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Fundamentals and Insurance > Ethics, Laws, and Code of Ethics (Lesson 1) > Flashcards

Ethics, Laws, and Code of Ethics (Lesson 1) Flashcards

1
Q

What does the CFP Boards Code and Standards do?

A
  • Benefits and protects the public
  • provides standards for delivering financial planning
  • advances financial planning as a distinct and valuable profession
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2
Q

Code of Ethics: CFP professional must: A A E A M A

A
  • Act with honesty, integrity, competence, and diligence
  • Act in the clients 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 certification
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3
Q

Standards of Conduct (What is Fiduciary Duty?)

A

Duty of loyalty, duty of care, and follow client instructions

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4
Q

Confidentiality and Privacy (When is Client Consent needed?)

A

Ordinary business - requires client consent

Legal and Enforcement Purposes - does not require consent

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5
Q

When providing Financial Advice that does not require finanical planning a CFP must provide the following seven elements prior to or at the time of the engagement:

D C C B C E O

A
  • Description of Services
  • Costs of products
  • Compensation
  • Bankruptcies/Regulatory Events
  • Conflicts of Interest
  • Economic Benefit of Referrals
  • Other Material Information
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6
Q

Fee Only means

A
  • direct fees charged to clients or as a percentage of financial assets
  • Hourly fees, flat fees, subscription fees, AUM, custodial platform fees, salary or bonus not related to sales or production goals, travel to custodian or research conference
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7
Q

Fee Based means

A

Fees and sales related compensation

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8
Q

Soft Dollar fees are

A

research or speaking services supplied by an investment company and are not sales related compensation

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9
Q

Standards of Conduct (What is Integrity)

A

CFP professional should be honest and upstanding

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10
Q

Standards of Conduct (What is Competence)

A
  • Provide professional services with relevant knowledge and skill to apply that knowledge
  • When not competent in an area CFP must gain competence, obtain the assistance of a competent professional, limit or terminate the engagement, or refer to another CFP professional
  • CPE 30 hours every two years and two hours are ethics
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11
Q

Standards of Conduct (What is Diligence)

A

Respond to client inquiries in a timely and thorough manner

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12
Q

Standards of Conduct (What is Disclose and Manage Conflicts of Interest)

A
  • Full disclosure of material conflicts of interest and provide the client with sufficiently specific facts so that a reasonable client would be able to understand
  • Written consent to a conflict is not required
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13
Q

Standards of Conduct (How does a CFP keep Sound and Objective Professional Judgement)

A

CFP professional may not solicit or accept any gift, gratuity, entertainment, non cash compensation, or other consideration that reasonably could be expected to compromise the CFP professional objectivity

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14
Q

Standards of Conduct (What is Professionalism)

A

treat clients, fellow clients, and others with dignity, courtesy and respect

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15
Q

Standards of Conduct (Comply with the Law)

A

Comply with laws, rules, and regulations governing Professional services

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16
Q

Standards of Conduct (Confidentiality and Privacy)

A

Ordinary business

  • with client consent
  • To a CFP professionals firm or other persons with whom the CFP professional is providing services to or for the client, when necessary to preform those services

Legal and enforcement purposes

  • to law enforcement authorities concerning suspected unlawful activities to the extent permitted by the law
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17
Q

Standards of Conduct (Providing Information to a Client)

A

Providing financial Advice

  • does not require a financial planning in accordance with the practice standards Providing Financial Planning
  • must be provided with accordance with the financial planning standards updating information
  • material changes and updates to public disciplinary history or bankruptcy information must be disclosed to the client within 90 days
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18
Q

Standards of Conduct (Duties when Communicating with a Client)

A

Provide accurate information and respond to client requests in a manner they will understand

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19
Q

Standards of Conduct (Duties when representing compensation method)

A

Cannot mislead the client in terms of compensation

  • Fee Only
  • Fee-Based
  • Sales related compensation (Soft dollar, 12b-1 fees, transaction fees, etc.)
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20
Q

Sales related compensation

A

Front load, back load, 12b-1 fees, insurance product commissions, sales based non cash travel incentives, salary or bonus based related to sales or production goals

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21
Q

Standards of Conduct (Duties when recommending engaging and working with additional persons)

A
  • reasonable basis for the recommendation
  • disclose compensation levels
  • exercise reasonable care to protect clients interests
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22
Q

Standards of Conduct (Duties when selecting, using, and recommending technology)

A
  • reasonable care and judgement when selecting software
  • reasonable understanding of the assumptions
  • reasonable basis for believing that the technology produces reliable, objective, and appropriate outcomes
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23
Q

Standards of Conduct (Refrain from Borrowing or lending money and commingling financial assets)

A

Can’t borrow money from client unless:

  • client is a member of the CFP’s family or
  • lender is a business organization that is in the business of lending money
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24
Q

Financial Planning Definition

A
  • Collaborative process
  • that helps maximize a Clients Potential for meeting life goals
  • through financial advice that integrates relevant elements of the clients personal and financial circumstances
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25
Q

Integrating Factors (Factors that the CFP board will weigh in determining whether a CFP professional has agreed to provide or provided financial Adivce)

A
  • Number of relevant elements the financial advice may affect
  • portion and amount of the clients financial assets that the advice may affect
  • length of time
  • effect on the clients exposure to risk
  • barriers to modifying the actions taken
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26
Q

What is the Financial planning process

A
  • Understanding the clients Personal and financial circumstances
  • Identifying and selecting goals
  • Analyzing the clients current course of action and potential alternative courses of action
  • Developing the financial planning recommendation
  • Presenting the financial planning recommendation
  • Implementing the financial planning recommendation
  • Monitoring Progress and Updating
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27
Q

Qualitative Data

A

Clients health, life expectancy, family circumstances, values, attitudes, expectations

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28
Q

Quantitative Data

A

Income, expenses, cash flow, savings, assets

29
Q

Duties owed to firms and Subordinates

A
  • Use reasonable care when supervising
  • Comply with Lawful objectives of CFP professionals firm
  • Providing notice of Public discipline (Need to provide employer with notice of suspension in writing that is it, no additional paper work need)
30
Q

Felony under CFP board

A

offense punishable by a sentence of at least one year or a fine of at least $1,000

31
Q

Relevant Misdemeanor under CFP Board

A

Criminal offense that is not a Felony for conduct involving fraud, theft, misrepresentation, other dishonest conduct, violence, a second (or more) alcohol and/or drug related offense

32
Q

Minor Rule Violation

A

$2,500 or less fine by SEC and sanctioned person does not contest the fine

33
Q

How soon must a CFP report that they have been named, charged, convicted, settled, adversely mentioned in an action, arbitration or civil event

A

30 Days

  • report both the initial charge or investigation as well as its outcome
  • Exceptions arbitration compensation for $5,000 or less and violations settled for $15,000 or less
34
Q

CFP Mark can only be followed by 6 approved nouns

A
  • professional
  • practitioner
  • mark
  • certificant
  • certification
  • exam
35
Q

The Disciplinary and Ethics commission has jurisdiction over

A

complaints that do not meet the criteria for interim Suspension

36
Q

The Disciplinary and Ethics commission will

A
  • give written notice to the Respondent the they are under investigation
  • Respondent as 30 calendar days to file a written response to the allegations with the CFP Board if no response after a second notice (30 days) CFP will be considered in Default
37
Q

What happens during a Interim Suspension

A

-cannot use the CFP marks

38
Q

How long does a CFP have to respond about the notice of intern suspension order

A

14 Days

39
Q

When will a interim suspension immediately be issued without a hearing from the CFP board?

A
  • Felony criminal conviction or misdemeanor criminal conviction for fraud theft, misrepresentation, violence or crimes of moral turpitude
  • Engaged in fraud, theft, misrepresentation, violence
  • Revocation of a financial professional license
40
Q

How long to responded to Notice of investigation and consequence of missed deadline

A

30 Calendar days, and second notice

41
Q

How long to respond to the Second Notice of Investigation and consequence of missed deadline

A

30 Calendar days, and Default

42
Q

How long to respond to request for documentation and consequence of missed deadline

A

30 Calendar Days, and Second request is sent

43
Q

How long to respond to second request for documents

A

14 calendar days, and Constitutes grounds for sanction

44
Q

How long to respond to motion for interim suspension

A

14 calendar days

45
Q

How long can the suspension of use of CFP marks last

A

90 days to 5 years

46
Q

How long can the revocation of use of CFP marks last

A

Permanent

47
Q

How long do you have to provide evidence to CFP board that certificant receiving suspension or revocation has stopped using the marks?

A

45 calendar days

48
Q

How long do you have to notify CFP board of change of mailing address or email address?

A

30 Calendar days

49
Q

What is a Private Censure?

A

Unpublished written reproach mailed by the Commission to a censored CFP Professional

50
Q

What is a Public Censure?

A

Publishable written reproach of the CFP professional

51
Q

What is a Suspension and how long can it last?

A

Period no less than 90 days and no more than 5 years

52
Q

What is a revocation?

A

permanent removal of a CFP professional’s right to use the marks

53
Q

CFP Board has identified three categories of adverse conduct relevant to fitness

A
  • Conduct that is unacceptable
  • Conduct that is presumed to unacceptable
  • Other conduct that may reflect adversely upon the individual, profession, or CFP marks
54
Q

(Candidate Fitness Standards)

Felony conviction for theft, embezzlement, or other financial based cirmes

A

Barred from becoming CFP

55
Q

(Candidate Fitness Standards)

Felony Conviction for tax fraud or other tax related crimes

A

Barred from becoming CFP

56
Q

(Candidate Fitness Standards)

Revocation of a finanical professional license unless the revocation is administrative in nature

A

Barred from becoming CFP

57
Q

(Candidate Fitness Standards)

Felony conviction for any degree of murder or rape

A

Barred from becoming CFP

58
Q

(Candidate Fitness Standards)

Felony conviction for any other violent crime within the last 5 years

A

Barred from becoming CFP

59
Q

(Candidate Fitness Standards)

Two or more personal or business bankruptcies

A

Presumed to be unacceptable

60
Q

(Candidate Fitness Standards)

Revocation or suspension of a nonfinancial professional liscense unless revocation is administrative

A

Presumed to be unacceptable

61
Q

(Candidate Fitness Standards)

Suspension of a financial professional liscense unless the suspension is adminstrative in nature

A

Presumed to be unacceptable

62
Q

(Candidate Fitness Standards)

Felony conviction for non violent crimes (including perjury) within the last 5 years

A

Presumed to be unacceptable

63
Q

(Candidate Fitness Standards)

Felony conviction for violent crimes other than murder and rape that occured more than 5 years ago

A

Presumed to be unacceptable

64
Q

One Bankruptcy

Report to CFP board within _____

Report to Client within _____

Type of Adjudication

A

30 Days CFP Board

90 Days Client

Public censure without incurring a hearing fee

or

pay a hearing fee and follow a streamlined adjuduction procedure

65
Q

Two Bankruptcy

Report to CFP board within _____

Report to Client within _____

Type of Adjudication

A

30 calendar days CFP Board

90 Days Client

Adjudication: Follow normal disciplinary procedure for adjudication complaints

66
Q

Review process for Transgressions that fall under the Presumption list

A
  • Submit written petition to Professional Review Staff and sign form agreeing to CFP Board jurisdiction to consider the matter
  • Fee will be charged to all canadidates
  • Staff will review the request to make sure it falls under the presumed list
  • If yes, all relevant information will be provided to the Disciplinary and Ethics Commission for a determination
67
Q

The Disciplinary and Ethics commission desicion can be appled to the ____

A

Appeals Committe of the Board of Directors

68
Q

What are the 6 Standards of Conduct?

D F P D D P

A
  • Duties owed to the client
  • Financial Planning and Application of the Practice Standards for the Financial planning process
  • Practice standards for the financial planning process
  • Duties owed to the firms and subordinates
  • Duties owed to CFP Board
  • Prohibition on Circumvention

Fundamentals and Insurance (10 decks)

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