CFP Board Announces New Sanction Guidelines

The Board of Directors of Certified Financial Planner Board of Standards, Inc. (CFP Board)  has announced, effective August 27, 2012,  the adoption and  implementation of  new Sanction Guidelines.

Typically, the CFP Board’s enforcement process involves them investigating incidents of alleged unethical behavior using  procedures established by the CFP Board’s Disciplinary Rules and ProceduresWhen violations are found, the CFP Board can impose discipline ranging from a private letter of censure or public admonition to suspension or revocation of the right to use the CFP®  mark. 

In the past, the differences in punishment meted out for those violating CFP’s rules haven’t always represented a model of consistency.  Presumably, the new guidelines will  assist the Disciplinary and Ethics Commission (DEC), the group that conducts disciplinary hearings under the  CFP Board’s rules,  in doing just that.  Similar to FINRA’s approach, the CFP Board’s sanction guidelines includes a chart featuring recommended sanctions for violations that cover everything from bankruptcy, to borrowing money from a client to unauthorized use of  the CFP®  mark.  The chart also includes a column or category entitled “Policy Notes” or factors that the DEC, and if appealed, may also be used by the Appeals Committee of the Board of Directors which considers appeals of DEC decisions.

 

 

Does the CFP Board’s Enhanced Enforcement Efforts Mean More Discipline?

Does the CFP Board’s recent creation of the position and appointment of a new director of investigations create yet another level of securities enforcement scrutiny for financial planners?  On the surface, it sure looks like it.

A recent Advisor One article entitled “CFP Board’s Keller Says New ‘Top Cop” Will Beef Up Investigations” quotes CFP Board CEO Kevin Keller stating that the reason for the position was not because of an increase in the number of compliance cases or violations of CFP rules but to “to build our capacity to achieve our mission of benefiting the public.”

Translation. What this means is that given its membership growth expect number of enforcement cases to rise.  More recently, the Board’s enforcement efforts have focused on bringing cases against members who have had bankruptcies or who have disclosures in FINRA or SEC matters that involve claims of misrepresentation or fraud.  Also, the number of cases the CFP Board opened in 2011 (1,569 cases) increased from the 1,472 cases opened in 2010.  Although most CFP investigations do not result in enforcement actions, expect a continued  increase in the number of investigations with the new appointment.