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CFP Board Outlines New Governance Reforms

The changes come in response to the findings of an independent task force report on the board's enforcement practices.

Members of the CFP Board’s Board of Directors will be able to serve two three-year terms as opposed to a single four-year term, the Board announced today. It was one of several reforms to the board’s governance practices following a review that began in the wake of an independent task force report examining the board’s enforcement practices.

“These improvements support CFP Board’s ongoing evolution as the professional body for personal financial planners and reinforce the consumer confidence that comes from working with a CFP professional,” Board CEO Kevin Keller said.

The independent task force was established in July of last year in response to reporting from the Wall Street Journal alleging that the CFP Board had failed to vet thousands of CFP professionals’ regulatory, disciplinary and criminal histories, and failed to include this information on a website designed to help customers assess and compare CFP professionals.

The task force, led by Denise Vogt Crawford, a member of the Board of Directors, a former Texas Securities Commission and former president of the North American Securities Administrators Association. In its final report issued last December, asserted that while there were “significant failures” in the board’s enforcement program and public interaction, the primary reasons for the failings were “systemic, longstanding, governance-level weaknesses, and that the problems discussed in this Report cannot be adequately addressed without commensurate governance reforms.”

In an interview with in January, Current Board Chair Jack Brod said the board had started a “governance review” in response to the task force’s recommendation, which included looking at the board’s composition and term limits. Today, Brod noted that the Board had already implemented several enforcement reforms in the aftermath of the task force, including that it would no longer solely rely on self-disclosure by CFP professionals and pledging to conduct more stringent checks of FINRA BrokerCheck and the SEC’s IAPD everytime a CFP professional renews. But he also stressed today’s governance reforms could have an impact moving forward.

“We believe the combination of these governance enhancements will achieve those objectives that were set out largely in the task force report, as well as what the board expects on its own,” Brod said.

In addition to the term limit changes, the Board will formalize its transition process of elected leaders and create a more formal process in its nominating committee that will help them target professional experience gaps in board composition. The committee will use the information to help find potential board members with expertise that could help fill these gaps.

“We want to target the types of backgrounds and experiences based on what we think is going to be necessary in the years ahead,” Brod said.

Brod outlined additional reforms, including broadening the scope of certain committees. For example, the Appeals Committee will now include oversight of ethical standards and enforcement, and the CEO Oversight Committee will now monitor compensation of all senior executive staff to adhere to the current policy that compensation and benefits can’t “deviate materially” from the market for those skills (previously, the committee’s oversight pertained solely to CEOs). 

The Audit Committee’s scope will also include oversight of enterprise risk management, and Brod said that the board was also looking at a review of its risk management framework, utilizing the help of a third-party enterprise risk management consultant. Brod said the board will also form a commission this year to review revisions to its fitness standards and sanctions guidelines, including the independent task force’s recommendation that failures to self-report should be subject to more significant sanctions.

Implementation of these rules is already underway, according to Brod, who expected that the board would approve changes to governing documentation that would make the reforms possible during its November meeting. This could include any necessary changes to bylaws or committee charters.

“We expect to be transitioning into these reforms going into next year,” he said.

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