Making Sense of the Duty to Report Information to CFP Board
CFP® Certificants in the News
Are CFP® Certificants obligated to report merely being charged with a felony or misdemeanor to CFP Board? How about being notified of a regulatory investigation or action? Read on to get the answers, based on CFP Board’s Duty to Report Information publication. Text in quotation marks is taken from this publication.
Felonies
In most states, there are at least two broad levels of criminal offense—felonies and misdemeanors. The certificant must report being “charged with, convicted of, or admitted into a program that defers or withholds the entry of a judgment for a felony…”
One could argue that—in fairness to the certificant—only convictions should be reportable. After all, the legal presumption in U.S. jurisprudence is one of innocent until proven guilty. We should all be thankful for that presumption of innocence taken from the fifth, sixth, and fourteenth amendments to the U.S. Constitution. However, remember that:
- CFP Board’s mission is to ensure the CFP designation is held in the highest ethical trust by clients—hence the rigorous standard of reporting even if a certificant is just charged with a felony, and
- CFP Board’s most severe punishment is to revoke one’s right to use the CFP® mark, not throw anyone in prison!
Before leaving this topic, note that a no contest plea (nolo contendere for you Latin aficionados) to a felony must also be reported.
Misdemeanors
All misdemeanors do not require reporting. Only a “relevant misdemeanor” must be reported. CFP Board defines a relevant misdemeanor as “A criminal offense, that is not a felony [under state law] for conduct involving fraud, theft, misrepresentation, other dishonest conduct, crimes of moral turpitude, violence, or a second (or more) alcohol and/or drug-related offense.”
In states that do not distinguish between felony and misdemeanor crimes, the certificant must report “an offense punishable by a sentence of at least one-year imprisonment or a fine of at least $1,000.”
Regulatory Actions and Regulatory Investigations
The term “regulatory investigation” should be interpreted broadly. For example, CFP Board defines this term as “An investigation initiated by a federal, state, or foreign government agency, self-regulatory organization, or other regulatory authority.” Think through with the author for a moment—the investigation must be reported even though the certificant has not been charged with any violation of the regulatory rules at this point!
A “regulatory action” must be reported and is defined as an action “initiated by a federal, state, or foreign government agency, self-regulatory organization, or other regulatory authority.” For example, a brokerage firm was suspended by FINRA for nine months for failure to comply with federal anti-money laundering procedures. In the author’s option, this suspension should have been reported to CFP Board if a certificant/broker was either individually subject to the FINRA suspension or a control person for the firm.
Summary
A certificant must generally report both the “initiation and the conclusion of the reportable matter” within 30 days of receiving notice thereof. Your CFP Board understands these reporting rules can seem complex. Contact CFP Board at compliance@cfpboard.org when you need guidance. Here’s a friendly tip from the author—when in doubt, disclose!
