Fundamentals Ch. 16 - Ethics and Standards of Conduct

Question 1

What are the 6 sections under the CFP Code of Ethics

Answer 1

1. Act with honesty, integrity, competence, and diligence
2. Act in the Client’s best interest
3. Exercise Due Care
4. Avoid or disclose and manage conflicts of interest.
5. Maintain Confidentiality and protect the privacy of client information
6. Act in a manner that reflects positively on the financial planning profession and CFP certification.

Question 2

Key points of Integrity and Honesty

Answer 2

1. Integrity demands honesty and candor which should not be subordinated to personal gain.

Integrity would be related to deriving compensation from a commission based product which could create a conflict of interest that would change a planning recommendation.

Question 3

Key points of Competence.

Answer 3

1. Attaining and maintaining adequate level of knowledge and kill and application of that knowledge and skill in servicing clients.
2. Includes wisdom to recognize limitations of knowledge and skill. Planner should refer to other professionals when they do not have the requisite level of competence.
3. Committed to ongoing learning and professional improvement.

Question 4

Key points acting in client’s best interest.

Answer 4

1. Impartial, intellectual honesty, and disclosure of material conflicts of interest.
2. Must withdraw your own feeling’s, prejudices, and desires in order to best serve the client.

Question 5

Due Care

Answer 5

Level of Judgement, care, prudence, determination, and activity required to understand a client’s goals, risk tolerance, objectives, and financial and personal circumstances.

Question 6

Avoid/Disclose and Manage Conflicts of interest

Answer 6

Disclose all material conflicts that could impact client decisions

Adopt and follow business practices designed to reasonably prevent conflicts of interest.

Question 7

Confidentiality and Privacy

Answer 7

Confidentiality means client information is only accessible to those authorized to have access.

Inherent to building trust and confidence with client.

Question 8

Acting in a manner that reflects positively on the planning profession and CFP designation

Answer 8

Professionalism requires behaving with dignity and courtesy to clients, fellow professionals, and in business related activities

Cooperation with other certificants to enhance and maintain public image and improve quality of services.

Question 9

What do the CFP standards of conduct do?

Answer 9

Practice standards seek to establish the level of professional practice expected of certificants engaged in financial planning.

Question 10

What is the purpose of CFPs practice standards?

Answer 10

Establish level of professionalism

advance professionalism in the practice of financial planning

enhance the value of financial planning

Question 11

What are the 6 sections that the standards of conduct are organized under?

Answer 11

1. Duties owed to the client
2. Financial planning and the application of the practice standards for the financial planning process
3. Practice standards for the financial planning process
4. Duties owed to Firms and Subordinates
5. Duties owed to the CFP board.
   Prohibition on Circumvention

Question 12

Under the standards of conduct, what are the duties owed to the client

Answer 12

1. Fiduciary Duty
2. Integrity
3. Competence
4. Disclose conflicts of interest
5. Diligence
6. Disclose and manage conflicts of interest
7. Professionalism
8. Comply with the law
9. Confidentiality and privacy
10. Refrain from borrowing or lending from a client

Question 13

Under what circumstances is it OK to disclose confidential client information?

Answer 13

1. In response to proper legal process. Subpoena
2. As necessitated by obligations to a certificants employer or partners.
3. To defend against charges of wrongdoing.
4. In connection with a civil dispute.
5. As needed to perform services for the client.
6. As required by the CFP Board in conjunction with an investigation or adjudication

Question 14

Candidate Fitness Standards: What will always bar a candidate from becoming certified?

Answer 14

1. Felony conviction for Theft, Embezzlement or other financial crimes
2. Felony conviction of tax fraud or other tax related crimes
3. revocation of a financial professional license unless revocation was administrative in nature.
4. Felony conviction for any degree of murder or rape.
5. Felony conviction for any other violent crime within last 5 years.

Question 15

Candidate Fitness standards: Presumptive Bar

Answer 15

1. Two or more personal bankruptcies.
2. Revocation or suspension of non-financial professional license, unless administrative
3. Suspension of financial professional license, unless administrative
4. Felony conviction for nonviolent crimes, including perjury, within last 5 years
5. Felony conviction of violet crimes that occurred more than 5 years ago.