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Advisors' disciplinary records could disappear from CFP Board website

In a bid to overhaul its disciplinary process, the CFP Board has proposed changes to its rules that would, among other things, apply a statute of limitations for most planner infractions and allow the record of certain punishments to disappear from the board's website after a period of time.

Modifications to the board’s Procedural Rules are designed to clarify its enforcement regime. One step the board took was to consolidate separate sets of rules that govern the disciplinary and appeals processes. The CFP Board is accepting public comments on the proposal through Jan. 19.

Photo by Scott Wenger

Additionally, as it prepares to implement a new code of conduct for financial planners in October, the CFP Board is issuing guidance to respond to some of advisors’ most common questions and concerns about the new standards.

One of the biggest areas of concern has been around expanded fiduciary obligations, in which CFP professionals will be expected to adhere to the board's requirement at all times when they are providing financial advice, a step up from the current standard that imposes fiduciary obligations only when providing planning services.

The new frequently asked questions document addresses the distinction between advice and planning.

"While financial planning requires financial advice, not all financial advice requires financial planning," the board explains.

Any communication that "would reasonably be viewed as a recommendation" for a client to take a certain action would be understood as providing advice, as would a situation in which the advisor has discretionary authority over the client's assets. Generic activity such as distributing marketing materials or providing financial education resources would not generally trigger the fiduciary requirement.

"The more individually tailored the communication is to the client, the more likely the communication will be viewed as financial advice," the CFP Board says in its FAQ.

The board also adopted a number of technical changes to clarify the language of its new code of standards.

The announcements come as the CFP Board gears up for a more vigorous approach to enforcement to ensure that planners are adhering to its new standards, incoming Chairman Jack Brod has said.

The procedural rules might be viewed as a mixed bag. On one hand, planners who aren't repeat offenders can expect to see records of disciplinary action drop off the CFP Board's website in five to 10 years. The board is also proposing a statute of limitations that would require investigations of most infractions to begin within seven years of the alleged conduct.

On the other hand, the board is proposing to expand the tools available to its investigators, including on-the-record exams recorded by a stenographer in which the respondent would be required to answer questions under oath.

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