CFP Professional Conduct

Code of Ethics

1. Act with honesty, integrity, competence, and diligence

2. Act in the client’s best interests

3. Exercise due care

4. Avoid or disclose and manage conflicts of interest

5. Maintain the confidentiality and protect the privacy of client information

6. Act in a manner that reflects positively on the financial planning profession and CFP® certification

Standards of Conduct

A. Duties owed to Clients

B. Financial Planning & the Application of the Practice Standards for Fin planning process

C. Practice Standards for the Financial Planning process

D. Duties owed to firms and subordinates

E. Duties owed to the CFP Board

F. Prohibition on Circumvention

Equation for Fiduciary Duty

Duty of care + Duty of Loyalty + Follow client instructions

What can always be verbally disclosed to a client

Material Conflicts of Interest

What are the 7 Practice Standards

Understand the client(s) personal and financial situation

Identifying and selecting goals

Analyze the current course of action and alternative courses of action

Develop financial planning recommendations

Present financial planning recommendations

Implement financial planning recommendations

Monitor progress and update plan

When must a CFP professional self-report under the duty to the CFPB

Within 30 calendar days

What are some duties owed to clients under Standard A

A.1 Fiduciary duty

A.2 Integrity

A.3 Competence

What is the punishment for CFP professional not responding to CFPB investigation

Automatic default which can result in a sanction in itself

What are the Fitness Standards

Applies to candidates seeking initial CFP certification evaluating their past conduct. Seeing if they are ethically fit for the position.

Difference between a bar and suspension

A bar is keeping candidates from applying/obtaining the CFP at all.

A suspension is for current CFPs

What is the main point on duty owed to firm and subordinates

Comply with lawful objectives, provide notice of public discipline, or notify of outside compensation

How many days to respond to CFPB for Notice of Investigation

14 calendar days

ETHICS Acronym

Engagement Type

Transparent Disclosures

Honor the Fiduciary Standard

Integrity Foundations

Confidentiality

Self Report

Used to remember some of the ethics CFPs must follow

Options when a client doesn’t agree to go into engagement

Limit the scope of engagement

Terminate the engagement

Not enter the engagement

Provide only the requested services of the client

Investment Advisors Act (Year and Describe)

1940: prohibits an investment advisor from using any schemes to defraud a client. Applies fiduciary duty. For RIAs

Securities Exchange Act (Year and Describe)

1934: Regulates broker dealers. FINRA lays oversight

Regulation Best Interest (Reg BI)

Governs broker dealers to recommend products under care, disclosure, COIs, and compliance. Used for retail investors. Not fiduciary standard

Gramm-Leach Bliley Act (GLBA)

Prohibits financial institutions from disclosing nonpublic personal information about a consumer to third parties. Privacy policies.

Fair Credit Reporting Act

Do not discriminate when evaluating credit

Truth in Lending Act

gives consumers the right to dispute billing errors or other incorrect information

DEC Acronym

Disciplinary & Ethics Commission

What constitutes an absolute bar

Theft, embezzlement, or other financial based crimes

Tax crimes

Murder or rape

Violent crime less than 5 years ago

What constitutes a presumptive bar

2+ bankruptcies

Felony conviction for violent crimes greater than 5 years

Conviction of nonviolent crimes within 5 years ago

Suspension of a financial professional license

Consequences of one bankruptcy

Caution or public notice

If within 5 years it’s on CFPB website for 10 years

Consequences of 2+ bankruptcies

Presumptive bar

DEC decides temporary or permanent bar

When must CFPs notify their clients of CFPB punishments

90 days

Time frame of requesting reinstatement of license during suspension (Petition and file)

Must petition within 5 years of suspension start date

Cannot file until 6 months until the end of suspension

FDIC Deposit Protection Limits

$250k per depositor, per institution, per ownership category

Dodd-Frank Act

$100M AUM: Register w/ SEC

<$25AUM: Register w/ state only

In between is by discretion of SEC

FINRA Rule 2111

Suitability of an investment, used for institutions in the commercial setting.

Reasonable basis to recommend transaction of investment strategy.

Securities Act (Year and definition)

1933: Used for IPOS.

Disclosures and anti-fraud measures

Includes prospectus

ADV Forms (when it’s filed, what is needed)

Part 1: Firm Information

Part 2A: Brochure Delivered to clients

Part 2B: Specific advisory personnel

Must file is registered with SEC

Part 2A is needed for clients

What is FINRA (Acronym, rules, and registration)

Financial Industry Regulatory Authority

Self regulating organization (SRO) for broker dealers. Operated under SEC oversight.

Manage Rule 2111 and Reg BI

Requires registration of Form U4 for securities industry registration

What are Blue Sky Laws

State regulation laws

NASAA

North American Securities Administrators Association

Serves as the coordinating body for state securities regulators

Fair Credit Billing Act (FCBA)

Protection if the purchase exceeds $50 and is within home state or 100 miles from home