—— CFP BOARD INVESTIGATIONS ——
The attorneys at the Law Office of Thomas V. Sjoblom defend Certified Financial Planners (“CFPs”) in CFP Board inquiries, Notice of Investigations, formal complaints and disciplinary hearings brought by the CFP Board, including appeal proceedings.
WHAT IS THE CFP BOARD?
The Certified Financial Planner Board of Standards, Inc. (“CFP Board”) is a nonprofit professional body for personal financial planners in the United States. The CFP Board sets standards for financial planning and administers the CFP® certification so that the public has access to and benefits from competent and ethical financial planning. CFP certification is currently held by more than 88,000 people in the United States. Qualified candidates with CFP certification are required to uphold the high standards in the CFP Board’s Code of Ethics and Standards of Conduct. Failing to do so may result in suspension or revocation of the financial planners right to use the CFP designation.
CFP BOARD ENFORCEMENT PROCESS
The CFP Board enforces the Code of Ethics and Standards of Conduct through a peer-reviewed process outlined in the Board’s Procedural Rules. The process includes:
• Notice of Investigation. The CFP Board provides the CFP professional with a written notice of investigation stating that the professional is under investigation and identifying the general nature of the investigation. The notice of investigation will demand a response in writing within 30 days. Failure to respond may result in a suspension of the professional’s certification and license for one year and one day; a temporary bar from seeking CFP certification for one year and one day; a revocation of certification and license; or a permanent bar from seeking CFP certification.
• Investigation. Once the CFP Board commences its investigation, it may deliver to the CFP professional Requests for Production, Requests for Information, and Requests for Admission. Generally, the professional must deliver responsive documents or information within 30 days, and within 14 days from delivery of any subsequent requests. Failure to respond, provide documents or truthful information constitutes grounds for sanctions.
• Letter of Dismissal; Settlement Offer; Complaint. Upon close of its investigation, the CFP Board must determine whether there is probable cause to believe grounds for sanction exist. If no probable cause exists, the investigation must be dismissed, but the CFP Board may reserve the right to reopen it in the future. If probable cause exists, the CFP Board has the option to dismiss the investigation with a Letter of Dismissal indicating that a violation has occurred, but the CFP professional’s conduct does not warrant referral to the CFP Board’s Disciplinary and Ethics Commission (the “DEC”) for a sanction; present a Settlement Offer to the DEC; and/or deliver a Complaint against the CFP professional.
• Interim Suspension.
o Automatic Interim Suspension. A CFP professional may be temporarily suspended during the pendency of proceedings, without a hearing, if the professional is convicted of a misdemeanor or felony for fraud, theft, misrepresentation, violence, or a crime of moral turpitude; is the subject of a Civil Finding for fraud, theft, misrepresentation, violence, or an act of moral turpitude; is the subject of a professional discipline that resulted in a revocation, bar, or equivalent sanction; voluntarily terminates or surrenders a financial professional license; or consents to the entry of an interim suspension order.
o Motion for Interim Suspension. Rather than an automatic interim suspension, the CFP Board may deliver a motion requesting temporary suspension of a CFP professional’s Certification and Trademark License. The Chair of the DEC has the discretion to hold a hearing on the motion. The motion will be granted if it is shown by a preponderance of the evidence (i.e., more probable than not) that the professional’s conduct poses a significant threat to the public or significantly impinges upon the reputation of the CFP profession or the CFP® certification marks.
• Issuance of Complaint; Answer. A professional must respond within 30 days of delivery of the Complaint, or within 14 days of delivery of an Amended Complaint. Failure to file an Answer constitutes grounds for sanction.
• Professional’s Request for Documents. A professional may request, in writing to the CFP Board’s counsel, the production of documents in CFP Board’s investigative file that are not privileged nor confidential. The CFP Board counsel has 30 days to respond to such request.
• Disciplinary Hearing. The CFP Board is obligated to hold a hearing in any case presented to the DEC if the professional, CFP Board Counsel, or the DEC requests hearing. A Hearing Panel will conduct the hearing, and must consist of at least three persons—a majority of which must be CFP professionals. At the hearing, the professional and CFP Board Counsel may present documents, witnesses, and argument, and make recommendations regarding an appropriate sanction.
• Final Order. The DEC will issue a written order that sets forth the basis for the decision that may be appealed to a committee of the Board of Directors.
• Appeal. A CFP professional or CFP Board Counsel may appeal the final order to a committee of the CFP Board’s Board of Directors. The CFP professional, however, has no further rights to appeal to the SEC or any other government agency or court.
Diagrams of the CFP Board investigative, settlement, and hearing process may be found here.
ACTIONS THE MAY PROMPT A CFP BOARD INVESTIGATION
CFP Board investigations are triggered by numerous sources, including:
• Customer complaints
• Customer arbitrations
• Criminal matters
• Regulatory actions by the SEC, CFTC, FINRA and state regulators,
• Employment terminations,
• Internal investigations.
GROUNDS FOR DISCLIPLINE
Misconduct by a CFP professional, individually or in concert with others, including the following acts or omissions, may constitute grounds for sanction:
• An act or omission that violates the provisions of the Code of Ethics and Standards of Conduct. A few acts or omission include:
o Failing to place the interests of the client above the interests of the CFP professional;
o Failing to avoid conflict of interests or failing to fully disclose and manage material conflicts of interest;
o Failing to act with the care, skill, prudence, and diligence that a prudent professional would exercise;
o Failing to comply with the terms of the engagement and all reasonable and lawful directions of the client;
o Failing to perform the professional services with integrity;
o Defrauded a client;
o Making any untrue statement of a material fact or omit to state a material fact;
o Failing to provide professional services with competence;
o Failing to respond to client inquires in a timely and thorough manner;
o Failing to exercise professional judgment on behalf of the client that is not subordinated to the interest of the CFP professional or others;
o Failing to treat clients or prospective clients with dignity, courtesy and respect;
o Failing to keep confidential and not disclose any non-public personal information about any prospective, current, or former client (subject to certain exceptions);
o Making false or misleading statements regarding the CFP professional’s method of compensation;
o Failing to exercise reasonable care and judgment when selecting, using, or recommending any software or technology while providing professional services to a client;
o Borrowing money from or lending money to a client (subject to certain exceptions);
o Commingling a client’s financial assets with those of the CFP professional.
• An act or omission that violates the criminal laws of any State or of the United States;
• Failure to respond to a request by CFP Board, or obstruction of the DEC, or any panel thereof, or CFP Board staff in the performance of its or their duties;
• Making false or misleading statements to the CFP Board
CATEGORIES OF SANCTION
The DEC may issue a final order that imposes discipline in the following forms:
• Private Censure. The DEC may order private censure of a professional, which is an unpublished written reproach of a professional that the DEC issues to a censured professional.
• Public Censure. The CFP Board will publish the order imposing the public sanction and/or summary of the contents of the order in a press release, on CFP Board’s website, and any other form of public disclosure that CFP Board determines is appropriate.
• Suspension. The DEC may order suspension of the right to use the CFP marks for a specified period of time, not greater than five years; and
• Revocation. The DEC may order permanent revocation of the right to use the CFP marks.
If you are facing a CFP Board investigation or disciplinary action, or would simply like more information on this topic, call the Law Office of Thomas V. Sjoblom, PLLC at 703-777-5971 or send us a message online.