At the Law Offices of David S. Rich, LLC, we have substantial experience representing employees in the securities industry, and employees in the financial services industry, who hold Certified Financial Planner (“CFP”) certification in disciplinary investigations brought by, and disciplinary hearings before, the Certified Financial Planner Board of Standards, Inc. (the “CFP Board”).
The Law Offices of David S. Rich, LLC represents brokers, financial advisors, and other certified financial planners (collectively, “CFP professionals”) in all stages of the process: (1) drafting the required, signed statements in response to the allegations; (2) researching the CFP Board’s Sanction Guidelines and published decisions of the CFP Board’s Disciplinary and Ethics Commission (the “Disciplinary and Ethics Commission”) to develop legal defenses and to identify mitigating circumstances; (3) negotiating settlements through Offers of Settlement; (4) answering disciplinary complaints; (5) making pre-hearing motions; and (6) litigating CFP Board disciplinary hearings.
How CFP Board Notices of Investigation Arise
A CFP Board staff attorney prepares and sends, to the broker, financial advisor, or other certified financial planner, a notice of investigation stating that the CFP Board is investigating the CFP professional and stating the general nature of the allegations made against the professional.
The CFP Board’s notice of investigation asks the broker, advisor, or other certified financial planner to provide a signed, written statement about potential violations of the CFP Board’s Code of Ethics and Professional Responsibility (the “Code of Ethics”) or of the CFP Board’s Rules of Conduct (the “Rules of Conduct”), possible failures to comply with the CFP Board’s Financial Planning Practice Standards (the “Practice Standards”), potential violations of securities laws or rules or of criminal laws, or other possible professional misconduct.
Further, the CFP Board’s inquiry letter typically asks the CFP professional to answer a list of particular questions and to provide copies of all correspondence or memoranda referring to the matter.
The CFP Board makes these requests under Rule 6.2 of the CFP Board’s Disciplinary Rules and Procedures (the “Disciplinary Rules”), which requires certified financial planners to provide information and records.
Flouting the CFP Board’s requests for information or books and records results in a significant penalty, such as a private written censure. Further, failure to provide information requested by the CFP Board may give rise to an adverse inference with respect to the alleged misconduct. So, too, disregarding the CFP Board’s requests for information or records will result in referral of the matter to the Disciplinary and Ethics Commission for further action.
If you are a broker, financial advisor, or other certified financial planner and you have received, from the CFP Board, a notice of investigation, contact the Law Offices of David S. Rich, LLC.
Circumstances In Which the CFP Board Issues Notices of Investigation
The CFP Board issues notices of investigation in various circumstances. Three common scenarios are:
- Form U-5s. Form U-5 (Uniform Termination Notice for Securities Industry Registration) is a document which brokerage firms must complete and file with securities regulators to report the cessation of a broker’s employment. On the Form U-5, the brokerage firm must set forth the reason for the broker’s termination, and whether the broker voluntarily left, was permitted to resign, or was fired.When the brokerage firm alleges on the Form U-5 that a broker who holds CFP certification quit, was fired, or was permitted to resign after being accused of (1) violating investment-related statutes, regulations, rules or industry standards of conduct, (2) fraud or wrongful taking of property, or (3) failure to supervise, the CFP Board may dispatch a notice of investigation to the broker asking for a signed, written statement replying to the firm’s allegations.
- Customer Arbitrations and Regulatory Actions. Customer arbitrations are arbitrations, before the Financial Industry Regulatory Authority, Inc. (“FINRA”), between investors and brokers and/or brokerage firms. In a customer arbitration, the investor may allege that his broker and/or his brokerage firm converted the customer’s monies, engaged in churning, made unsuitable investments, committed fraud, made misrepresentations, engaged in unauthorized trading, failed to execute the customer’s orders, or perpetrated other misconduct. When a broker who holds CFP certification is named as a respondent in a customer arbitration, the CFP board may issue a notice of investigation to the broker.
So, too, when a broker who holds CFP certification is made a respondent or a defendant in a regulatory action initiated by a government agency or officer such as the SEC, the Commodity Futures Trading Commission, a state securities regulator, a state attorney general, or a foreign financial regulatory authority, the CFP Board may propound a notice of investigation to the broker.
- Grievances. When an individual customer or client of a CFP professional, who believes he or she has been the victim of professional misconduct, submits, to the CFP Board, a written complaint against the CFP professional, the CFP Board will issue a notice of investigation to the professional.
The Law Offices of David S. Rich, LLC skillfully prepares, on behalf of brokers, financial advisors, and other certified financial planners, written statements responding to the CFP Board’s notices of investigation. Even if the CFP professional has committed the charged violations of the Code of Ethics, the Rules of Conduct, securities laws or rules or the like, CFP Board Disciplinary Hearings Attorney David S. Rich may be able to bring out mitigating circumstances and to negotiate a favorable settlement.
Informal Disciplinary Actions
In addition to propounding the notice of investigation, the CFP Board staff attorney or other CFP Board staff may issue, to the broker, financial advisor, or other certified financial planner, additional requests for information and documents.
At the close of the CFP Board’s investigation, the CFP Board staff attorney analyzes the written complaint (if any) by the CFP professional’s individual customer or client, the CFP professional’s written statement responding to the CFP Board’s notices of investigation, and the law and determines whether there is probable cause to believe grounds for discipline exist.
If probable cause is lacking, the CFP Board staff attorney will dismiss the allegations.
If the CFP Board staff attorney determines that the CFP professional may have violated the Code of Ethics or the Rules of Conduct and/or failed to comply with the Practice Standards, but that that that CFP professional’s conduct does not warrant referral to the Disciplinary and Ethics Commission, the matter may be resolved with an informal disciplinary action, such as the issuance of a letter of caution.
A letter of caution may be appropriate where, for example, the violation is of a minor nature and there is no customer harm or detrimental market impact.
An informal disciplinary action is one that is not publicly reported. Instead, an informal action is a private admonishment that the CFP Board believes the CFP professional has violated the Code of Ethics or the Rules of Conduct and/or has neglected to comply with the Practice Standards.
CFP Board Disciplinary Hearings
In more serious cases, the CFP Board staff attorney may prepare a formal Complaint against the CFP professional. This formal Complaint begins a process that, absent a settlement, leads to a disciplinary hearing before a hearing panel of three members, two of whom must be CFP professionals.
Sanctions following a disciplinary hearing may include the suspension or revocation of the right to use the Certified Financial Planner marks, a private written censure, or a public letter of admonition.
Further, the broker, financial advisor, or other certified financial planner will be required to inform his or her present clients of any CFP Board suspension or revocation. Consequently, a suspension or revocation could ruin a CFP professional financially.
The CFP Board staff attorney serves, on the CFP professional, a formal complaint against the professional. The respondent broker files an answer to the formal complaint.
Most formal disciplinary actions settle before the disciplinary hearing through the issuance of a settlement agreement called an Offer of Settlement. An Offer of Settlement is a document, available to the public, which sets forth the CFP Board’s findings of fact and the sanctions imposed.
The CFP professional and the CFP Board staff attorney negotiate the Offer of Settlement. However, the hearing panel and the Disciplinary and Ethics Commission, successively, must approve the Offer of Settlement.
If the CFP professional is unable to settle, then the CFP professional and the CFP Board’s outside counsel try the case, before a hearing panel, at a disciplinary hearing.
The disciplinary hearing is not as a formal as a trial in court, but it takes place in a similar manner. The professional has the rights to appear and testify at the hearing, to call and question witnesses, to cross-examine the CFP Board’s witnesses, and to present evidence and argument on his or her behalf.
After the hearing, the hearing panel convenes and makes its findings of fact and recommendations to the Disciplinary and Ethics Commission. The Disciplinary Commission reviews the hearing panel’s findings of fact and recommendations, and either accepts the recommendations or remands the matter back to the hearing panel for further consideration. The CFP professional has certain rights to appeal from any adverse order of the Disciplinary and Ethics Commission.
On behalf of brokers, financial advisors, and other certified financial planners, the Law Offices of David S. Rich skillfully negotiates, with CFP Board staff attorneys, settlements of formal disciplinary actions. When a settlement cannot be reached, CFP Board Disciplinary Hearings Attorney David S. Rich aggressively defends the CFP professionals in disciplinary hearings before hearing panels.
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