The Certified Financial Planner Board of Standards began enforcing its new Code of Ethicsand Standards of Conduct on June 30,2020. This means a CFP is obligated toact as a fiduciary and in the best interest of his or her client at all times whenproviding financial planning or advice.
Failure to comply may result in disciplinary action based on the CFP Board’snew Procedural Rules, also effectiveJune 30, 2020.
Among other changes, the CFP
Board’s revisions to the Code and
Standards require a CFP to:
• Obtain the information necessary to
review and analyze the client’s per-
sonal and financial circumstances
prior to determining their financial
•Document the facts and circumstances they gathered or providedto the client when giving advice,including recommendations, andretain that information;
•Analyze and document the client’scurrent course of action and providepotential alternatives, develop financialplanning recommendations and present the recommendations to the client;
• When engaged for monitoring, theCFP should document and retainhis/her analysis of the client’s progress towards achieving those goals;
• If they specifically exclude monitoring and implementation as part oftheir engagement, they must complete, at least, the first five steps of thefinancial planning process. Otherwise,they must complete all seven steps ofthe financial planning process;
However, when engaged for monitor-
ing and updating, a CFP must:
a) Document which actions, prod-
ucts and services are and are not
subject to the their monitoring
b) Determine how and when they
will monitor actions, products
c) Establish how the client will noti-
fy them of any material changes
in the client’s qualitative and
quantitative information; and,
d)Determine the circumstances
under which they will update/
revise the client’s financial plan-
• Fully disclose material conflicts of
interest that may affect the profes-
sional relationship, how the CFP will
manage those conflicts and obtain
the client’s informed consent; and
• Not make false or misleading rep-
resentations regarding their firm’s
method(s) of compensation.
Remember, the Code and Standards
are the responsibility of the CFP and not
of their respective firms. However, if an
advisory firm updates its policies and
procedures to provide guidance to its
CFPs, regulators (e.g., the Securities and
Exchange Commission and the Financial
Industry Regulatory Authority), may
consider these policies and procedures
during review of the advisory firm.
The final Procedural Rules replace
the previous rules. The CFP Board’s
Disciplinary and Ethics Commission
“has the authority to issue a final order
that finds facts, determines whether
a violation has occurred and, where
appropriate, impose discipline in the
form of a sanction,” which may include
revoking a CFP’s designation with “no
opportunity for reinstatement.”
Additionally, the latest rules require
a CFP with multiple customer dis-
putes (evidenced by BrokerCheck), to
turn over documents related to those
disputes. The existence of the settled
customer complaints will constitute
grounds for sanction(s) unless the CFP
proves that the allegations of miscon-
duct are without merit.
Guidance, including a Roadmap to theCode and Standards and Case StudiesApplying the New Standards, is availablefrom the CFP Board .
Also, CFPs should consider implementing best practices and enhancements tocertain documents including the InvestorProfile Statement, Client EngagementLetters, Investment Advisory Agreementsand the CFP’s Form ADV Part 2B.
Thomas D. Giachetti is chairman of theInvestment Management and SecuritiesPractice Group of Stark & Stark, a law firm. Hecan be reached at firstname.lastname@example.org.
THE COMPLIANCE COACH
By Thomas D. Giachetti
CFP Board Is Now Enforcing New Code of
Ethics and Standards of Conduct
Advisors will have to toe the line with new rules that put into place
fiduciary and best interest requirements.