The organization that grants the primary financial planning credential has added muscle to its enforcement arm.
Last Monday, Rex Staples became the first director of investigations at the Certified Financial Planner Board of Standards Inc. He will oversee a burgeoning agenda.
Creation of the position reflects the growth in the number of CFP designation holders, a group that has increased by 20% in the past five years to about 65,000 in the United States, and the heightened need to enforce the certification's code of ethics, said Kevin Keller, the CFP Board's chief executive.
In 2002, 1,025 investigations were opened by the CFP Board and 882 closed. In 2011, by contrast, the number of investigations opened had risen to 1,569, and those closed to 1,345. The results of those inquiries ranged from dismissal to revocation of the CFP certification.
“It is part of the natural evolution of the CFP Board's role in regulating the financial planning profession,” Mr. Keller said.
Some observers wonder whether the CFP Board, by beefing up enforcement, is becoming a quasi-regulator.
“It has raised some eyebrows out there about what the long-term plans of the CFP Board are,” said Michael Kitces, director of research at Pinnacle Advisory Group Inc. “This step doesn't necessarily indicate they're going in that direction, but it does put the question back on the table.”
SEASONED INVESTIGATOR
The wiry Mr. Staples, 54, who has a piercing stare befitting an investigator, arrives at the CFP Board after working for seven years as general counsel of the North American Securities Administrators Association Inc. Before that, he served for 10 years as branch chief for broker-dealer and investment adviser enforcement in the Washington State Securities Division.
Last week,
InvestmentNews asked him about his new post.
Q. Why did the CFP Board create your position?
A. There came a time in [the CFP Board's] life where the number of complaints was such that there needed to be a split between adjudicative matters, and enforcement and investigative matters. Overall, we'll have a stronger program than we did before.
Q. “Stronger” will mean what to CFP designees?
A. I think a quicker response to complaints, overall speed. They'll see quicker movement on cases and quick resolution. They'll find the subject matter knowledge will increase.
Q. Why has enforcement become a CFP Board emphasis?
A. Enforcement is important in all of financial services now, particularly with the economy such as it is. Compliance and enforcement are up all across the board with the [Securities and Exchange] Commission, [the Financial Industry Regulatory Authority Inc.] and the states. We're trying to protect a very prestigious brand: the CFP. It needs to be a priority so that financial consumers will have confidence in that mark.
Q. What attracted you to this position?
A. I like the idea of being able to remake and revamp the investigative division. I've got a tremendously professional staff. There's a lot of potential here.
Q. What do you have in mind for the remake?
A. It is only Day Three. I'm still working through my 60-, 90-, 120-day plans. But some [goals] are to look at caseloads and see how quickly we're moving through them — make sure there's no backlog, make sure the results of cases are fair and equitable to both parties. They have been and will continue to be so.
Q. Are there certain types of financial fraud that particularly concern you?
A. The typical things that concern me are selling away, unauthorized transactions, misappropriation. Other issues may rise to the forefront.
Q. Are CFPs taking ethical risks during a time when interest rates are so low?
A. It's too early in the game to make a comment on that. The notion of that concerns me, but do I know whether they are or not? No, I don't.
Q. How will your state experience inform your work at the CFP Board?
A. Governmental enforcement can lend a lot to association enforcement. There are methodologies and techniques that are used [on the state level] that are not normally used in associations, and I think we can use those to our advantage.
Q. What are some examples of them?
A. The velocity with which we can pursue cases and how aggressive we should be while maintaining fairness and objectivity.
Q. Do CFP designees have anything to fear from you?
A. They should know I come from a background of aggressive enforcement. They don't have anything to fear from me. In fact, they should welcome me. I'm a fair individual. If you're running a clean business, then we can be best of friends.
Q. What is the fun part of enforcement?
A. Protecting the public interest ... That's the fun part of enforcement: taking bad guys and either removing the mark, or taking them off the street or to jail.
Q. A year from now, what do you hope to have accomplished?
A. I'd like to see an increase in velocity. We should have a quick turnaround of cases, and the penalty should be appropriate to the violation and executed without delay.
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