CFP Board proposes making sanctions public for reporting failures

The CFP Board is considering a change to its guidelines that would make some sanctions public while allowing CFPs to avoid paying fees for disciplinary hearings about certain allegations of misconduct.

The organization has drawn criticism from financial advisors who want more public information about disciplinary snafus by planners and a higher level of scrutiny than is faced by advisors without the mark.

A proposed change to the CFP Board’s sanction guidelines would make public the current private censure for an inaccurate ethics declaration or a failure to timely report potential misconduct. Another adjustment to the organization’s procedural rules would enable CFPs accused of reporting snafus to avoid a hearing fee by accepting the public censure.

The CFP Board announced the proposals on July 28 while opening them to public comment by financial advisors and other stakeholders through Sept. 21.

Officials with the organization point out that only four out of more than 200 organizations overseeing the industry’s array of certifications have any public sanctions and that they’re continuing to overhaul enforcement since launching their first sanction guidelines in 2012. Reporting of compliance snafus looms especially large as an issue after a 2019Wall Street Journal investigation revealed that a public database maintained by the board didn’t have accurate disciplinary records for more than 6,300 CFPs.

A committee tasked earlier this year with examining the organization’s sanction guidelines considered keeping the censures private, turning them public or creating its first-ever monetary penalties, according to CFP Board General Counsel Leo Rydezewski.

“This movement to a public censure is a significant advancement of the sanction that would apply to the CFP professional,” Rydezewski said on a call with reporters about the proposal. “They analyzed a number of options. … The strongest of those is a public censure. It would let the world know that the individual has violated CFP Board's standards of conduct.”

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The organization does collect fees for hearings before its Disciplinary and Ethics Commission, and its staff is evaluating whether to impose an administrative fee to cover enforcement costs as part of the sanction, he added. Like the laundry list of 26 CFPs in a press release issued on July 27 by the CFP Board, certificants running afoul of the new guidelines would have their names listed in the lengthy disciplinary statements put out by the organization under the new proposals.

Two planners who have exhorted the CFP Board to get tougher in imposing standards for nearly 90,000 advisors with the mark panned the potential new guidelines as inconsequential. They amount to “lots of bark from a toothless hound,” advisor John Robinson of Honolulu-based Financial Planning Hawaii said in an email.

“I have yet to see an advertising campaign from CFP Board advising consumers to check out their CFPs on BrokerCheck,” Robinson says. “Instead, the campaigns tell consumers that CFPs are more thoroughly vetted, trustworthy and better qualified. The message is, ‘You should only trust a CFP.’ This is extremely harmful messaging to consumers. There is also scant research evidence to suggest that CFPs are more ethical or more qualified than non-CFP planners.”

Allan Roth, the founder of Colorado Springs, Colorado-based Wealth Logic and a Financial Planning columnist, says there’s “no doubt in my mind they believe that they're doing everything to protect the public and I'm being unfair.” He wishes that the CFP Board would have standards rising above those of FINRA, the SEC and other regulators in keeping with what the mark means to the profession and that he could write an article about the organization taking strong action, he says.

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“The CFP Board was supposed to have the higher standard and, instead, it's a lower standard,” Roth says. “Show me an enforcement action that a regulator or a court hasn't already taken first. I’m not out to get them. My expectations weren't high with the task force but, even so, they weren't as low as they should have been. I expected more.”

For their part, officials with the organization invite all parties to weigh in during the public comment period. Its board will decide at a later meeting whether to adopt the proposals, and CFPs will have ample time before they’re effective. The organization’s staff “take our obligation to enforce those standards seriously” and holders of the mark have “pledged to a high level of ethical standards,” CFP Board CEO Kevin Keller told reporters, describing the changes as “just the next step of improvement.”

“We've been on a campaign of continuous improvement of our enforcement process,” Keller said. “There has been a lot of progress over the past decade.”