CFP Board Sanctions Financial Planners to Protect Investors

ver 40,000 individuals have earned the designation, CFP, or Certified Financial Planner. The Certified Financial Planner Board of Standards, Inc. polices the ranks to ensure that the CFP designation continues to be well respected. Recently, numerous CFPs were sanctioned. CFPs must abide by rules of professional responsibility and a code of ethics. The CFP Board of Standards has the right to admonish CFPs, as well as to suspend and to revoke the right of an individual to use the CFP designation.

The details of some of these cases are worth reviewing. In one case, the CFP Board of Standards revoked the CFP license of Donald Lukens of California. According to the Securities and Exchange Commission (SEC), Lukens: defrauded investors of about $12 million during the 1990s; was arrested for writing bad checks; and allegedly used investors' money for personal purposes.

In another matter, the CFP Board of Standards revoked the license of Clifford Maher of Fort Lauderdale, Florida. The reason was that he was the subject of two customer arbitration claims filed at the National Association of Securities Dealers (NASD). The claims alleged that he failed to supervise an employee who had sold customers investments that were not suitable for them.

The CFP Board of Standards likewise revoked the licenses of Michael Hancock of Maine, William Goren of New York, and Larry Cherry of Tennessee. Each individual allegedly misappropriated client funds. Goren, in fact, was convicted of securities fraud and was sentenced to prison. Hancock did not have a state securities license. The state of Tennessee had enjoined Cherry for his securities activities.

On the lighter side, one individual applied for CFP designation but the Board of Standards delayed that application. It seems that two years before applying for the CFP designation, William Fauth of New York promoted himself on his website as already having the CFP designation.

Separately, the CFP Board of Appeals affirmed the sanctions imposed against two individuals. First, the appeals board reviewed and affirmed the suspension (for one year and one day) of a Florida CFP's right to use the CFP mark. The findings against T. "Jerry" Royer were that he: a) failed to calculate the cost basis for his client's annuities but told the client that there would be a taxable event; and b) did not know what strategy would be best because he did not know his client's situation.

Similarly, the CFP Board of Appeals reviewed and affirmed the permanent revocation of a St. Louis CFP's right to use the CFP designation. Among other things, the appeals board found that Michael Grimes: a) was the subject of a NASD 30-day suspension and $30,000 fine as well as a $25,000 fine by his state's securities commission; b) misrepresented authorship of a book; c) based his recommendations to a variety of clients on information obtained from a single source and accepted those recommendations at face value; and d) recommended other brokers in his office to clients without doing appropriate review of their capabilities, while sharing 50% of all commissions.

These and other sanctions protect investors. More information regarding the CFP mark, as well as the standards that CFPs must follow, may be found at www.cfpboard.org.