Tuesday, December 16, 2014

Staff Grants Relief to Combat Advisers’ Reluctance to Provide Documents to CFP Board

[This story previously appeared in Securities Regulation Daily.]

By John Filar Atwood

The staff of the SEC’s Division of Trading and Markets has expanded a March 2011 no-action position to help the Certified Financial Planner Board of Standards (CFP Board) to obtain documents that investment advisers and brokers currently are reluctant to provide. The CFP Board sought an expansion of the definition of “background documents” because advisers and brokers have been hesitant to provide any documents other than those specifically mentioned in the 2011 letter.

In the 2011 letter to the CFP Board, the staff stated that broker-dealers and registered investment advisers may provide the CFP Board with copies of any customer complaint involving the applicant, and the employer’s response to the customer complaint. It also said that advisers and brokers could provide any statement of claim (including arbitration claims) involving the applicant, and the resolution of the claim (collectively referred to as “background documents”).

More effective investigations. Based on its experience in conducting investigations since March 2011, the CFP Board asked the SEC staff to clarify the definition of background documents to provide comfort to brokers and advisers that certain documents are included within the scope of the definition. Without the clarification, the CFP Board said, it would not be able to process effectively applications of candidates for CFP certification, and efficiently investigate CFP professionals.

In the no-action letter, the staff noted that the original staff position applied to consumer complaints and responses by broker-dealers and investment advisers to those complaints, statements of claim and claim resolution documents. The CFP Board asked that it be extended to include related documents including any attachment or exhibit to, any document referenced in the text of, and any document material to, a complaint, statement of claim, response or claim resolution document.

In granting the relief, the staff noted that the CFP Board would use the background documents to process applications for CFP certification and to investigate and possibly take action against holders of the CFP certification. It also noted that many broker-dealers and investment advisers employ individuals who have obtained the CFP certification, and that more than 70,000 financial planning professionals have obtained the CFP certification.

Sensitive information. The staff stated that the disclosure of background documents to the CFP Board for the purpose of assessing compliance with CFP Board’s ethical standards will be covered by the exception provided by Section 248.15(a)(3) of Regulation S-P. Accordingly, the CFP Board will treat the information contained in background documents as if it were received pursuant to this exception and limit the redisclosure and reuse of the information. The CFP Board said that it recognizes that certain background documents may contain sensitive personal information, and it has procedures in place for safeguarding and properly disposing of the documents.

In addition to the relief granted by the Division of Trading and Markets, the SEC’s Division of Investment Management stated that it will not recommend Commission action against an investment adviser if the adviser discloses background information to the CFP Board in accordance with the no-action letter.