The Certified Financial Planner Board of Standards Inc. on Tuesday announced new measures to tighten its oversight of more than 85,000 stockbrokers, insurance agents and other financial advisers.
The action followed a Wall Street Journal article that found that thousands of advisers with the coveted Certified Financial Planner designation listed in the group’s public directory as having clean records had histories of customer complaints, bankruptcies, regulatory problems or criminal records.
The CFP Board had been relying solely on planners to self-report red flags in their records when they renewed their certification annually. The Journal’s investigation found that many such red flags were publicly disclosed on a website run by the Financial Industry Regulatory Authority, a watchdog organization funded by the brokerage industry—but not in the CFP Board’s LetsMakeAPlan.org directory.
Separately, the Journal found that the CFP Board reviewed far fewer planners for potential misconduct in recent years than it had a decade ago, with investigations falling by three-quarters even as the number of CFPs rose by almost one-third. The CFP Board called that interpretation “inaccurate” and “not comparable.”
In July, the CFP Board appointed a task force, which it described as independent, to review its enforcement and disclosure procedures. The task force was headed by Denise Voigt Crawford, a former Texas state securities commissioner who also serves on the board of directors of the CFP Board.
The task force submitted its report to the group’s board of directors on Nov. 1. It found that the failings identified by the Journal’s investigation resulted from “systemic, longstanding, governance-level weaknesses” at the CFP Board and warned that “these weaknesses will inevitably result in a recurrence of the kind of events reported by the Journal unless the Board of Directors acts to implement reforms.”
The report recommended a series of steps including a “substantial increase” in spending on investigations, hiring an enforcement chief with regulatory experience, expanding staff, upgrading technology, analyzing data more effectively and eliminating private disciplinary actions so all sanctions would be public.
In its response, which the CFP Board called “preliminary,” the organization said it would strengthen its background checks on planners and take several measures to improve enforcement.
At the same time, the board didn’t commit to implement all of the report’s recommendations, many of which “require further deliberation to fully analyze their implications.” The board said some steps recommended by the task force are more suitable to regulatory authorities than a professional certification group.
Between May 2019 and this month, the CFP Board publicly reported sanctions against about two dozen planners, according to an analysis by the Journal of disciplinary actions listed on the organization’s site. Of the six planners with regulatory or criminal red flags identified in the Journal’s article in July, the CFP Board has since suspended one and revoked another’s certification.
The CFP Board told the Journal in July that it will take “appropriate action” if planners are found guilty of crimes. However, among those still listed on LetsMakeAPlan.org with a clean CFP history is Kevin Daniel Jr. , a Seattle adviser whose record on FINRA’s disclosure site shows he entered into a felony diversion program in 2018 after threatening to kill someone.
Mr. Daniel and his firm didn’t respond to a request for comment.