General Principles Flashcards
Financial advice: what to provide in writing
Privacy policy
Financial advice: what to provide orally or in writing
- Material conflicts of interest
- Services and products
- How the client pays
- How you are compensated
- Public discipline and bankruptcy
- Referral compensation arrangements
- Other material info
Financial planning: what to provide in writing
- Privacy policy
- Services and products
- How the client pays
- How you are compensated
- Public discipline and bankruptcy
- Referral compensation
- Terms of engagement
- Other material info
Financial planning: what to provide orally or in writing
Material conflicts of interest
Practice Standards for the Financial Planning Process
- Understanding the Client’s Personal and Financial Circumstances
- Identifying and Selecting Goals
- Analyze the client’s current course of action and potential alternatives
- Developing Financial Planning Recommendations
- Presenting the Financial Plan Recommendations
- Implementing Financial Plan Recommendations
- Monitoring the Plan
Always bar from CFP Certification
- Felony conviction of theft, embezzlement, tax fraud, or financial crimes
- Murder and rape
- Violent crime within the past five years
- Revocation of financial professional license
Presumed unacceptable for CFP Certification
- Two of more personal or business bankruptcies
- Felony conviction of violent crime other than murder or rape that occurred more than five years ago
- Nonviolent crimes, including perjury, within the past five years
- Revocation or suspension of non-financial professional license
What happens during a petition for consideration?
- Candidate submit written petition and agree to CFP Board’s jurisdiction
- Staff makes sure issue falls under “presumed unacceptable” list
- If “always bar,” there is no recourse
- If “presumed unacceptable,” the Disciplinary and Ethics Commission makes a decision
What happens during Disciplinary and Ethics Commission decision?
- If candidate is fit, they will get certification.
- If the DEC denies the petition, certification is barred.
- You can appeal DEC decision to Appeals Committee of the Board of Directors
- Decisions are final unless a felony conviction is overturned
How much AUM to register with the state?
Less than $100 million
How much AUM to register with SEC?
More than $110 million
Between $100 and $110 million, you can choose to register with state or SEC
Eligibility to file petition for fitness determination - reinstatement
- Suspension of more than one year
- Respondent must file written
petition for reinstatement
- Hearing panel and DEC review - Decisions are final unless felony conviction is overturned, at which time individual may submit a new petition
Bankruptcy rules for CFPs
1st:
- report to CFP Board within 30 calendar days
- report to client within 90 days
- choose public censure or hearing fee to follow adjudication
2nd:
- Same reporting rules
- Follows normal disciplinary procedure for adjudicating complaints
Suspension to use CFP marks vs. revocation
Suspension - 90 days or five years
Revocation - permanent
Brochure rule
Written disclosure for:
- Advisory services and fees
- Types of securities
- Education and business standards
- Participation / interest in securities transactions
- Conditions for managing accounts
Must be given to client at or before time of entering into contract
Provide client with ADV Part 2
Series 6
Mutual funds, UITs, variables (life insurance and annuities)
Series 7
Everything except commodities and futures
Demand curve moves up and to the right
Discretionary income increase (income increase, lower taxes, lower savings rate)
Demand curve moves down and to the left
Discretionary income decrease (decrease income, higher taxes, and higher savings rate)
Supply curve moves down and to the right
Production improves (firms produce more goods at lower cost)
Supply curve moves up and to the left
Increase in production costs (firms produce less at a higher cost)
Four monetary policy tools
1) reserve requirement
2) discount rate
3) open market operations
4) excess reserve rate
Open market operations
Buying / selling government securities
- buying: increase money supply / decrease interest rates
- selling: decrease money supply / increase interest rates
Current ratio
- ability to meet short-term obligations
Current assets / current liabilities
