Certified Financial Planners and CFP applicants can no longer hide their disciplinary histories from the CFP Board under the guise of client confidentiality, the Board revealed in April. Following the March request of the Certified Financial Planner Board of Standards, the SEC issued a no-action letter in March that gives brokers and advisors the go-ahead to share customer complaint information with the Board without fear of reprisal from the SEC. The SEC decision removes advisors’ ability to assert client confidentiality as a justification for not disclosing customer complaint information to the CFP, giving the Board free-reign to scour members’ backgrounds.
As part of its certification process, the CFP Board conducts background checks on all applications seeking CFP certification. The SEC’s no-action letter allows the CFP Board to obtain information from firms concerning complaints filed against RIAs, broker-dealers and their representatives. Prior to this green light, the CFP application previously required only disclosure of investigations or legal proceedings that occurred within the past two years.
The old procedure allowed RIA and broker-dealer firms to cite Regulation S-P, allowing them to refrain from disclosing customer complaint information in an effort to protect customer privacy. According to the SEC, “while Regulation S-P is intended to protect the privacy rights of customers, the No Action letter acknowledges that protecting the public from criminal and improper conduct is paramount to ensuring investor confidence.”
The new procedure is not designed to be a retributive tool. It is meant to increase the efficiency of the certification process by preventing delays in application processing due to requests for customer complaint information. It should also decrease the number of dismissed misconduct investigations due to insufficient evidence.
The CFP Board said in believes that the “guidance from SEC staff will help candidates become