

and/or appellant’s or appellee’s counsel’s last known

address.. if a response to a motion 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.

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b. Paper Review. The appeal Panel chair must

rule on all motions in a written order mailed

to both parties 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 or administrative order 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 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 each party, designating the date and place

of the hearing. The notice shall be deposited in the


to each party’s last known address.

9.2: ReVIew Of THe ReCORD

The appeal Panel shall review the record on appeal

(see article 8.1).

9.3: PReseNTaTIONs

a. Right to presentation.

1. appellant

appeals from orders issued by the dec. if

appellant requests an appearance pursuant

to article 5.2(c), he/she will have the right

to make an oral presentation. if appellant

has waived his/her right to appear pursuant

to article 5.2(c) 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.

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 5.2(c) of these

rules.

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.

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 affirm, modify the rule violation(s) and/

or disposition of the proceedings, or remand

the matter to the dec.

1. affirm

if the appeal Panel finds no clear error in the

dec’s findings of fact, rule violation(s) and

the disposition of the proceedings, it shall

affirm the dec’s decision;

2. modify

if the appeal Panel finds clear error as to

the rule violation(s) and/or disposition of

the proceedings but not the dec’s findings

of fact, the appeal Panel shall affirm the

dec’s findings of fact but it may modify the

rule violation(s) and/or disposition of the

proceedings; or

3. remand

if the appeal Panel finds clear error as to

the dec’s findings of fact, the appeal Panel

shall 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’ or ‘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.

b. Administrative Orders.

1. affirm

The appeal Panel shall affirm cfP board’s

administrative order; or

2. remand

The appeal Panel shall remand the matter

to the dec for a disciplinary hearing. in

order to remand, 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 shall be mailed to both parties within

30 days after the review by cfP board’s appeals

committee 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.

52 53

FITNESS STANDARDS FOR CANDIDATES AND PROFESSIONALS ELIgIBLE FOR REINSTATEmENTEFFECTIvE SEPTEmBER 14, 2012

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aRTICle 11: ReVIew by THe aPPeals COmmITTee Of THe bOaRD Of DIReCTORs Of CfP bOaRD

11.1: PReseNTaTION TO aPPeals COmmITTee

The managing director of Professional standards

and legal (“managing director”) shall present every

decision issued by the appeal Panel to the appeals

committee of the board of directors. The appeals

committee shall: (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 shall: (i) affirm the appeal Panel’s

decision; or (ii) if it finds clear error in the appeal

Panel’s decision, remand the matter to the appeal

Panel with instructions for further proceedings.

DefINITIONs

administRative oRdeRs cfP board counsel issues an administrative order

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 dec.

aPPellantThe party who appeals an order issued by the dec

and/or an administrative order.

aPPelleeThe 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 negleCta 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 dec; (2) the length of the delay and

its potential impact on the proceedings of either the

dec 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.

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.

effective January 1, 2011, the Fitness Standards shall

apply to Professionals eligible for reinstatement

(Per), 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.

CONDUCT DeemeD UNaCCePTable

The following conduct is unacceptable and will always

bar an individual from becoming certified:

• felony conviction for theft, embezzlement or

other financially-based crimes.

• felony conviction for tax fraud or other

tax-related crimes.

• revocation of a financial (e.g. registered

securities representative, broker/dealer,

insurance, accountant, investment advisor,

financial planner) professional license, unless

the revocation is administrative in nature, i.e.

the result of the individual determining not to

renew the license by not paying the required

fees.

• felony conviction for any degree of murder or

rape.

• felony conviction for any other violent crime

within the last five years.

CONDUCT DeemeD a PResUmPTIVe baR

The following conduct is presumed to be unacceptable

and will bar an individual from becoming certified

unless the individual petitions the commission for

consideration, and the commission grants the petition:

• Two or more personal or business

bankruptcies.

• revocation or suspension of a non-financial

professional (e.g. real estate, attorney)

license, unless the revocation is administrative

in nature, i.e. the result of the individual

determining not to renew the license by not

paying the required fees.

• suspension of a financial professional (e.g.

registered securities representative, broker/

dealer, insurance, accountant, investment

advisor, financial planner) license, unless the

suspension is administrative in nature, i.e. the

result of the individual determining not to

renew the license by not paying the required

fees.

• felony conviction for non-violent crimes

(including perjury) within the last five years.

• felony conviction for violent crimes other than

murder or rape that occurred more than five

years ago.

54

other matters that may reflect adversely upon the

profession or the cfP® certification marks will be

reviewed by the commission under the procedures

outlined in cfP board’s Disciplinary Rules and

Procedures, after the candidate or Per has

successfully completed the education, examination

and experience requirements for certification. These

include, but are not limited to, customer complaints,

arbitrations and other civil proceedings, felony

convictions for non-violent crimes that occurred more

than five years ago, misdemeanor convictions, and

employer investigations and terminations. cfP board

requires candidates for cfP® certification and Pers to

disclose certain matters on the ethics declaration of

the certification application.

PeTITIONs fOR CONsIDeRaTION

individuals who have conduct that either falls under

the “Presumptive bar” list (see above) or may reflect

adversely upon the profession or the cfP® certification

marks may petition the commission for consideration

and a determination whether their conduct will bar

certification. The process for these reviews is as

follows:

1. when cfP board learns that an individual’s

conduct falls within the “Unacceptable” list (see

above), cfP board shall notify the individual that

he/she is permanently barred from becoming

certified.

2. The individual submits a written petition for

consideration to cfP board’s Professional

standards department, and signs a form agreeing

to cfP board’s jurisdiction to review the matter.

3. cfP board reviews the request to confirm that the

conduct either falls within the “Presumptive bar”

list, or is conduct that may reflect adversely upon

the profession or the cfP® certifications marks.

once confirmed, cfP board will request all

relevant documentation from the individual, and a

fee shall be paid by the individual submitting the

petition for consideration.

following the commission’s review of the petition,

the commission shall make one of the following

determinations:

• grant the petition after determining the

conduct does not reflect adversely on the

individual’s fitness as either a registrant seeking

reinstatement or as a candidate for cfP®

certification, or upon the profession or the

cfP® certification marks, and cfP® certification

shall be issued to the individual.

• deny the petition but allow the individual to

re-apply for cfP® certification after a period

not to exceed five years. The individual shall be

required to satisfy the education, examination,

experience and ethics requirements of cfP®

certification at the time of re-application.

• deny the petition after determining the

conduct reflects adversely on the individual’s

fitness as a registrant seeking reinstatement or

as a candidate for cfP® certification, or upon

the profession or the cfP® certification marks,

and the cfP® certification shall be permanently

barred.

The commission’s decision regarding a petition

for consideration may be appealed to the appeals

committee of the board of directors, in accordance

with article 12 of the Disciplinary Rules and

Procedures.

registrants applying for reinstatement following a

period of suspension must follow the reinstatement

procedures outlined in article 16 of the Disciplinary

Rules and Procedures.

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