CFP Board checks certificants against Finra, SEC databases in wake of WSJ analysis

Organization says it will no longer rely on self-reporting of disciplinary backgrounds and is creating a task force to reform its enforcement practices

Jul 30, 2019 @ 2:17 pm

By Mark Schoeff Jr.

This story was updated at 5:15 p.m. on Tues., July 30.

The CFP Board will no longer rely on mark holders to reveal their disciplinary histories but instead check regulatory databases itself, the organization said in response to a Wall Street Journal analysis of its consumer-facing website.

The organization said it will conduct searches on BrokerCheck, which is maintained by the Financial Industry Regulatory Authority Inc., and the Investment Adviser Public Disclosure database maintained by the Securities and Exchange Commission.

"In the past, CFP Board has relied heavily on self-disclosure, complaints from either clients or other CFP professionals, and news scans," the Certified Financial Planner Board of Standards Inc. said in its response to the WSJ article. "Effective immediately, we are reviewing BrokerCheck and IADP for existing CFP professionals. We continue to follow up on regulatory actions by the federal government and self-regulatory agencies if CFP professionals are named."

The WSJ reviewed more than 72,000 CFPs listed on the CFP Board's website, which aims to help the public find a financial adviser, and discovered that more than 6,300 of the CFPs had Finra regulatory disclosures that were not mentioned.

The newspaper compared information on to records kept in Finra's BrokerCheck, including disciplinary histories and customer complaints.

The CFP Board said its new standards of conduct would address some of the weaknesses highlighted in the WSJ article.

"We now review BrokerCheck or IAPD when a CFP professional renews his or her certification," the CFP Board stated. "We also have made adjustments to the 'Verify' section of so that the site now points consumers to BrokerCheck and IAPD for more information."

On Tuesday, the CFP Board announced the creation of a task force to reform its enforcement practices. The panel will be headed by former Texas securities commissioner Denise Voigt Crawford, who also will appoint its members. The task force is expected to make its first report to the board in November.

CFP Board chief executive Kevin Keller said the CFP designation stands out among the more than 200 financial credentials listed on the Finra website because of the organization's enforcement efforts. But he said the WSJ article shows it can do a better job.

"I'm not aware of any other financial certification that goes anywhere close to what the CFP Board does, but that doesn't mean there aren't opportunities to improve the enforcement of our standards," Mr. Keller said on a conference call with reporters. "We acknowledge that self-disclosure is not sufficient enough for us to actively enforce the [CFP] standards, and we agree with the need to strengthen the enforcement program."

The board must manually review disciplinary histories of the nearly 3,500 CFPs who renew their credentials each month. CFP Board officials hope they'll be able to set up a system where the CFP database can interface with SEC and Finra databases.

"It's definitely going to require more resources, whether that's software or people," CFP Board chairwoman Susan John told reporters.

One mark holder praised the CFP Board's response to the front-page WSJ story.

"It's an opportunity to improve, and it looks like they're taking the bull by the horns and doing that," said Carolyn McClanahan, founder of Life Planning Partners.

She said the CFP Board should not try to be a regulatory enforcer like the SEC or Finra. But the ongoing advertising campaign that promotes CFPs to investors increases the pressure to scrutinize CFP holders.

"It's very important for them to vet certificants if they're going to promote the CFP holders to the public," Ms. McClanahan said.

The CFP Board grants the designation and upholds the educational, experience and ethical requirements attached to it. There are approximately 85,000 CFPs in the United States, and about 38,797 are registered with Finra.

The CFP Board last year strengthened the investment advice rules pertaining to the mark, requiring holders to act as fiduciaries at all times for their clients. The CFP Board will begin enforcing the standard next June.

That move makes vetting CFP holders a priority, said Dennis Nolte, vice president of Seacoast Investment Services.

"If there's a fiduciary duty, then the CFP Board has a fiduciary duty to do a better job of screening," Mr. Nolte said. "Maybe keeping someone out because there's a significant disciplinary history is something the CFP Board should consider."

In its statement, the CFP Board said it has publicly posted disciplinary matters or taken enforcement actions against more than 1,000 CFPs in its 30-year history. But it also asserted it's unfair to compare the CFP Board to Finra.

It noted Finra's budget is approximately $1 billion, compared to the CFP Board's $30 million. It also said Finra has subpoena power and the ability to obtain documents and information from financial firms that the CFP Board lacks as a standards-setting organization.

It also said BrokerCheck includes allegations against brokers. The CFP Board only acts against a mark holder when its Disciplinary and Ethics Commission approves discipline.

Those differences notwithstanding, the CFP Board has to be careful when talking about enforcement, Mr. Nolte said.

"If you're not going to do due diligence like Finra, then don't hold yourself out as the first line of defense," he said.


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