CFP Board Changes Rules For Bankruptcies, Disciplinary Procedures

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After taking public comment, CFP Board announced new changes to its rules and procedures in three areas, including the way it handles bankruptcies among certificants and applicants.

In the past three years, CFP Board has seen reported bankruptcies among planners rise sharply, to 37 in just the first quarter of this year, up from one in 2008, eight in 2009, 20 in 2010 and 49 in 2011. The increase is due, in most cases, to the economic downturn, according to Michael Shaw, the board’s managing director of professional standards and legal.

Going forward, the board will issue a news release four times a year, publicizing all bankruptcy-only cases and will no longer take the time to investigate these bankruptcies when public filings about them are readily available. So-called bankruptcy-only cases involve planners who are not under investigation for other issues by the board. Currently, the board submits all such bankruptcies to a disciplinary procedure, which can result in some actions that are not made public.

The decision to routinely publicize bankruptcies came after members of the planning community expressed a concern that the board currently does not adequately publicize bankruptcies. In total, 316 comments came in to the board’s website on the matter.

“Many believed that the process lacked transparency,” Shaw says.

Under the new procedure, which would take effect on July 1, the public could easily find press releases via Google searches instead of going to the CFP board website to search for bankruptcies on a planner’s profile. Once they have discovered a bankruptcy, the court documents relating to them are publicly available.

According to CFP Board, the new procedure is consistent with its mission to benefit the public and with a CFP professional’s obligation to disclose any information about the CFP professional that could materially affect the client’s decision to hire or continue working with the certificant, including a bankruptcy filing.

Key Changes:

-- Eliminating the process where CFP Board investigates – and the board’s Disciplinary and Ethics Commission adjudicates – bankruptcy-only cases.

-- Implementing a new procedure for addressing bankruptcy-only cases that involves:

-- Verifying the bankruptcy filing by checking publicly available court records and confirming it with the CFP professional or candidate for certification;

-- Noting the bankruptcy filing on the CFP professional’s public profile, which is available through the search functions on CFP Board’s website ( This notification would remain in place for 10 years; and

-- Issuing a news release no less than four times each year to identify CFP® professionals who have filed bankruptcy within the previous five years. 

More information about the new bankruptcy disclosure procedure can be found here.

The following is an overview of further changes regarding the experience requirement and to disciplinary rules:

Experience Requirement

Individuals seeking to attain CFP certification must complete CFP Board’s education, examination, experience and ethics requirements.  Under the current experience requirement, those wanting to become certified must have three years of relevant financial planning experience. There are six different categories for which someone can acquire experience – personal delivery of financial planning, supervision, direct support, teaching, internships and residency programs. In addition, individuals must successfully complete a course of study addressing a required financial planning curriculum, pass the comprehensive CFP exam, pass a background check and agree to CFP Board’s Code of Ethics and Professional Responsibility, Rules of Conduct and Financial Planning Practice Standards.

In 2011, CFP Board completed a comprehensive review of the experience requirement in accordance with best practices for professional certification organizations, including CFP Board’s accrediting organization, National Commission on Certifying Agencies. Following a public comment period, the board of directors adopted several changes to the experience requirement consistent with CFP Board’s mission.

Key Changes:

Recognizing two years of full-time experience, or its part-time equivalent, as a way to fulfill the experience requirement when three very rigorous requirements are met and documented:

-- The individual is working under the direct supervision of a CFP professional;

-- The individual is providing direct financial planning services to clients; and 

-- The individual has documented in writing performance of all six (6) steps of financial planning process.

-- Eliminating the requirement that individuals applying for CFP certification must have six (6) months of experience gained within twelve (12) months of reporting the experience.  The requirement that experience must occur within ten (10) years before or five (5) years after the successful exam completion still applies.

-- Providing an option for individuals to submit experience to CFP Board for review prior to passing the CFP exam.  This will provide those contemplating CFP certification the assurance that their experience will meet CFP Board requirements prior to them pursuing the education or examination requirements.

“While there are six ways to gain qualifying experience, the Board believes that providing direct financial planning services to clients should be weighted more heavily than the other five,” says Alan Goldfarb, chair of the board of directors of CFP Board. “We recognize this is the best form of experience for candidates to develop expertise and sharpen the skills needed to deliver personal financial planning services independently as a CFP professional.”

These changes are effective September 1, 2012.  More information about the changes to the experience requirement can be found here.

Amendments to Disciplinary Rules

The Board of Directors adopted a series of amendments to the Disciplinary Rules intended to clarify ambiguities, eliminate inconsistencies and strengthen, in particular, the interim suspension procedures of the Disciplinary Rules.

Key Changes:

-- Treating an individual’s failure to respond to a request for information relating to an investigation as that individual having admitted to the allegations in the complaint.

-- Permitting CFP Board to immediately issue an interim suspension without a hearing in instances where it receives evidence of a conviction or professional suspension.

--Permitting CFP Board to share investigative information with government regulators and industry self-regulatory organizations.

These amendments are effective June 1, 2012.  More information about amendments to the Disciplinary Rules can be found here.

Ann Marsh writes for Financial Planning.








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