ETHICAL CONDUCT 2012

Financial Planning

100

Which of the following areas are most likely to involve financial planning: a) Qualified and non-qualified investments b) Employee benefits c) Multiple goals d) Current and projected cash flow

What is C or What are multiple goals? Source: Terminology - Personal Financial Planning

200

Activities that the CFP Board would likely consider material elements of financial planning include: a) Fact finding to meet regulatory requirements for suitability rules b) Providing investment advisory services as defined by Federal or state regulators c) Engaging in the sale of a variable universal life policy d) Completing tax returns without providing any other financial services e) All of the above

What is b or what is providing investment advisory services as defined by Federal or state regulators Source: Terminology - Personal Financial Planning

300

When a CFP professional provides financial planning or material elements of financial planning, the Standards require: a) A heightened duty of care to the client b) Additional disclosures to the client or prospective clients, including some that must be made in writing c) A written agreement covering the financial planning services d) All of the above e) Items B and C only

What is D or all of the above Source: Rules of Conduct 1.3, 1.4, 2.2

400

A financial planning engagement ends when the financial plan is delivered to the client: a) True b) False

What is b or False Source: Rules of Conduct 1.3

500

Rule 1.4 states that at all times a certificant places the interest of the client ahead of his or her own interests. Rule 4.3 indicates that a certificant shall make and/or implement only suitable recommendations. Is it possible that if, under FINRA rules, a CFP professional's recommendation is determined to be suitable and the CFP professional has still violated Rule 1.4 a) Yes b) No

What is a or Yes Source: Rules of Conduct 1.4

Disclosures

100

The CFP Standards require that all disclosures must be made in writing: a) True b) False

What is b or False Source: Rules of Conduct 2.2

200

The CFP Standards require that CFP professionals disclose a customer complaint to the CFP Board within 10 days of filing: a) True b) False

What is b or False Source: Rules of Conduct 6.4

300

Which of these represents a potential conflict of interest that must be disclosed? a) Sale of a proprietary mutual fund b) Trading from the inventory of your firm c) Bonus compensation paid on volume of sales achieved d) Finder's fee for a client referral e) All of the above

What is e or all of the above Source: Rules of Conduct 2.2

400

Which of the following represents a cost that must be disclosed: a) Sales charges on A shares b) Account maintenance fees c) Account termination fee d) Subscription for planning software e) a, b, and c f) All of the above

What is f or all of the above Source: Rules of Conduct 2.2

500

If the CFP offers financial planning or material elements, the following must be disclosed: a) that CFP receives computer terminals, software and adm. support allowance for custody accounts through clearing broker b) how the cost of products and services are determined c) how the CFP professional may benefit from the client's decision d) contact information for the CFP professional, and the firm which the CFP is associated e) b,c, and d only f) all of the above

What is f or all of the above Source: Rules of Conduct 2.2

Rules of Conduct

100

Broker-dealer firms are required to implement supervisory procedures to assure that registered representatives who hold the CFP designation adhere to the CFP Board's ethical standards: a) True b) False

What is b or False Source: Disciplinary Rules and Procedures Article 2.1

200

Filing for bankruptcy protection reflects adversely on a CFP professional's integrity and upon the financial planning profession: a) True b) False

What is a or True Source: Rules of Conduct 6.5, Candidate Fitness Standards

300

All CFP professionals are considered fiduciaries and must act in a manner that he or she believes to be in the best interest of the client: a) True b) False

What is b or False Source: Rules of Conduct 1.4

400

It is not a violation of the CFP Standards to sign another person's name to a document to facilitate the emergency transfer of funds as long as the client provides authorization to do so: a) True b) False

What is What is b or False Source: Rule of Conduct 6.5

500

Failure to comply with federal or state regulatory requirements may subject the CFP professional to disciplinary action even if the violation is not specifically addressed in the CFP Standards of Professional Conduct: a) True b) False

What is a or True Source: Rules of Conduct 4.3

Practice Standards

100

Compliance with Practice Standards for certificants is mandatory when performing financial planning tasks or activities addressed by a Practice Standard a) True b) False

What is b or False. Source: Description of Practice Standards

200

Practice Standard 400-1, Identifying and Evaluating Financial Planning Alternatives, is completed during which of the following steps of the financial planning process: a) Developing and presenting financial planning recommendations b) Analyzing and evaluating the client's financial status c) Establishing and defining the relationship with the client

What is a or developing and presenting financial planning recommendations Source: Description of Practice Standards

300

If a CFP professional is unable to obtain sufficient and relevant quantitative information and documents pertaining to the client's financial situation, what is the best course of action? a) Obtain the information from a third party b) Proceed with the development of recommendation based on the information the client is comfortable in providing c) Restrict the scope of the engagement to those matters for which sufficient information is available d) Terminate the agreement e) c or d

What is e or restrict the scope of the engagement or terminate the agreement. Source: Practice Standards 200-2

400

In considering alternative actions to appropriately addressing the client's financial planning issues, which of the following should be considered: a) Legal and/or regulatory limitations depending on what hat the CFP professional is wearing (insurance agent, registered representative, investment adviser) b) Level of competency of the CFP professional c) Compensation earned in relationship to complexity of the case d) All of the above e) a and b only

What is e or legal and/or regulatory limitations and level of competency Source: Practice Standard 400-1

500

The following impact statement is most likely related to which Practice Standard: Clients are more likely to be satisfied when they have realistic and clear expectations communicated before the services are provided. a) Determining a client's personal and financial goals, needs and priorities b) Defining the scope of the engagement c) Defining monitoring responsibilities

What is b or defining the scope of the engagement Source: Practice Standard 100-1

Case Studies

100

A CFP professional introduces a client to his son, who recently obtained his insurance license and sells fixed annuities to some of his clients. Because it is not clear as to whether this client will need a fixed annuity as part of the implementation of his financial plan, no disclosure is required in the agreement: a) True b) False

What is b or False Source: Rules of Conduct 2.2

200

A CFP professional indicates on her website that she provides financial planning services even though she has never offered such services to clients in the past. She has misrepresented her services: a) True b) False

What is a or True Source: Principle 1, Rules of Conduct 2.1, 4.2

300

At the beginning of a client engagement, a CFP professional discloses that he does not offer any proprietary products. Several months later, the CFP begins offering proprietary products but does not offer any proprietary products to this client. The CFP professional must update his disclosures to this client: a)True b) False

What is a or True Source: Rules of Conduct 2.2

400

A CFP candidate was fined $5,000 by FINRA and suspended from association with a FINRA member firm for 3 months for borrowing $85k from a client, who was not an immediate family member. The most likely action from the CFP Board is: a) Bar the candidate from becoming certified b) Bar the individual from being certified unless he/she petitions the Disciplinary and Ethics Committee for reconsideration c) Delay action until candidate passes the CFP Certification examination.

What is b or bar the individual from becoming certified unless he/she petitions the Disciplinary and Ethics Committee for reconsideration Source: Candidate Fitness Standards

500

A CFP professional agrees to prepare, implement, and monitor a financial plan for a client. The CFP undertakes a review of client's financial plan every two years. Despite significant withdrawals outside those contemplated in the plan, CFP continues to recommend client maintain current asset allocation and liquidity. The CFP was obligated to re-evaluate recommendations given client's withdrawal activity. a) True b) False

What is a or True Source: Practice Standards 600-1