The Certified Financial Planner Board of Standards has taken a step toward increasing the sanctions imposed on advisors holding the CFP mark who do not live up to the board’s requirements, the board announced today.
The board issued proposed changes to its sanction guidelines and procedural rules, which determine what can happen to a CFP mark holder who fails to meet deadlines for answering a board inquiry or for misreporting information to the board.
The main change would make sanctions that are imposed available to the public instead of having the board privately notify the errant advisor of his or her violations, Leo G. Rydezewski, general counsel to the CFP Board, said yesterday during a web press conference to announce the proposed changes.
The board is asking all stakeholders, including the public, to file comments about the proposals by Sept. 21. After that, the CFP Commission on Sanctions and Fitness, which was created last year to review the board’s sanction policies, will review the comments and make any changes to the proposals it thinks are necessary. The proposals then will be sent to the CFP Board of Directors for adoption.
The new sanctions will not be enforced for at least a year after adoption to allow time for CFP candidates and mark holders time to receive education on the new requirements, said Thomas A. Sporkin, managing director of enforcement at the CFP Board. Sporkin was appointed to the newly created position last December to head a team of attorneys and legal staff to modernize the detection, investigation and prosecution activities at the CFP Board.
The proposed changes, if adopted, “will strengthen the guidelines concerning the consequences for failing to timely report potential misconduct to the CFP Board and for providing an inaccurate ethics declaration to the CFP Board, and introduce a streamlined option for accepting those consequences,” the board said in a statement. The changes were proposed by the Commission on Sanctions and Fitness, which will continue its work by reviewing punishment the board imposes for violations of other guidelines and regulations.
The procedural rules explain how the board enforces its code of ethics and standard of conduct, both of which were updated recently after a lengthy review. The sanction guidelines provide guidance on the sanctions that can be imposed for violations.
“Throughout the last two years, the CFP Board has enhanced its detection practices so that it no longer primarily relies on self-reporting by the CFP professionals to detect potential misconduct. However, the public records we review have coverage gaps and may be subject to error. Therefore, fair and effective self-reporting remains an important feature of the enforcement program,” CFP Board CEO Kevin R. Keller said in a statement.
Sanctions can be imposed if a CFP mark holder fails to comply with a request for information within 30 days. In addition, the CFP Board requires candidates and CFP professionals to complete an ethics declaration statement that asks for information that might reveal misconduct.
Public sanctions are taken seriously by other CFP designees and the public, Keller said. The board is considering the imposition of an administrative fee on CFP mark holders who commit self-reporting violations to help offset the costs of enforcement. The new sanctions will require additional work by the enforcement staff of the board, Keller said.
“Strengthened guidelines for these requirements reflect the importance of CFP professionals’ self-reporting obligations and their duty to act with honesty and integrity,” Keller added.
The board learns of violations of its regulations through court records and other public documents, but not all information that might reveal violations are public, Sporkin said.
The comments submitted to the CFP Board will be posted on the board’s website, CFP.net, with the name of the commenter and date submitted.