Professional Conduct and Regulation practice questions

Answer: B) The CFP® professional may not knowingly or recklessly assist another person's violation, so sending the templates breaches the duty

Standard A.4 requires a CFP® professional to comply with the laws, rules, and regulations governing Professional Services. It also forbids intentionally or recklessly participating or assisting in another person's violation of those laws or of the Standards.

• AIncorrect. Standard A.4 goes beyond the professional's own conduct. It prohibits intentionally or recklessly participating or assisting in another person's violation.
• BCorrect. A.4 requires compliance with the laws, rules, and regulations governing Professional Services. It also says a CFP® professional may not intentionally or recklessly participate or assist in another person's violation of them.
• CIncorrect. The CFP® professional is bound by the Standards. A.4 covers assisting another person's violation of the laws, rules, or regulations governing Professional Services, whether or not that person is certified.
• DIncorrect. A.4 does not make the professional's duty depend on a regulator first finding the other person liable. Knowingly or recklessly assisting a violation is itself prohibited.

Answer: A) Bring in a competent tax professional to help, or limit the engagement and tell the client which requested services will not be provided

Under Standard A.2 (Duty of Competence), a professional who lacks competence in an area must gain competence, obtain a competent professional's help, limit or terminate the engagement, and/or refer the client. They must also tell the client which requested services they will not provide.

• ACorrect. Standard A.2 says a professional who lacks competence must gain competence, obtain the assistance of a competent professional, limit or terminate the Engagement, and/or refer the Client. The professional must also describe any requested services they will not provide.
• BIncorrect. Disclosure and consent are the tools for handling conflicts of interest. They do not cure a lack of competence. A.2 still requires the professional to gain competence, get competent help, limit or terminate the engagement, or refer the client.
• CIncorrect. A.2 expressly anticipates that a professional may not be sufficiently competent in a particular area. Holding the certification does not create competence in every specialized matter.
• DIncorrect. Termination is only one of several permitted responses. The professional may also gain competence, obtain assistance, limit the engagement, or refer the client, so withdrawing completely is not required.

Answer: A) Clarify how conflicts between the spouses will be handled

• ACorrect. Both are clients.
• BIncorrect. Both are clients.
• CIncorrect. That breaches confidentiality.
• DIncorrect. Goals can differ.

Answer: A) 30 days

• ACorrect. Per CFP Board's Standards of Conduct.
• BIncorrect. Report within 30 days.
• CIncorrect. Report within 30 days.
• DIncorrect. Report within 30 days.

Answer: A) Dispute inaccurate information in their credit reports

• ACorrect. Bureaus must investigate.
• BIncorrect. Accurate information can stay.
• CIncorrect. There's no guarantee.
• DIncorrect. That isn't a right.

Answer: C) Oversees consumer products like mortgages and credit cards

• AIncorrect. States regulate insurance.
• BIncorrect. That's the SEC.
• CCorrect. It was created by Dodd-Frank.
• DIncorrect. That's CFP Board.

Answer: A) Act with honesty, integrity, competence, and diligence

CFP Board's current Code of Ethics lists six commitments. The first is to act with honesty, integrity, competence, and diligence. The others are to act in the client's best interests, exercise due care, avoid or disclose and manage conflicts, protect client confidentiality, and reflect positively on the profession.

• ACorrect. This is the first of the six Code of Ethics commitments a CFP® professional must meet.
• BIncorrect. This wording is not in the current Code of Ethics. The current Code requires acting with honesty, integrity, competence, and diligence.
• CIncorrect. The Code of Ethics requires the CFP® professional to avoid, or disclose and manage, conflicts of interest. It does not require written consent before every conflict.
• DIncorrect. This is not a Code of Ethics commitment. The Code requires acting in the client's best interests and exercising due care, not always picking the lowest-cost product.

Answer: A) Preventing violations of applicable laws, rules, regulations, and the CFP Board's Standards

Standard D.1 requires a CFP® professional to exercise reasonable care when supervising people under their direction, with a view toward preventing violations of applicable laws, rules, regulations, and the Standards.

• ACorrect. Standard D.1 requires reasonable care when supervising people acting under the professional's direction, with a view toward preventing violations of applicable laws, rules, regulations, and the Standards.
• BIncorrect. D.1 specifically covers preventing violations of laws, rules, regulations, and the Standards. The professional cannot hand that responsibility off to a compliance department.
• CIncorrect. The standard is reasonable care to prevent violations. It does not guarantee investment outcomes.
• DIncorrect. D.1 does not require supervised persons to become certified. Its focus is preventing violations of laws, rules, regulations, and the Standards.

Answer: A) Fully disclose the conflict, obtain informed consent and follow business practices designed to keep it from compromising the client's best interests

For a Material Conflict of Interest, a CFP® professional must give full disclosure that is specific enough for informed consent. The professional must also adopt and follow business practices reasonably designed to keep the conflict from compromising the client's best interests.

• ACorrect. Standard A.5.a requires full disclosure of Material Conflicts of Interest and the client's informed consent. It also requires business practices reasonably designed to keep conflicts from compromising the professional's ability to act in the client's best interests.
• BIncorrect. Disclosure and consent do not end the obligation. The professional must still manage the conflict and act in the client's best interests.
• CIncorrect. The Standards let professionals address a material conflict through full disclosure, informed consent and proper management. Avoiding the recommendation is not required.
• DIncorrect. Disclosure must give specific enough facts for a reasonable client to understand the conflict and the business practices behind it, and then give informed consent.

Answer: A) How the professional, the firm, and any Related Party are compensated, and any Material Conflicts of Interest

Before or at the time of engagement, a CFP® professional must disclose how the professional, the firm, and any Related Party are compensated, along with Material Conflicts of Interest. Other required items include the services and products to be provided and any public discipline or bankruptcy.

• ACorrect. Standard A.10.a requires these disclosures before or at the time of engagement. The list also includes a description of the services and products, how the client pays, any public discipline or bankruptcy, and other information that is Material to the client's decision.
• BIncorrect. The Standards require a description of how the professional, the firm, and Related Parties are compensated. They do not require the exact commission in dollars or the firm's profit margin.
• CIncorrect. These disclosures must be made before or at the time of engagement, not after the transaction.
• DIncorrect. Standard A.10.a expressly requires disclosing how any Related Party is compensated, not only the professional and the firm.