More On Legal & Compliancefrom The Advisor's Professional Library
- Regulatory Oversight of Investment Advisors Although the regulatory environment is in a state of flux, it is imperative that RIAs adhere to their compliance obligations. To ensure compliance, RIAs and IARs must fully understand what those obligations are.
- Conducting Due Diligence of Sub-Advisors and Third-Party Advisors Engaging in due-diligence of sub-advisors isnt just a recommended best practice it is part of the fiduciary obligation to a client. An RIA should be extremely reluctant to enter a relationship with a sub-advisor who claims the firms strategy is proprietary.
New sanction guidelines set to take effect on Aug. 27 were the topic of a CFP Board webinar Tuesday, during which speakers offered examples of their application and attendees discussed their effects on planners.
The webinar was presented by Christopher Beard, chairman of the 2012 disciplinary and ethics commission (DEC), which is in charge of sanctioning certified financial planners; Michael Shaw, managing director of professional standards and legal for the Certified Financial Planner Board of Standards; and Adam Zajac, CFP Board’s adjudicatory counsel. During the presentation, the guidelines were presented as a means of ensuring “consistency, fairness and transparency in the disciplinary aspect of CFP Board’s mission.”
While the DEC will continue to rely on anonymous case histories, the guidelines offer an additional tool, according to Beard, that will assist it in reaching decisions that are “fair, consistent and transparent.” Although the sanction guidelines offer recommended sanctions for specific instances of conduct, the commission will continue to use its own judgment and experience in considering the facts of each case.
Suggestions received during the public comment period on the guidelines resulted in increases to some proposed penalties; forgery, fraud and breach of fiduciary duty all saw suggested penalties raised to a suspension of a year and a day.
Mitigating and aggravating circumstances will be considered by the DEC, once the CFP has had the opportunity for a hearing. Factors that will get heavy consideration when deciding a penalty include repeated instances of behavior and whether the individual was working with older clients.
While the number of revocations of the CFP mark has increased substantially over the past five years, in the interests of fairness, the DEC does not simply take it away when considering violations.
One aspect of the webinar that drove home the responsibility of the DEC was the polling of attendees on four separate scenarios of violations. There was substantial disagreement on whether the behavior in each scenario should result in suspension, revocation of the mark, a public letter of reprimand or private admonishment, and in each case the presenters discussed the mitigating or aggravating circumstances that led to the decision.
The anonymous case histories to be used in assisting the DEC to reach its decisions will be available online, according to the presenters, and will be searchable by conduct, sanction and rule violation.