Defending Against Alleged Violations of the CFP’s Code of Ethics and Standards of Conduct
Financial professionals with the Certified Financial Planner (CFP) designation must uphold the high standards outlined in the CFP Board’s Code of Ethics and Standards of Conduct. Failing to do so will put your ability to use the CFP designation at risk. When the CFP Board becomes aware of some conduct that gives them a reason to believe a violation occurred, they will typically open an investigation.
If you receive a Notice of Investigation from the CFP Board’s Enforcement Counsel, you should immediately hire experienced counsel to guide you through the process. Responding to inquiries from the CFP Board without the benefit of experienced counsel can unnecessarily put not only your CFP designation but also other aspects of your business at risk.
Lewitas Hyman PC represents advisors, brokers and other financial professionals in all matters involving the CFP Board, including CFP Board investigations. Headquartered in Chicago, our securities attorneys represent clients nationwide.
Our approach is tailored to each matter, but generally involves the following:
- Counseling on the CFP Board’s Code of Ethics and Standards of Conduct
- Responding to the CFP Board’s inquiries on your behalf
- Representing you in CFP Board hearings
- Advising you on any related issues, such as the customer complaint, arbitration or other matters that may have triggered, or otherwise be related to, the inquiry
What Actions May Prompt a CFP Board Investigation?
The CFP Board learns about matters that may reveal violations of its Code from complaints to the CFP Board, self-disclosures by CFP professionals and CFP Board background checks that will include reviewing any CRD disclosures. The types of matters that often time trigger an investigation include:
- Customer complaints
- FINRA, SEC, state or other types of regulatory actions
- Involuntary terminations
- Certain types of internal investigations
- Certain types of criminal matters
When the CFP Board opts to proceed with an investigation, the CFP professional will receive a written Notice of Investigation from either a CFP Board Compliance Analyst or Counsel. This document formally states that the CFP professional is under investigation, and it outlines the alleged conduct that the CFP Board plans to investigate. It will also include a request for documents and information from you. You are typically required to respond to any request for documents and information within 30 days of any initial request unless you secure an extension.
CFP professionals have a Duty to Cooperate in connection with any CFP Board investigation. Thus, you must provide timely, truthful and complete information in response to all CFP Board inquiries. Your failure to do so will detrimentally impact any defense you may have to the underlying conduct under investigation, along with providing a basis for an additional charge for failing to fulfill your Duty to Cooperate.
When responding to the CFP Board, several key items should be kept in mind:
- Always respond to the CFP Board’s requests in a written letter. The use of email or other digital forms of communication tends to be too informal for matters as serious as a CFP Board investigation.
- You should respond to all allegations listed in the notice of investigation. Ignoring certain items will highlight them to the CFP Board or otherwise result in a follow-up inquiry.
- Provide evidence and supplemental materials that can help to prove that the underlying allegations are not true. If the accusation is true, then the letter should focus on demonstrating why that conduct does not violate the CFP Board Code of Ethics and Rules of Conduct or provide reasons why the sanction should be minimal.
After reviewing the responses to the requested documents and information, the CFP Board may make another written request for additional documents and information, or it may seek to ask questions through an oral examination.
Investigations undertaken by the CFP Board are intended to determine if there is probable cause for finding a violation of the CFP’s Code of Ethics and Standards of Conduct. If the CFP Board determines that there is probable cause, they typically advise the CFP professional of their intent to proceed with the filing of a formal complaint unless a resolution can be negotiated.
If there is no settlement, the matter then proceeds to a formal hearing before a CFP Board Hearing Panel, which will determine whether a violation occurred. Any finding of a violation can be further reviewed by the CFP Board’s Disciplinary and Ethics Commission and the CFP Board of Directors’ Appeals Committee.
What Are the Possible Disciplinary Actions?
If the CFP Board determines you violated their Code of Ethics and Standards of Conduct, and grounds for sanctions are established before a hearing panel or otherwise agreed upon as part of a settlement, you will be subject to disciplinary sanctions, which may include:
- Private censure
- Public censure
- Suspension of rights to use the CFP marks, up to five years
- Permanent revocation of the right to use the CFP marks
All disciplinary matters, except for private censure, will be publicly disseminated.
When faced with a CFP Board inquiry, working with an experienced lawyer is vital. How you respond is not only relevant to any determination by the CFP Board, but it may also impact related litigation and/or regulatory proceedings that you are facing from the alleged misconduct. The resulting discipline may also become a public record that can be discovered by someone running a google search.
The stakes are high. The attorneys at Lewitas Hyman have helped clients navigate these issues and can assist if you are faced with a CFP Board investigation. In addition to assisting with CFP investigations, our firm represents financial professionals on regulatory investigations and registration issues involving:
- The SEC, FINRA, state and other regulatory bodies
- Employment disputes specific to the financial services industry such as wrongful termination, defamation and the expungement of BrokerCheck and other CRD disclosures
- Allegations by clients of advisor misconduct leading to investment losses