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Regulation and Compliance > Federal Regulation

New CFP Board Enforcement Rules Kick in Sept. 1. Here's What You Need to Know.

By Melanie Waddell

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What You Need to Know

  • Revised Procedural Rules are a critical component of CFP Board’s multi-year plan to enhance and modernize its enforcement and adjudication programs.
  • CFP Board adopted the revised Procedural Rules in mid-May.
  • Revised rules provide further clarification and assistance for CFP members responding to an investigation, an attorney says.

Starting Sept. 1, the Certified Financial Planner Board of Standards revised Procedural Rules ushering in new rules for CFPs under investigation take hold. CFP Board adopted the revised Procedural Rules in mid-May.

As of Sept. 1, the new rules “govern in all proceedings then pending or thereafter commenced,” CFP Board said.

The Procedural Rules outline processes for investigating alleged misconduct and enforcing CFP Board’s Code of Ethics and Standards of Conduct in a manner that it says was “designed to be fair to those whose conduct is being evaluated as well as credible to the public.”

Leo Rydzewski, CFP Board’s general counsel, told ThinkAdvisor in a recent email that CFP Board “periodically updates the Procedural Rules to enhance the investigation and adjudication process.”

The recent revisions to the Procedural Rules, Rydzewski said, “are a critical component of CFP Board’s multi-year plan to enhance and modernize its enforcement and adjudication programs.”

One of the “most significant changes,” Rydzewski continued, “is the expansion of the authority of the Disciplinary and Ethics Commission Counsel (DEC Counsel) to decide motions, such as how long a hearing will last. These enhancements will make CFP Board’s processes more efficient and effective.”

Tom Sporkin, CFP Board’s managing director of Enforcement, added in the email that from an investigations standpoint, the new Procedural Rules modify CFP Board’s “longstanding duty to cooperate.”

The new language, Sporkin explained, “specifies that the Respondent must provide documents to CFP Board if they are under their control, as opposed to documents under their possession, custody or control.

“This change means that certificants will not be found to have failed to cooperate if they don’t produce documents that they have in their possession if it is their firm, and not them, that controls the documents,” Sporkin said.

The revised Procedural Rules also “introduce a new way for CFP Board enforcement staff to seek information called an ‘Informal Inquiry,’” Sporkin said. “This less formal outreach allows Enforcement Counsel to seek information from an individual or entity without opening a formal investigation.”

In June, CFP Board released its annual Ethics Report, which notes that the board opened 907 investigations last year and closed 957.

CFP Orders 2023 CFP Board Year in Review Ethics Report, June 2023

David Hantman, principal at Bressler, Amery & Ross, told ThinkAdvisor that the rule changes are “significant because following the adoption of these new rules, all CFP members under investigation by the CFP Board must ensure that they adhere to these rules and procedures.”

In many ways, Hantman said, “the revised rules provide further clarification and assistance for CFP members responding to an investigation. The CFP Board appears to have considered industry and member feedback, and designed changes that provide greater clarity and a more common sense approach.”

Hantman agreed that among the “most significant modification” to the procedural rules is the Duty of Cooperation.

“A respondent must only produce documents in its control,” Hantman said. “The previous definition, which required respondents to produce documents in its possession, custody or control, proved difficult because many documents are firm documents that the individual is not permitted to provide outside the firm pursuant to firm policies and procedures.”

Other revisions to the CFP Board rules transfer some administrative functions from enforcement to adjudication; require respondents who are the subject of an Interim Suspension Order to file a Petition for Reinstatement within two years or receive an Administrative Order of Revocation; and establish a process for admitting expert witness testimony.

Photo: Tom Sporkin

Melanie Waddell

@Think_MelanieW

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