Home -> Law Blog Directory -> Corporate & Securities Law Blogs -> OverRegd - Securities Regulation and Litigation Blog

Corporate & Securities Law

: OverRegd - Securities Regulation and Litigation Blog

New CFP Standards Effective July 1

Last month, the Certified Financial Planner Board of Standards issued updated Standards of Professional Conduct for CFP-certified financial planners. Those standards take effect on July 1, 2008.

The new CFP Standards highlight the increasing convergence, from a regulatory standpoint, between the once clearly distinct worlds of broker-dealers and investment advisors. Many registered securities representatives, particularly experienced reps, have earned and use the CFP designation in their practice. Many of those same CFP-certified reps also have their own Registered Investment Advisor firm, or are investment advisor representatives of a RIA or a dually-registered securities firm. As the CFP itself states, the new Standards apply to every CFP-certified financial professional, regardless of that professional’s licensure under the B-D or IA schemes, or both.

So what do the updated standards do? Although the CFP strengthened a number of its standards related to data gathering, disclosure, analysis, and monitoring, the bottom line is that the standard of care has been significantly ratcheted up: whereas the CFP required before, at minimum, a standard of “reasonable and prudent professional judgment” it now states that a CFP certificant “shall at all times place the interest of the client ahead of his or her own.” In other words, a fiduciary obligation.

Not surprisingly, advocates from the B-D world see this as a further erosion of the distinction between the obligations and business models of broker-dealers and investment advisors; the Financial Services Institute, for example, has urged its independent broker dealer members to raise concerns with the CFP Board regarding the standards.

Groups like the FSI will and should fight hard to insure that standards and legal requirements make sense for firms, representatives, and clients. However, the trend is clear. State securities regulators will continue to press for a fiduciary obligation for B-D firms and representatives. There is movement at the federal level for significant change in the financial services regulatory scheme, with the Treasury Department’s recent “Blueprint for a Modernized Financial Regulatory Structure" the clearest example. Dual-registration will increase, and traditional broker-dealers will continue to expand “hybrid” platforms to serve both B-D and IA models. Nobody can say for sure where this is going, but it is clear that the next few years will see substantial changes in the way securities firms are regulated.

Full post as published by OverRegd - Securities Regulation and Litigation Blog on May 13, 2008 (boomark / email).