CFP Board Seeks Improvements to Ethics and Conduct

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CFP Board Seeks Improvements to Ethics and Conduct

The Certified Financial Planner Board of Standards, Inc. (Board) is looking to upgrade its Standards of Professional Conduct, the ethics Bible for certified financial planners (CFP). Opening up a 60-day comment period, the announcement follows on the Board’s automatic interim suspension less than a week prior of Randy Alford’s  CFP certification following the Financial Industry Regulatory Authority’s (FINRA) action to bar him from associating in any capacity with any FINRA member firm because he failed to provide requested information during the Authority’s investigation.

Not really locking the barn door after…

Alford wasn’t the impetus for the Board’s update, but more a signal of its commitment to really encourage advisors to “do the right thing.” Alford was discharged from his position as a registered representative for failing to disclose an outside business activity involving a limited partnership and for “selling away” without his firm’s approval. He failed to provide requested documents and information resulting in FINRA issuing a three-month Notice of Suspension. The suspension became permanent when Alford failed (again) to communicate with FINRA requesting a termination of his suspension. FINRA’s disciplinary actions sparked the automatic suspension and revocation of his CFP certification.

Rules still matter

The 60-day comment period ends Monday, August 21, 2017 for the Board’s recommended changes to the Terminology, Code of Ethics and Professional Responsibility, Rules of Conduct, and Financial Planning Practice Standards sections of the Standards, which include:

  • Broader fiduciary standards. It is a given that CFPs are obligated to act as a fiduciary when providing financial planning. The new standard broadens the definition of what’s included under the “financial planning” umbrella.”
  • More precise definition of “financial planning.” The Board seeks to define financial planning as “a collaborative process that helps maximize a client’s potential for meeting life goals through financial advice that integrates relevant elements of the client’s personal and financial circumstances.”  It presumes that CFPs are required to provide financial planning when providing financial advice, while also outlining the factors CFP Board will weigh in determining whether financial planning is required.
  • Specific Practice Standards for financial planning. The Practice Standards notes that the financial planning process beginning after the engagement has been formed and with goals selected after the CFP® professional has developed an understanding of the client’s personal and financial circumstances.
  • Revised process for addressing bankruptcies. As it did prior to 2012, the CFP Board will once again be involved in the disciplinary process to address bankruptcies and other types of adverse conduct.

Compliance still matters

Revising its Standards of Professional Conduct into a kinder, gentler format in no way means the Board is easing its stance on compliance. Good actors matter. Bad actors have to be identified and prevented from doing further harm. Losing one’s license, paying fines and penalties is costly. Going to jail is priceless. All of which begs the question that with all the affordable regulatory compliance tools currently on the market, why not just do the right thing? Fines and suspensions are expensive. Compliance is cheap!

Procrastination is not a compliance strategy

Waiting for the rules to change…waiting for the regulatory shoe to drop — that is not a compliance strategy. Ask yourself: Why risk even the smallest fines when compliance is so much cheaper? Especially when companies like Patrina are offering comprehensive compliance solutions and compliant data capture, file storage, and records archiving specifically designed for the financial services community.

It’s so inexpensive to do the right thing. So why don’t you? Be ready. Be compliant. Let’s talk (212-233-1155). Don’t be pennywise and pound foolish. Be safe, secure, and compliant instead.