Sifma has long taken issue with the CFP Board’s rules for its members, but it went further this week, publishing a whitepaper to make the case that the group acts as a “de facto, private regulator.”
The CFP Board’s enforcement of its standards and imposition of sanctions for advisors creates headaches for the “hundreds of [Sifma] member firms that employ tens of thousands of” registered Certified Financial Planners, the paper stated. The Securities Industry and Financial Markets Association takes issue with the CFP Board in part because planners and advisors are subject to overlapping oversight from the Securities and Exchange Commission, Finra, and state securities regulators. But another, potentially bigger issue for Sifma member firms, is that CFPs facing investigations by the CFP Board may hand over documents that are owned by the firms that employ them.
“CFP Board currently operates in a manner that is essentially indistinguishable from – but that competes and conflicts with – the SEC, Finra, and other securities regulators, in terms of performing core regulatory functions, such as creating their own rule sets, conducting their own investigations, bringing their own enforcement actions, adjudicating their own cases, imposing their own sanctions, and publicizing their own case outcomes and disciplinary actions online,” Sifma’s paper read. “No private credentialing organization – other than CFP Board – undertakes or aspires to infringe upon the core regulatory functions of government securities regulators in this manner.”
Sifma has commented in writing in the past over the issue, but the “CFP Board has not meaningfully responded to or addressed our concerns to date.”
The board is reviewing recommendations Sifma suggested, a spokesperson said in an email to InvestmentNews.
“We will consider Sifma’s input as we have with all public comments on our ethics documents, including CFP Board’s procedural rules, sanction guidelines, fitness standards, and code of ethics and standards of conduct,” the spokesperson said. “CFP Board has an established, transparent process for upholding its standards, incorporating regular outreach and opportunities for feedback and public comment. We always welcome meaningful dialogue with Sifma, the SEC, Finra, and other stakeholders.”
However, the organization is indeed not a regulator, they said.
“More than 100,000 CFP certificants make a voluntary commitment to CFP Board to adhere to our code of ethics and standards of conduct. Both the public and CFP professionals expect high standards,” the email read. “CFP certification enhances client trust and advisor credibility, and firms gain a competitive edge by employing CFP professionals. CFP Board remains dedicated to upholding a process that ensures CFP certification as the standard for competent and ethical financial planning.”
Sifma has asked the board to throw out rules or standards that overlap with SEC and Finra regulations. In addition, it wants the CFP Board to notify firms of document or information requests made to CFPs who are under investigation and to not use or ask for any company materials unless authorized. CFPs who submit company documents to the board without their companies’ approval should be sanctioned by the board, Sifma wrote.
Further, the organization asked the CFP Board to specify in the sanctions it publishes that such actions apply to the named CFP, not the wider firm, and that sanctions do not amount to laws being broken.
Investigations and sanctions might be more of a concern to firms since the CFP Board has amended its conduct standards to increasingly hold CFPs as fiduciaries. Before 2007, the standards only held to a fiduciary duty for financial planning involving custody of client assets, Sifma noted. In 2007, that was expanded to include all financial planning. And in 2019, it further extended to all financial advice, whether given by a CFP working as a broker or advisor.
There have been several changes since then that also concern Sifma, including a notice last year that any publicly announced sanctions would include the disciplinary order that contains more information.
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