A. Professional Conduct & Regulation Flashcards
A.1.a. Explain the Fitness Standards for CFP® Candidates & Registrants?
Standards established for new & returning CFP® candidates to identify adverse conduct in three different levels that either deems eligilibity for or barring from registration:
- Conduct that is unacceptable
- Conduct that is presumed to be unacceptable
- Other conduct that may may adversely reflect one’s integrity, profession, fitness, or the CFP® marks
A.1.a.i. Conduct Deemed Unacceptable (Fitness Standards)
- Financially-based crimes
- Tax-related crimes
- Revocation of a financial professional license
- (unless administrative in nature - ie: not paying renewal fees)
- Murder or rape
- Any violent crime within 5 years
A.1.a.ii. Conduct Presumed to be Unacceptable (Fitness Standards)
- 2+ personal or business bankruptcies
- Revocation/suspension of financial or non-financial professional license
- (unless administrative in nature - ie: not paying renewal fees)
- Non-violent felony within last 5 years
- Murder or Rape crimes 5+ years ago
A.1.a.iii. Other Adverse Conduct (Fitness Standards)
- Customer complaints
- Arbitrations & other civil proceedings
- Felony convictions 5+ years ago
- Misdemeanor convictions
- Employer investigations or terminations
A.1.b.i. Explain the six principles of the Code of Ethics
- Act with honesty, integrity, competence and diligence.
- Act in the client’s best interests.
- Exercise due care.
- Avoid or disclose and manage conflicts of interest.
- Maintain the confidentiality and protect the privacy of client information
- Act in a manner that reflects positively on the financial planning profession and CFP® certification
A.1.c. Explain the Duties Owed to Clients under the Standards of Conduct.
- Fiduciary Duty
- Loyalty
- Care
- Follow Client Instructions
- Integrity
- Competence
- Diligence
- Disclose & Manage Conflicts of Interest
- Sound & Objective Professional Judgment
- Professionalism
- Comply with the Law
- Confidentiality & Privacy
- Provide information to & communicate with the client
A.2.a. Describe the Financial Planning Process under the Standards of Conduct.
Ukeleles In A Dive Bar Playing Iron Maiden
- Understanding the Client’s Personal Goals & Financial Circumstances
- Identifying and Selecting Goals
- Analyzing the Client’s current and potential courses of action
- Developing Financial Planning Recommendations
- Presenting Financial Planning Recommendations
- Implementing Financial Planning Recommendations
- Monitoring Progress & Updating
A.2.b. When do the Practice Standards in developing and communicating a financial plan for a client apply?
- The CFP® Professional agress to provide Financial Planning or Financial Advice that requires planning
OR
- The Client has reasonable basis to believe they will or have provided financial planning
A.3.a. Grounds for disciplining a CFP® professional
Misconduct, including acts or omissions, that violates the CFP® Board’s Code and Standards (whether a client is involved or not).
A.3.b. Explain the disciplinary procedures of the CFP® Board
The process typically includes some or all of the following steps:
- Commencement of investigation by CFP® Board
- Investigation (if determined)
- Requests for Documents, Information, & Admissions
- Probable Cause Determination
- Dismissal by no further investigation
- Dismissal by letter with no referral to DEC
- Process complaint
- Issuance of Complaint
- CFP® must write back in 30 calendar days
- Hearing Panel (of 3 people - majority CFP® and DEC members)
- recommends whether to find grounds for sanction to DEC
- Disciplinary & Ethics Commission (DEC)
- Provides the final decision by email
- Public Censure
- Suspension of CFP®Marks
- Revocation of CFP® Marks
- Provides the final decision by email
- Appear Panel
- CFP® Professional can appeal
A.3.c. What are the disciplinary actions that can be taken by CFP® Board?
- Private Censure
- Public Censure
- Suspension of CFP®Marks
- Permanent Revocation of CFP® Marks
A.4.a. Secondary marketinstitutions,Primary market institutions, and their regulators for each security.
Legislation
Market
Regulator
Securities Act of 1933
Primary Market
SEC
Securities Exchange Act of 1934
Secondary Market
SEC = in charge of securities law
Maloney Act of 1938
- Amended Act of 1934
Secondary Market
FINRA
Investment Company Act of 1940
Primary Market
SEC
A.5.a. Identify the regulatory authorities that implact the financial planning process.
- Accountants - Board of Accountancy
- Investment Advisors - SEC or State of business
- Also subject to FINRA (SRO) & broker/dealer
- Insurange Agents - State of business
- NAIC is a regulator support organization
- Legal Practices - State Regulatory Agency
- Can be a discipline commission or committee as well
- Real Estate agents - Real Estate Commission
- Must also follow Nat’l Association of Realtors (NAR) Code of Ethics
A.5.b. Differentiate proper investment knowledge that is proper to use in the evaluation of securities and insider information.
Proper investment knowledge is available to the public while insider information is only available to Insiders of the company (like executives).
A.5.c.i. Demonstrate comprehensive understanding of investment advisor regulation.
Those who offer Advice as a Business for Compensation (ABCs) must register with state (SEC (>$110m).
- Exceptions = TABLES (Teachers, Accountants, Brokers, Lawyers, Engineers)
- Exemptions = VIPs are SaFE
- Venture Capital, Insurance companies, Private funds State, Foreign advisors, non-national Exchange securites
