The Certified Financial Planner Board of Standards on Thursday announced detailed changes to its governing regulations that, among other things, will make it easier to enforce the board’s new code of ethics.
The changes cover a range of specific governance procedures under which the board operates and are designed so that the governance is modernized, said Kevin R. Keller, board CEO, and Jack Brod, CFP Board chairman, during a web conference.
The board oversees granting permission to qualified financial planners to use the CFP mark. To do so, mark holders have to live up to a detailed Standards of Conduct and Code of Ethics, which were recently revised. Mark holders who do not meet these standards can have their ability to use the certifying mark suspended or revoked. Until now, appeals from those decisions were made to an appeals committee.
Under the changes announced Thursday, the scope of the appeals committee has been expanded to include oversight of the new ethical standards and their enforcement. The committee’s name has been changed to the “Code and Standards Enforcement Committee” to reflect the additional scope.
The change will give the committee additional leverage for enforcement, Brod said.
The CFP Board made changes late last year to its enforcement procedures after a Wall Street Journal investigation revealed that planners who were reported on the board’s website as having clean records actually had client complaints against them. That round of changes tightened the board’s oversight enforcement procedures so that fewer complaints slipped through the cracks.
“The CFP Board implemented enhancements to its enforcement program and took some immediate action in response to the Wall Street Journal report,” Brod said Thursday.
Another change announced Thursday broadens the scope of the CEO Oversight Committee to allow it to monitor all senior staff compensation, as well as the compensation of the chief executive officer. Compensation for the CEO and staff is based on comparable salaries for similar organizations. The committee name has been changed to the “CEO Oversight and Compensation Committee.” The change does not necessarily mean salaries will be increased, Brod said.
The board is enhancing its nominating process for members of the board of directors to state explicitly what professional skills, experience and knowledge are needed on the board. The 16-member board includes 10 certified financial planners and six members who are not CFPs. The terms for the members will be changed from single four-year terms to a maximum of two three-year terms.
In addition, the board’s roles, responsibilities and organizational monitoring processes were more clearly defined.
“CFP Board establishes, upholds and enforces the competency and ethical standards for more than 87,000 CFP professionals that benefit the public,” Keller said in a statement. “These improvements support the CFP Board’s ongoing evolution as the professional body for personal financial planners and reinforces the consumer confidence that comes from working with a CFP professional.”
“Modernizing our organization—particularly our governance practices, enforcement program and enterprise risk management—is an essential part of our work as a professional certifying and standards-setting body,” Brod said in a statement. “Over the last few months, and with the assistance of consultants from a global consulting firm, the board agreed on essential actions to improve our governance of the CFP Board.”