CFP Board drops self-disclosure of disciplinary events amid enforcement overhaul
Trust but verify, the saying goes.
The CFP Board is discontinuing its practice of relying on planners to submit records of their own disciplinary histories, and will instead begin checking SEC and FINRA databases as part of the certification renewal process. The decision marks the beginning of a broader campaign to overhaul the CFP Board's enforcement regime, an effort that will draw on the recommendations of an independent task force, the board announced.
"We acknowledge that self-disclosure is not sufficient enough for us to actively enforce the standards and we agree with the need to strengthen the enforcement program," Kevin Keller, the CFP Board's CEO, said on a conference call with reporters.
The move comes after an investigation by The Wall Street Journal showed that the CFP Board's LetsMakeAPlan.org website offers an incomplete picture of certificants' past customer disputes, disciplinary actions and criminal history. The Journal combed through more than 72,000 profiles on the board's website and found that more than 6,300 certified planners show clean records, but have some incident noted in their BrokerCheck profile maintained by FINRA.
Leaders of the CFP Board have often pointed out that the organization is a professional one, not a regulatory body, so by design it lacks the enforcement resources and authorities of the SEC or FINRA. Still, critics have knocked the group for lax or inconsistent oversight of its own policies. In 2013, a Financial Planning investigation found that hundreds of wirehouse advisors who hold the CFP designation were advertising their practice as "fee-only," in a direct violation of the board's rules.
The CFP Board says background checks are a part of its initial certification process, but that it also "has relied heavily on self-disclosure, complaints from either clients or other CFP professionals, and news scans" when processing renewal applications.
"Effective immediately, we are reviewing BrokerCheck and [the SEC's] IAPD for existing CFP professionals," the board said in a statement. The board plans to meet with officials from both regulators to discuss the possibility of tapping into their databases so that the board could automate what is now a manual process of checking those records, Keller said during the call.
The policy shift comes as the CFP Board is rolling out its revised Code of Ethics and Standards of Conduct, which will take effect Oct. 1 and require planners to adhere to a fiduciary standard when providing advice. The board has pushed back the date it will begin enforcing the guidelines to June.
CFP Board officials have said there will be a heightened focus on enforcement once the new standards take effect. Still, in announcing its new policy this week, the board emphasized it still takes a fundamentally different approach to enforcement than FINRA. For one, the CFP Board notes that it doesn't publicize allegations of misconduct, which FINRA does, in the form of noting a customer complaint in the BrokerCheck records.
The CFP Board's new task force will be led by Denise Crawford, a former Texas securities commissioner and a public member of the group's board of directors. All recommendations of that independent task force are expected to be made public, and the board has asked Crawford to "expedite his process so we will hopefully have some things available for discussion at our board meeting in November," said Susan John, the chair of the CFP Board's board of directors, said during the call.
"As times change, so do the needs for different types of tactics as far as enforcement is concerned," John said. "We have about 3,500 CFP professionals who renew every month, so the scope of effort there is tremendous, and it absolutely is going to require more resources."