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July 30, 2021 at 10:28 AM
What You Need to Know
- Imposing monetary penalties is a behavior akin to that of a regulator — which, by law, the CFP Board is not, Michael Kitces says.
- The CFP Board says the payment would be an administrative fee to help offset the cost of enforcement.
- The Board reviewed its standards of conduct and other policies after a Wall Street Journal report in 2019.
The Certified Financial Planner Board of Standards is proposing to toughen the consequences for CFPs’ failure to timely report potential misconduct and ethical violations to CFP Board — including, for the first time, imposing monetary penalties, akin to a regulator.
The board is requesting comments by Sept. 21 on its proposed changes to its Sanction Guidelines and Procedural Rules.
The proposed changes, if adopted, will stiffen the consequences for failing to timely report potential misconduct to CFP Board and for providing an inaccurate Ethics Declaration.
The plan also introduces a streamlined option for accepting those consequences.
Kevin Keller, CFP Board’s CEO, said on a call with reporters that “throughout the last two years, CFP Board has enhanced its detection practices so that it no longer primarily relies on self-reporting by 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.”
In December, the CFP Board appointed former Securities and Exchange Commission official Thomas Sporkin to the newly created position of managing director of enforcement.
The proposed changes reflect the first set of recommendations from CFP Board’s Commission on Sanctions and Fitness, formed in February.
Public Censure
Under the current Sanction Guidelines, a “Failure to Timely Report Information to CFP Board” or submitting an “Inaccurate Ethics Declaration” results in a private censure.
The proposed changes “increase the sanction guidelines for these two conduct categories to a public censure.”
CFP Board explained that while it “concluded that a public censure is the most appropriate sanction, CFP Board is evaluating whether to impose an administrative fee on those who engage in self-reporting violations to help offset the costs of enforcement.”
The proposed sanction guidelines “include factors that might make the sanction higher or lower than a public censure, depending on the circumstances,” CFP Board said.
Also, the proposed guidelines include a policy note indicating that no violation will be found if the information was timely reported on Form U4 (Uniform Application for Securities Industry Registration or Transfer), CFP Board said.
