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CFP 501-Intro to financial planning > Module 1 (3) Rules of Conduct & Disciplinary Procedures > Flashcards

Module 1 (3) Rules of Conduct & Disciplinary Procedures Flashcards

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1
Q

What is rule 4.4?

A

A FA shall exercise reasonable and prudent professional judgment in providing professional services to clients.

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2
Q

What is rule 3.6?

A

A FA shall not borrow money from a client. Exceptions are as follows:

a. The client is a family member
b. The client is an institution in the business of lending money and the borrowing is unrelated to the professional services performed by the FA.

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3
Q

What is rule 4.3?

A

A FA shall be in compliance with regulatory requirements governing professional services provided to the client.

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4
Q

What is rule 3.1?

A

Treat information as confidential except as required in response to proper legal process

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5
Q

What is rule 6.1?

A

A FA shall abide by the terms of all agreements with CFP board, including but not limited to:

  1. using CFP marks properly
  2. Cooperating fully with CFP Board’s trademark and professional review operations requirement
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6
Q

What is rule 3.7?

A

A certificate shall not lend money to a client. Exceptions are as follows:

a. The client is a family member
b. The FA is an employee of an institution in the business of lending money and the money lent is that of the institution.

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7
Q

Rule 1.3

If the services include financial planning or elements of financial planning, what must the certificant do, and what must it specify?

A

the certificant will enter a written agreement that shall specify:

  1. the parties to the agreement
  2. the date of the agreement and the duration
  3. how and on what terms each party can terminate the agreement
  4. the services to be provided as part of the agreement
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8
Q

What is rule 3.3?

A

A FA shall obtain the information necessary to fulfill his or her obligations. If the FA cannot obtain the necessary information, the FA shall inform the prospective client of client of any and all material deficiencies.

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9
Q

Rule 1.2

If the certicants’ (FA’s) services include financial planning or material elements of financial planning, prior to entering an agreement what must the FA provide, and what must it include?

A

shall provide written information or discussion with the prospect and/or client with the following:

  1. the obligations/responsibilities of each party related to : defining goals/objectives
  2. gathering and providing appropriate data
  3. examining the result of the current course of action without changes
  4. the formulation of any recommended actions
  5. implementation responsibilities
  6. monitoring responsibilities
  • Compensation that any party to the agreement or legal affiliate to the party will or could receive under the terms of the agreement (basically whose paid, how they’re paid) & factors or terms that determine costs; how decisions benefit each person
  • terms under which the agreement permits the certificate to offer proprietary products

terms under which the certificate will use other entities to meet any of the agreement’s obligations

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10
Q

What do the Rules of Conduct articulate?

A

the professional duties owed to clients on the part of financial planners

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11
Q

What is rule 5.1?

A

A FA who is an employee/agent shall perform professional services with a dedication to the lawful objective of the employer/principal and in accordance with CFP board of ethics.

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12
Q

What is rule 3.5?

A

A certificate shall identifying keep complete records of all funds or other property of a client in the custody or under the discretionary authority of the FA.

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13
Q

What is rule 3.9?

A

An FA shall not commingle a client’s property with other clients property unless the this is permitted by law, or the FA has both explicit written authorization to do so from each client, and sufficient record keeping to track each client’s assets accurately.

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14
Q

What is rule 4.2?

A

A FA shall offer advice only in those areas in which he is competent to do so, and shall maintain competence in all areas in which he is engaged to provide professional services.

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15
Q

Describe the Hearing Panel.

A

When a complaint is filed, a hearing takes place before a panel of a minimum of 3 individuals.
At least one member must be a member of the disciplinary and ethics commission and at least two must be CFP’s.

The respondent can respond in person or by phone. The respondent can be represented by counsel, and to cross examine witness and to present evidence.

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16
Q

Describe the role of Disciplinary and ethics commission.

A

The hearing panel submits its findings for review to the full disciplinary and ethics commission which after considering all the facts and recommendations rends a final decision.

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17
Q

What is rule 4.1?

A

A FA shall treat prospective clients fairly and provide professional services with integrity and objectivity.

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18
Q

What is rule 4.5?

A

In addition to rule 1.4, a FA shall make and/or implement only recommendations that are suitable for the client.

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19
Q

What is rule 4.7?

A

A FA shall advise his clients of any certification suspension or revocation he receives from CFP board.

20
Q

What is rule 6.2?

A

A FA shall meet all CFP Board requirements, including:

1. Continuing education requirements

21
Q

What are the steps of the disciplinary process?

A
  1. Request an investigation
  2. Investigation
  3. Probable cause determination
  4. Hearing panel
  5. Disciplinary and Ethics Commission
  6. Appeals Committee
22
Q

What are the rules of conduct?

6

A
  1. Defining the relationship with the prospective clients and current clients
  2. Information disclosed to prospective clients and current clients
  3. Prospective client and client information and property
  4. Obligations to prospective clients and clients
  5. obligations to employers
  6. Obligations to CFP board.
23
Q

How is appeals committee made up?

A

It is composed of up to four members of the board of directors. At least two of whom are first year members of the board. Members of the appeals committee may not be members of the disciplinary and ethics commission.

24
Q

Rule 1.4

What must the certificant do at all times? And what do they owe to the client?

A

a certificant shall at all times place the interest of the client ahead of his or her own.

When the certificant provides financial planning or material elements of financial planning, the certificant owes to the client the duty of care of a fiduciary

25
Q

Describe the process of Probable Cause Determination.

A
  1. The CFP board determines if there is probable cause to believe grounds for discipline exist.
    1a. if so, they shall will issue a formal complaint agains the CFP and a notice of hearing.
    1b. The formal complaint contains the specific allegations of misconduct and the potential code of ethics and/or practice standard violations.
  2. The CFP has 20 days from the date of receipt f the compliant to file a written answer.
    2a. If not answer is received, the allegations in the complaint are deemed admitted and the CFP’s right to use mark is revoked.
26
Q

What is rule 6.3?

A

A FA shall abide by the terms of all agreements with CFP board, to notify board within 45 days of changes in:

  1. e-mail address
  2. telephone numbers
  3. physical address
27
Q

What are the forms of discipline?

A
  1. Private written censure
  2. Public letter of admonition- a published revocation of the FA’s behavior
  3. Suspension of the right to use the CFP marks for a period of time, not to exceed 5 years. (A suspension of more than 1 year requires petition for reinstatement.
  4. Permanent revocation of the right to use CFP marks.
28
Q

What does rule 6 deal with?

A

Obligations to CFP borad.

29
Q

What is rule 6.5?

A

A FA shall not engage in conduct which reflects adversely on his integrity or fitness as a FA or upon the CFP marks, or upon the profession.

30
Q

What is rule 3.2?

A

A FA shall take prudent steps to protect the security of information and property.

31
Q

What does rule 5 deal with?

A

Obligations to employers.

32
Q

What is rule 6.4?

A

A FA shall notify the CFP Board in writing of any conviction of a crime, except driving, unless it involves alcohol or drugs, or of any professional suspension or bar within 10 calendar days after the date on which the FA is notified of the conviction or suspension or bar.

33
Q

What does rule 4 deal with?

A

Obligations to prospective clients or clients.

34
Q

What is rule 4.6?

A

A FA shall provide reasonable and prudent professional supervision or direction to any subordinate or 3rd party to to whom the FA assigns responsibilities for any client services.

35
Q

What is Rule 1.1 (related to defining the relationship with the prospective client or client)?

A

The certificant and the prospective client shall mutually agree upon the services to be provided by the certificant

36
Q

What are the grounds for discipline?

A
  1. Any act or omission which violates the provisions of the CFP board’s code of ethics and professional responsibility
  2. Any act or omission which fails to comply with the CFP boards financial planning practice standards
  3. any act or omission which violates the criminal laws of any state or of the U.S.
  4. Any act as the proper basis for suspension of a professional license
  5. Any act or omission which violates the CFP board’s Disciplinary Rules and Procedures
  6. Failure to respond to a request by the disciplinary and ethics commission’s performance of duties
  7. any false or misleading statement made to the CFP board
37
Q

When does a matter go to the appeals committee

A

If a CFP is aggrieved by the decision of the Disciplinary and Ethics commission, a CFP has the right to petition the decision to the appeals committee.

38
Q

Rule 2.1

What must the certificant not fail to disclose to the client and/or prospective client?
Rule 2.1

What must a certificant not mislead in?

A
  • must not fail to disclose or otherwise omit facts where that disclosure is necessary to avoid misleading clients
  • about the potential of benefits of the certificant’s services.
39
Q

Rule 2.2

What information must the certificant disclose to a prospective client or client?

A

an accurate and understandable description of the compensation arrangements being offered

Information related to costs and compensation to the certificant and/or the certificant’s employer, and

terms under which the certificant and/or the certificant’s employer may receive any other sources of compensation, and if so, what the sources of these payments are and on what they are based

A general summary of likely conflicts of interest with all parties involved (including affiliates, third parties, etc.) including contractual or agency relationship of the certificant or employer that has a potential to materially affect the relationship

any information about the certificant/employer that could reasonably be expected to materially affect the client’s decision to engage the certificant that the client might reasonably want to know in establishing the scope and nature of the relationship, including but not limited to information about the certificate’s areas of expertise

contact information for the certificant

If the services include financial planning or material elements of financial planning–these disclosures must be in writing.

40
Q

What does rule 3 deal with?

A

Prospective client and client information and property

41
Q

What is rule 3.8?

A

an FA cannot commingle a client’s property with the property of the FA or the FA’s employer.

Exception: if the commingling is permitted by law or explicitly authorized and defined in a written agreement between the parties.

42
Q

What is rule 3.10?

A

A FA shall return a client’s property to the client upon request as soon as practicable or consistent with a time frame specified in an agreement with the client.

43
Q

Describe the process of investigation.

A

If the CFP Board decides to proceed with and investigation a CFP professional is given written notice, which the general nature of the allegations.

the CFP is given 30 days within which to file written response.

If no response is received within the allotted 30 days, a a formal compliant is issued and the case is presented to a hearing panel.

44
Q

What is rule 5.2?

A

A FA who is an employee/agent shall advise his current employer/principal of any certification suspension or revocation he receives from CFP board.

45
Q

Describe the process of “Request for Investigation”

A

Upon receipt of a written complaint, CFP Board Counsel reviews the allegations to determine if further investigation is warranted.

46
Q

What is rule 3.4?

A

A FA shall clearly identify assets, if any, over which the certificate will take custody, exercise investment discretion, or exercise supervision.

CFP 501-Intro to financial planning (8 decks)

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