Professional Conduct & Regs (7%) Flashcards
6 Steps in the Financial Planning Process Practice Standards?
(EGAD IM - Even God Admits Dat It’s Mesmerizing)
- Establishing and Defining the client planner relationship.
- Gathering client data and including goals
- Analyzing and evaluating the client’s current financial status.
- Developing and presenting recommendations and/or alternatives.
- Implementing the recommendations.
- Monitoring the recommendations.
CFP Board Code of Ethics and Professional Responsibility Code of Ethics
Hint: (DO I C CFP?)
D iligence - Provide professional services diligently. Diligence is the provision of services in a reasonably prompt and thorough manner, including the proper planning for, and supervision of, the rendering of professional services.
O bjectivity - Provide professional services objectively. Objectivity requires intellectual honesty and impartiality. Regardless of the particular service rendered of the capacity in which a certificate functions, certificates should protect the integrity of their work, maintain objectivity and avoid subordination of their judgement.
I ntegrity - Provide professional services with integrity. Integrity demands honesty and candor which must not be subordinated to personal gain and advantage. Certificants are placed in positions of trust by clients, and the ultimate source of that trust is the certificant’s personal integrity.
C ompetence - Maintain the knowledge and skill necessary to provide professional services competently. Competence means attaining and maintaining an edqauate level of knowledge and skill.
C onfidentiality - Protect the confidentiality of all client information. Confidentiality means ensuring that information is accessible only to those authorized to have access.
F airness - Be fair and reasonable in all professional relationships. Disclose conflicts of interest. Fairness requires impartiality, intellectual honesty and disclosure o material conflicts of interest.
P rofessionalism - Act in a manner that demonstrates exemplary professional conduct. Professionalism requires behaving with dignity and courtesy to clients, fellow professionals, and others in business-related activities.
Rules of Conduct
DDC OOO (O cubed)
- Defining the Relationship with the Prospective Client or Client
- 4 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 as defined by CFP Board.
- Information Disclosed to Prospective Clients and Clients
- shall not communicate false or misleading information directly or indirectly related to certificants professional qualifications or services.
- Disclose all of the following
- conflicts of interest
- Prospective Client and Client Information and Property
- Treat everything as confidential. No such thing as advisor/client privileges like attorney / client privileges.
- A certificant shall not borrow money from a client. Exceptions to this Rule include:
- The client is a member of the certificant’s immediate family, or
- The client is an institution in the business of lending money and the borrowing is unrelated to the professional services performed by the certificant
- A certificant shall not lend money to a client. Exceptions to this Rule include:
- The client is a member of the certificant’s immediate family, or
- The certificant is an employee of an institution in the business of lending money and the money lent is that of the institution, not the certificant.
- Obligations to Prospectives Clients and Clients
- A certificate shall treat prospective clients and clients fairly and provide professional services with integrity and objectively.
- Obligation to Employers
- Obligations to the CFP Board
- Need to notify CFP in writing of any conviction in 30 days.
Discipline Process and Procedures
Hint: (RIP HDA)
- Request for Investigation
- Investigation
- Probable Cause Determination
- Hearing Panel
- Disciplinary and Ethics Commission
- Appeal Committee
Activities that CFP Board would NOT likely consider to be material elements of financial planning include
- Opening an account or completing an application
- Fact-finding to meet regulatory requirements for suitability such as the“Know Your Customer” rules
- Solely providing brokerage and/or insurance products or services
- Engaging in activity solely related to the sale of a specific product
- Acting as a mortgage broker without providing any other financial services
- Completing tax returns without providing any other financial services
- Teaching a financial class or continuing education program
Under the definition of “financial planning,” the Standards provide guidance CFP® professionals may use to determine whether they are providing financial planning.
- The client’s understanding and intent in engaging the CFP® professional
- The degree to which multiple financial planning subject areas are involved
- The comprehensiveness of data gathering
- The breadth and depth of recommendations
How to use the CFP® letters
- Always use capital letters.
- Never use periods.
- Always use the ® symbol.
- Always use with one of CFP Board’s approved nouns (“certificant,” “professional,” “practitioner,” “certification,” “mark” or “exam”) unless directly following the name of the individual certified by CFP Board. (ME CC PP)
- Always associate with the individual(s) certified by CFP Board.
How to use the word CERTIFIED FINANCIAL PLANNER™
- Always use capital letters or small cap font.
- Always use the ™ symbol.
- Always use with one of CFP Board’s approved nouns (“certificant,” “professional,” “practitioner,” “certification,” “mark” or “exam”) unless directly following the name of the individual certified by CFP Board. (ME CC PP)
- Always associate with the individual(s) certified by CFP Board.
Fitness Standards - Conduct Deemed Unacceptable
The following conduct is unacceptable and will always bar an individual from becoming certified:
- Felony conviction for theft, embezzlement or other financially-based crimes.
- Felony conviction for tax fraud or other tax-related crimes.
- Revocation of a financial (e.g. registered securities representative, broker/dealer, insurance, accountant, investment advisor, financial planner) professional license, unless the revocation is administrative in nature, i.e. the result of the individual determining not to renew the license by not paying the required fees.
- Felony conviction for any degree of murder or rape.
- Felony conviction for any other violent crime within the last five years.
Fitness Standards - Conduct Deemed a Presumptive Bar
The following conduct is presumed to be unacceptable and will bar an individual from becoming certified unless the individual petitions the DEC for consideration, and the DEC grants the petition:
- Two or more personal or business bankruptcies.
- Revocation or suspension of a non-financial professional (e.g. real estate, attorney) license, unless the revocation is administrative in nature, i.e. the result of the individual determining not to renew the license by not paying the required fees.
- Suspension of a financial professional (e.g. registered securities representative, broker/dealer, insurance, accountant, investment advisor, financial planner) license, unless the suspension is administrative in nature, i.e. the result of the individual determining not to renew the license by not paying the required fees.
- Felony conviction for non-violent crimes (including perjury) within the last five years.
- Felony conviction for violent crimes other than murder or rape that occurred more than five years ago.
CFP Certificant - State Registration
Register with the STATE if…
- Meets definition of an adviser (Provides Advice or Analysis Concerning Securities + Is in the BUSINESS of providing investment advice + Receives Compensation for services)
- Manages less than $100 million of client funds
- State where adviser is a nonresident may not impose greater requirements than state of residence
CFP Certificant - Federal Registration
Register with the SEC if….
- Meets definition of an adviser (Provides Advice or Analysis Concerning Securities + Is in the BUSINESS of providing investment advice + Receives Compensation for services)
- Manages $100 million of client funds, may register with SEC*
- Manages $110 million or more, must register with SEC
- No state registration available
CFP Board’s Disciplinary Rules and Procedures
Hint: Pee Pee SenioR - P P S R
- Private censure
- Public letter of admonition
- Suspension
- Revocation
M1 T00 v8 1707 time 14:15 Full material think like a planner. Review it two weeks before exam and understand this well. You will have explain the higher level of thinking on this by going through the steps in order.
- Code of Ethis and Professional Responsibility
- Pratice Standards
- Discipline Process and Procedures
Review webpage https://www.cfp.net/for-cfp-professionals/professional-standards-enforcement/current-standards-of-professional-conduct/compliance-resources/frequently-asked-questions/index-of-questions
https://www.cfp.net/for-cfp-professionals/professional-standards-enforcement/current-standards-of-professional-conduct/compliance-resources/frequently-asked-questions/index-of-questions
