Professional Conduct and Regulation Flashcards by Matthew Moore

Code of ethics: Act with

Honesty, integrity, competence, and diligence.

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Code of ethics: Act in the

Client’s best interest

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Code of ethics: Excercise

Due care

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Code of ethics: Avoid

Or disclose and manage conflicts of interest.

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Code of ethics: Maintain

The confidentiality and protect the privacy of client information.

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Code of ethics: Act in a

Manner that reflects positively on the financial planning profession and the CFP certification.

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Fiduciary duty

At all time a CFP professional must act in the client’s best interest. This includes a duty of loyalty, duty of care, and duty to follow client instructions.

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If a CFP lacks competence, he may

1) gain competence
2) obtain the assistance of a competent professional
3) limit or terminate the engagement
4) refer the client to a competent professional

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A CFP professional must report a reportable offense to the CFP Board in writing within __ calendar days?

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If a consumer is denied credit, they must be informed which credit reporting agency provided information to the creditor

Fair Credit Reporting Act of 1971

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Negative information may be retained on a credit report for 7 years and bankruptcy for 10 years

Fair Credit Reporting Act of 1971

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Consumer may include a written version of facts in their file if they disagree with the credit reporting agency.

Fair Credit Reporting Act of 1971

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Right to challenge credit card charges

Fair Credit Reporting Act of 1971

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Lenders must make uniform disclosures

Truth in Lending Act of 1968 and 1996

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Provides a standard method of calculating and reporting interest (APR).

Truth in Lending Act of 1968 and 1996

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Lenders must disclose payment terms

Truth in Lending Act of 1968 and 1996

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Regulation Z Required disclosures - the law

Truth in Lending Act of 1968 and 1996

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Enables borrowers to recover from creditors who break the rules regarding the correction of billing errors

Fair Credit Billing Act

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Allows a borrower to recover if a creditor discriminates against her for any reason that is prohibited by the Act

Equal Credit Opportunity Act

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Provides for recovery by those who suffer losses due to a financial institution failing to follow the provisions of the act.

Electronic Fund Transfer Act

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Requires the registration of IPOs

Securities Act of 1933

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Requires companies with previously issued securities to keep information current.

Securities Exchange Act of 1934

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Created the SEC

Securities Exchange Act of 1934

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Requires brokers and dealers to register with the SEC

Securities Exchange Act of 1934

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Extended securities laws to investment companies (mutual funds)

Investment Company Act of 1940

Requires registration for and regulates the activities of investment advisers

Investment Adviser Act of 1940

Insures customers' accounts up to $500,000 in securities and cash with a limit of $250,000 of cash coverage

Security Investors Protection Act of 1970

Toughens the accountability for accuracy of financial information released by corporations

Sarbanes-Oxley Act of 2002

Requires independence on corporate boards

Sarbanes-Oxley Act of 2002

Set stricter rules for auditors

Sarbanes-Oxley Act of 2002

Created the Consumer Financial Protection Bureau and the Financial Stability Oversight Council

Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010

Wrote into law the fiduciary duty owed by investment advisers to their clients

The Investment Advisers Act of 1940

Sets minimum standards for pension and health plans in private industry and provides protection for individuals participating in those plans

Employee Retirement Income Security Act of 1975

Directed the SEC to supervise the development of a national securities market and a system for nationwide clearing and settlement of securities transactions

Securities Acts Amendments of 1975

Exempted derivatives from regulation

Commodity Fututres Modernization Act of 2000

Requires broker-dealers to have internal policies, procedures, and controls to meet the "know your customer" mandate

The USA PATRIOT Act of 2001

Requires hedge fund managers with assets under management of $100 million or more to register with the SEC

Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010

What is step 1 of the financial planning process?

Understanding the client's personal and financial circumstances

What is step 2 of the financial planning process?

Identifying and selecting goals?

What is step 3 of the financial planning process?

Analyzing the client's current course of action and potential alternative course(s) of action.

What is step 4 of the financial planning process?

Developing the financial planning recommendation(s)

What is step 5 of the financial planning process?

Presenting the financial planning recommendation(s)

What is step 6 of the financial planning process?

Implementing the financial planning recommendations(s)

What is step 7 of the financial planning process?

Monitoring progress and updating

What are the three tests to be classified as an adviser under the Investment Advisers Act of 1940?

1. Advice - must give advice concerning securities 2. Business - must be engaged in the business of giving advice about securities 3. Compensation - must receive compensation for such advice

This was the original law that required investment advisers to register with the SEC?

The Investment Advisers Act of 1940

Which law prohibited financial institutions from consolidating and offering any combination of traditional commercial banking, investment banking, and insurance.

Glass-Steagall Act of 1933

This law extended SEC regulation to the OTC market.

Maloney Act of 1938

This law spread the regulation and control of insurance to the state level.

McCarran-Ferguson Act of 1945

What are the purposes of FINRA?

1. Market regulation 2. Member regulation 3. Enforcement 4. Dispute resolution 5. Advertising regulation/investment companies

What is the securities industry self-regulating body?

Financial Industry Regulatory Authority (FINRA)

Which license allow an adviser to sell mutual funds, variable annuities, variable life insurance, and initially offered Unit Investment Trusts?

Series 6

What license allow an adviser to sell any securities including individual stocks and ETFs?

Series 7

What license allows an adviser to act as a registered principal and is required to manage member's securities or investment banking business?

Series 24

What license allow an adviser to sell securities within a state?

Series 63

What license allows an adviser to provide investment advice to clients within the holder's primary state of residence?

Series 65

What license combines the Series 63 and 65 licenses?

Series 66 - must first pass Series 7

Taxes, public spending, and government borrowing are exmaples of what?

Fiscal policy

Required reserve ratio, open market operations, and the discount rate are examples of what?

Monetary policy

When taxes go down, public spending goes up, and government borrowing goes up

Expansionary policy

When taxes up, public spending goes down, and government borrowing goes down

Contractionary policy

The Truth in Lending Act states that a credit card holder can only be liable for $___ of unauthorized charges if they report the credit card lost or stolen.

$50

How many continuing education hours are required by CFP every two years?

30 hours