In June, the Financial Planning Standards Council’s Board of Directors (the “Board”) approved a number of changes to the FPSC® Rules of Conduct (the “Rules”), as recommended by the Enforcement Policy Committee, a standing committee of the Board. The Enforcement Policy Committee, composed of members of the public and CFP® professionals, is responsible for overseeing FPSC enforcement policies and recommending appropriate changes to the Board.
The Board approved amendments to Rules 8, 12, 17 and 24. A minor wording change to Rule 20 was also approved. An overview of the changes, which apply to CFP professionals and FPSC Level 1® Certificants in Financial Planning, is included below.
The FPSC® Rules of Conduct form part of the Standards of Professional Responsibility for CFP Professionals and FPSC Level 1 Certificants in Financial Planning, set and enforced by FPSC. The revised Rules, which came into effect on August 1, 2015, govern the conduct of CFP professionals and FPSC Level 1 certificants from that date forward.
We encourage you to review the revised rules in detail.Should you have any questions, please email firstname.lastname@example.org.
The amendments serve to strengthen the existing rule and to reflect best practices relating to the management and resolution of conflicts of interest. The revised rule reflects the thoughtfulness and care professionals should take when considering whether to accept an engagement or continue in an existing engagement.
The revised rule reflects:
- The duties professionals owe their clients;
- The level of service and professionalism clients expect of professionals; and
- The Client First Principle in the FPSC® Code of Ethics.
As revised, Rule 8 restricts a CFP professional’s ability to enter into a client engagement where there is an existing conflict of interest between the CFP professional and his/her client, and/or among the CFP professional’s clients in the case of a joint engagement (for example, where the CFP professional is jointly engaged by spouses, business partners, family members, etc.).
The revised rule requires that a CFP professional decline to provide services to a client where there is an existing conflict of interest between the CFP professional and the client. In such instances, services may only be provided by the CFP professional once the client, having been fully advised of the conflict, makes the informed decision to engage the CFP professional notwithstanding the conflict, and provides specific written direction to the CFP professional to continue with the engagement.
Further, the revised rule requires that a CFP professional cease providing services to a client where a conflict of interest arises during the course of an ongoing relationship, either between the client and the CFP professional or between the CFP professional’s clients in the case of a joint engagement. The CFP professional must immediately advise the client, in writing, of the conflict and cease providing services until such time as the client provides written consent to continue the engagement. The revised rule includes guidance around the definition of a conflict of interest and examples of circumstances in which a conflict may arise.
The revised rule reflects the expectations Canadians have of professionals and the high standards to which financial planners are held, by FPSC and all Canadians. It reflects the professionalism expected of CFP professionals and FPSC Level 1 Certificants in Financial Planning, who must abide by a Code of Ethics requiring them to place their clients’ interests ahead of all others.
Rule 12 was amended to clarify the scope of a CFP professional’s supervisory responsibilities. The revised rule reflects the public’s expectation that a CFP professional will exercise prudent and appropriate supervision of others when acting as a CFP professional. Under the revised rule, CFP professionals are required to exercise prudent and appropriate supervision when assigning, reviewing or overseeing another individual’s work (for example, when overseeing work as part of a team and/or as part of one’s core duties whether or not the work was directly assigned in the first instance). A CFP professional’s supervisory responsibility is triggered by actual oversight and/or review of another individual’s work.
The former rule included a unique qualification to a CFP professional’s duties and responsibilities to act prudently by permitting a CFP professional to implement strategies that were neither prudent nor appropriate where the client provided written direction to proceed. This qualification has now been removed.
Under the revised rule, a client’s direction can no longer override the CFP professional’s duty to act prudently. The revised rule reflect FPSC’s expectation that a CFP professional will only implement those strategies that are prudent, appropriate and unlikely to materially impact the client’s best interests in a negative manner. Again, the revised rule reflects the expectation of CFP professionals and FPSC Level 1 certificants to place their clients’ interests first.
The scope of cooperation required under Rule 24 has been broadened beyond the context of investigations. Under the revised rule, a CFP professional, in all cases, is required to respond promptly and fully to any communication from FPSC wherein a response is requested.