Ethical Responsibilities

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Chapter 23

• Ethical Responsibilities

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Ethics, Law, and Codes of Ethics

• Ethics
• Law
• Code of Ethics

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CFP Board and the Code of Ethics

• CFP Boards Board of Professional Review (BOPR)
• CFP Boards Board of Governors
• Principles
• Rules
• CFP Board designee

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Principle 1 Integrity

• Rule 101 of the Code prohibits the solicitation
  of clients through false or misleading
  communications or advertisements.
• Rule 102 prohibits conduct involving dishonesty,
  fraud, deceit, or misrepresentation.

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Rule 103

• Rule 103 establishes responsibility for a CFP
  Board designee regarding funds and property of
  clients.
• Commingling of funds
• Fiduciary responsibility

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Principle 2 Objectivity

• Rule 201 A CFP Board designee shall exercise
  reasonable and prudent professional judgment in
  providing professional services.
• Rule 202 A financial planning practitioner
  shall act in the interest of the client.

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Principle 3 Competence

• Rule 301 A CFP Board designee shall keep
  informed of developments in the field of
  financial planning and participate in continuing
  education throughout the designees professional
  career.
• Under Rule 302 a CFP Board designee must offer
  advice only in those areas in which he/she has
  competence.

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Principle 4 Fairness

• Under Rule 401, a CFP Board designee shall
  disclose to the client material information
  relevant to the professional relationship,
  including conflict(s) of interest,
• Rule 402 requires the financial planning
  practitioner to make timely written disclosure
  of all material information relative to the
  professional relationship.

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Principle 4 Fairness (cont.)

• Rule 403 requires a CFP Board designee providing
  financial planning services to disclose upon
  request of the client the details of the
  financial planners compensation as it relates to
  his or her engagement.
• Rule 404 mandates CFP Board designees to offer
  the disclosures described in Rule 402 at least
  annually.

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Principle 4 Fairness (cont.)

• Rule 405 A CFP Board designees compensation
  shall be fair and reasonable.
• Rule 406 requires all CFP Board designees to
  adhere to the same standards of disclosure and
  service.
• Under Rule 407, a CFP Board designee must advise
  the CFP Board designees employer of outside
  affiliations which reasonably may compromise
  service to an employer

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Principle 4 Fairness (cont.)

• Rule 408 requires CFP Board designees to inform
  employers of compensation in connection with
  their services to clients that are in addition to
  compensation from the employers.
• Rule 409 mandates designees entering into
  personal business transactions with clients be
  fair and reasonable.

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Principle 5 Confidentiality

• Rule 501 provides that a CFP Board designee is
  prohibited from revealing or use for his or her
  own benefitwithout the clients consent, any
  personally identifiable information relating to
  the client relationship or the affairs of the
  client, except and to the extent disclosure or
  use is reasonably necessary.

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Principle 5 Confidentiality (cont.)

• Rule 502 requires a CFP Board designee to
  maintain the same standards of confidentiality
  to employers as to clients.
• Rule 503 states that a CFP Board designee doing
  business as a partner of a financial services
  firm owes to the designees partnersa
  responsibility to act in good faith.

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Principle 6 Professionalism

• Rule 601 CFP Board designees must use the
  marks in compliance with the rules and
  regulations of the CFP Board.
• Under Rule 602, designees must show respect for,
  and engage in fair and honorable competitive
  practices with other financial planning
  professionals.

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Principle 6 Professionalism (cont.)

• Rule 603 requires a CFP Board designee who has
  knowledge that is not confidential that another
  CFP Board designee violated the Code which
  raises substantial questions as to the
  designees honesty, trustworthiness or fitness as
  a CFP Board designeeshall promptly inform the
  CFP Board
• Under Rule 604, a CFP Board designee with
  knowledge that raises a substantial question of
  unprofessional, fraudulent, or illegal conduct by
  a CFP Board designee or other financial
  professional must promptly inform the appropriate
  regulating body.

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Principle 6 Professionalism (cont.)

• If the CFP Board designee has reason to suspect
  illegal conduct within his/her organization, the
  designee must timely inform his/her immediate
  supervisor. If measures are not taken to remedy
  the situation, Rule 605 requires the designee to
  alert the appropriate authorities and CFP Board.
• Rule 606 When rendering professional
  activities, a CFP Board designee must perform
  services according to applicable laws, rules, and
  regulations of governmental agencies and policies
  of CFP Board.

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Principle 6 Professionalism (cont.)

• Rule 607 prohibits CFP Board designees from
  engaging in any conduct that reflects adversely
  upon the CFP mark or upon the profession.
• Rule 608 deals with registered investment
  advisers.
• Rule 609 forbids designees from practicing any
  other profession unless he/she is qualified to
  practice in that field.

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Principle 6 Professionalism (cont.)

• Rule 610 mandates that CFP Board designees return
  clients original records timely upon request.
• Under Rule 611, a designee is prohibited from
  bringing disciplinary proceedings for no
  substantial purpose other than to harassanother
  CFP Board designee.
• Rule 612 commands designees to comply with CFP
  Boards post certification requirements.

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Principle 7 Diligence

• Under Rule 701, a CFP Board designee shall
  provide services diligently.
• Rule 702 A financial planning practitioner
  shall enter into an engagement by a client only
  after determining that the relationship is
  warranted by the clients needs.

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Principle 7 Diligence

• Rule 703 directs a CFP Board designee to make
  and/or implement only recommendations which are
  suitable for the client.
• Under Rule 704, the designee is required to make
  a reasonable investigation regarding the
  financial products recommended to clients.
• Rule 705 A CFP Board designee must properly
  supervise subordinates with regard to their
  delivery ofservices

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Disciplinary Rules and Procedures

• The Procedures are the rules and regulations
  for disciplinary proceedings against CFP Board
  designees.
• A standard of proof, or burden of proof, is the
  requirement of proving facts to a certain degree
  of probability.

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Burdens of Proof

• Preponderance of the evidence
• Clear and convincing evidence
• Evidence beyond a reasonable doubt

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Grounds and Forms of Discipline

• Grounds for discipline--any act which violates
  the Code, fails to comply with the Practice
  Standards, violates any criminal laws, whether
  the CFP Board designee is convicted or acquitted,
  violates these Procedures or an order of
  discipline
• Failure to respond to a request of the CFP Board
  without good cause, or obstruction of the CFP
  Board or staff in the performance of their duties
• Any false or misleading statement made to the CFP
  Board
• Other acts amounting to unprofessional conduct

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Grounds and Forms of Discipline (cont.)

• Forms of Discipline
• Private censure
• Public letter of admonition
• Suspension
• Revocation

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The Practice Standards

• The 100 Series establishing and defining the
  relationship with the client.
• The 200 Series gathering client data.
• The 300 Series analyzing and evaluating the
  clients financial status.
• The 400 Series developing and presenting the
  financial planning recommendations.
• The 500 Series implementing the financial
  planning recommendations.
• The 600 Series monitoring.