CFP Board Censures Improper CFP® Professional Conduct

Certified Financial Planner Board of Standards, Inc. (CFP Board) announced today public disciplinary actions against the following individuals’ right to use the CFP® certification marks, effective immediately or on the date noted in each case. Public disciplinary actions taken by CFP Board, in order of increasing severity, include letters of admonition, suspensions and permanent revocations.

This release contains information about disciplinary actions relating to 19 CFP® professionals. Of these actions, there were three revocations, eight suspensions, one interim suspension and seven letters of admonition.

The basis for each decision can be found in a Disciplinary Action Report below and on CFP Board’s Web site. The public may check on an individual’s disciplinary history and certification status with CFP Board at www.CFP.net/verify.

CFP Board’s enforcement process is a critical consumer protection.  CFP® professionals agree to abide by CFP Board’s Standards of Professional Conduct (Standards), which includes the Code of Ethics and Professional Responsibility (Code of Ethics), Rules of Conduct and Financial Planning Practice Standards (Practice Standards). The Standards set forth the ethical standards for financial planners who hold the CFP® certification, who agree to act fairly and diligently when providing clients with financial planning advice and services, putting the clients’ interests first.

CFP Board enforces its ethical standards by investigating incidents of alleged unethical behavior, and following the procedures established in CFP Board’s Disciplinary Rules and Procedures. In cases where violations are found, CFP Board may impose discipline ranging from a private censure or public letter of admonition to the suspension or revocation of the right to use the CFP® marks. The Disciplinary Rules and Procedures set forth a fair process for investigating matters and imposing discipline where violations have been found.

The actions in this release result from final decisions of the Disciplinary and Ethics Commission (Commission).  The Commission meets three times a year to provide a fair, unbiased review of any matter in which a CFP® professional is alleged to have committed violations of the Standards.  

The Commission functions in accordance with the Disciplinary Rules and Procedures and reviews all matters on a case-by-case basis, taking into account the details specific to an individual case. While CFP Board has attempted to capture the details relevant to each decision, the summary nature of these releases may omit certain details affecting the decision. Accordingly, the decisions and/or rationale described in the releases may not apply to other cases reviewed by the Commission or reflect the Commission’s future interpretation or application of the Standards.

LETTERS OF ADMONITION

CALIFORNIA

Leonard I. Heller, CFP® (San Ramon):  In August 2013, following a review by CFP Board’s Disciplinary and Ethics Commission, CFP Board issued a Letter of Admonition to Mr. Heller.  This discipline followed Mr. Heller’s entry into a settlement agreement with CFP Board in which he consented to CFP Board’s findings that he filed for Chapter 13 Bankruptcy in 1990 and again in 2005.  CFP Board determined that Mr. Heller’s conduct violated Rule 607 of CFP Board’s Code of Ethics, providing grounds for discipline pursuant to Article 3(a) of CFP Board’s Disciplinary Rules and Procedures.  The Commission determined to deviate from CFP Board’s Sanction Guidelines because Mr. Heller’s 1990 Bankruptcy occurred 23 years prior to the hearing and 10 years prior to CFP Board granting Mr. Heller the CFP® certification.  In addition, the Commission noted that Mr. Heller’s bankruptcies did not cause any client harm.  Accordingly, the Commission admonished Mr. Heller with regard to the above-mentioned conduct. 

GEORGIA

Darold C. Brooks, CFP® (Marietta): In August 2013, following a review by CFP Board’s Disciplinary and Ethics Commission, CFP Board issued a Letter of Admonition to Mr. Brooks. This discipline followed the Commission’s determination that Mr. Brooks filed for Chapter 7 Bankruptcy in 1994 and again in 2007. The Commission determined that Mr. Brooks’ conduct violated Rule 607 of CFP Board’s Code of Ethics, providing grounds for discipline pursuant to Article 3(a) of CFP Board’s Disciplinary Rules and Procedures.  The Commission determined to deviate from CFP Board’s Sanction Guidelines because Mr. Brooks’ bankruptcies were not due to improper budgeting, liquidity, or spending patterns. Further, the Commission determined that the filings were caused by extraordinary events that did not impact Mr. Brooks’ performance as a financial planner and were beyond his control. Accordingly, the Commission admonished Mr. Brooks with regard to the above-mentioned conduct. 

IOWA

John S. Tuve, CFP® (Waterloo): In August 2013, following a review by CFP Board’s Disciplinary and Ethics Commission, CFP Board issued a Letter of Admonition to Mr. Tuve. This discipline followed CFP Board’s investigation of a grievance filed against Mr. Tuve alleging that he churned a client’s insurance policy by recommending an unnecessary 1035 exchange and engaged in other improprieties with regard to the 1035 exchange transaction.  Mr. Tuve initially recommended that the client purchase an insurance policy in 1987. The policy was due to mature in 2019. In 2002, Mr. Tuve recommended that the client perform a 1035 exchange because the 1987 policy was in danger of lapsing. The grievance alleged that Mr. Tuve pressured the client into signing documents for the 1035 exchange and that the exchange was inappropriate for the client. The Commission determined that the 1035 exchange was supported by the client’s need and that Mr. Tuve had documented the need for the exchange.  The Commission also determined that Mr. Tuve: 1) dated illustrations for the 1035 exchange of a life insurance policy without the client being present and for a date that was not the date Mr. Tuve met with the client; and 2) Mr. Tuve should have discussed other options with the client to stop the 1987 policy from lapsing and documented the discussion of those options. The Commission determined that Mr. Tuve’s conduct violated Rules 102, 201, 202, 406, 606(a), 606(b) and 607 of CFP Board’s Code of Ethics and Standards 400-1, 400-2 and 400-3 of CFP Board’s Financial Planning Practice Standards, providing grounds for discipline pursuant to Articles 3(a) and 3(b) of CFP Board’s Disciplinary Rules and Procedures. The Commission determined to deviate from the Sanction Guidelines because Mr. Tuve had no prior disciplinary history, and his dating of the documents was based on his reasonable belief that he had implied authority to date the documents. Accordingly, the Commission admonished Mr. Tuve with regard to the above-mentioned conduct. 

MINNESOTA

Greg M. Ferguson, CFP® (Edina):  In August 2013, following a review by CFP Board’s Disciplinary and Ethics Commission, CFP Board issued a Letter of Admonition to Mr. Ferguson. This discipline followed the Commission’s determination that Mr. Ferguson filed for Chapter 7 Bankruptcy in 1981, Chapter 13 Bankruptcy in 1990 and Chapter 7 Bankruptcy in 2010.  The Commission determined that Mr. Ferguson’s conduct violated Rule 6.5 of CFP Board’s Rules of Conduct, providing grounds for discipline pursuant to Article 3(a) of CFP Board’s Disciplinary Rules and Procedures.  The Commission determined to deviate from CFP Board’s Sanction Guidelines because Mr. Ferguson’s bankruptcies were primarily due to family medical issues and debt that was incurred by the family member’s business. Accordingly, the Commission admonished Mr. Ferguson with regard to the above-mentioned conduct. 

NEW JERSEY

Robert J. Richards, Jr., CFP® (Toms River): In August 2013, following a review by CFP Board’s Disciplinary and Ethics Commission, CFP Board issued a Letter of Admonition to Mr. Richards. This discipline followed the Commission’s determination that Mr. Richards violated his firm’s policies when he affixed a client’s signature from an Individual Retirement Account (IRA) Adoption Agreement to an IRA distribution form. Mr. Richards admitted that he used the signature from the Adoption Agreement to complete the client’s request for a required minimum distribution. The Commission determined that Mr. Richards’ conduct violated Rules 4.4, 5.1 and 6.5 of CFP Board’s Rules of Conduct, providing grounds for discipline pursuant to Article 3(a) of CFP Board’s Disciplinary Rules and Procedures. The Commission determined to deviate from CFP Board’s Sanction Guidelines because Mr. Richards used the signature from the Adoption Agreement to carry out the client’s request to take the distribution, the distribution form was unchanged from the client’s previous forms and Mr. Richards did not affix the signature to take advantage of or mislead the client.  Accordingly, the Commission admonished Mr. Richards with regard to the above-mentioned conduct. 

NORTH CAROLINA

Robert W. Volpe, CFP® (Holly Springs): In August 2013, following a review by CFP Board’s Disciplinary and Ethics Commission, CFP Board issued a Letter of Admonition to Mr. Volpe. This discipline followed Mr. Volpe’s entry into a settlement agreement with CFP Board in which he consented to CFP Board’s findings that he: 1) stated an annual income figure for a client on that client’s account application that he knew to be inaccurate, causing his firm’s books and records to be inaccurate and in violation of National Association of Securities Dealers’ (NASD) Rules 2110 and 3110; 2) recommended to a client that she purchase a variable universal life insurance policy with an annual premium of $10,000 when Mr. Volpe knew that the client was unemployed and did not have a source of annual income; and 3) was placed on heightened supervision by his firm for violation of the firm’s lending policy and for failure to comply with firm policies and procedures relating to following pre-approval restrictions when he received loans from his mother’s account to finance his investment in a pre-approved outside business activity. CFP Board determined that Mr. Volpe’s conduct violated Rules 102, 201, 406, 606(a), 606(b), 607 and 704 of CFP Board’s Code of Ethics and Rules 4.4, 5.1 and 6.5 of the Rules of Conduct, providing grounds for discipline pursuant to Article 3(a) of CFP Board’s Disciplinary Rules and Procedures. The Commission noted the number of violations cited against Mr. Volpe, his failure to properly oversee a subordinate’s actions and his tendency to “over-sell” as aggravating factors. Accordingly, the Commission admonished Mr. Volpe with regard to the above-mentioned conduct. 

VIRGINIA

Jacqueline Hanson, CFP® (Leesburg): In August 2013, following a review by CFP Board’s Disciplinary and Ethics Commission, CFP Board issued a Letter of Admonition to Ms. Hanson. This discipline followed the Commission’s determination that Ms. Hanson consented to the entry of findings that she violated Financial Industry Regulatory Authority, Inc. (FINRA) Rules 1122 and 2010 when she failed to make a timely disclosure of material facts on her Form U4 related to her 2010 Chapter 13 Bankruptcy filing.  FINRA suspended Ms. Hanson for 30 business days.  The Commission also determined that Ms. Hanson failed to notify CFP Board of her suspension within 30 days of her notification that she was suspended by FINRA.  The Commission determined that Ms. Hanson’s conduct violated Rules 5.1, 6.1 and 6.5 of CFP Board’s Rules of Conduct, providing grounds for discipline pursuant to Article 3(a) of CFP Board’s Disciplinary Rules and Procedures.  Accordingly, the Commission admonished Ms. Hanson with regard to the above-mentioned conduct. 


INTERIM SUSPENSION

RHODE ISLAND

John A. Licciardello (Providence): In August 2013, following a review by CFP Board’s Disciplinary and Ethics Commission, CFP Board issued Mr. Licciardello an interim suspension of his right to use the CFP® certification marks.  CFP Board issued an interim suspension after discovering that Mr. Licciardello had been arrested on charges of one felony count of Possession of Child Pornography and one felony count of Transmission of Child Pornography. The charges were the result of an undercover operation to identify subjects allegedly involved in sharing images of child pornography on the internet. Pursuant to Article 5.6 of the Disciplinary Rules and Procedures, the Commission issued an interim suspension because it found that while Mr. Licciardello provided evidence that established by a preponderance of the evidence that he did not pose an immediate threat to the public, he failed to demonstrate that his conduct did not significantly impinge on the stature and reputation of the marks. Under the interim suspension order, Mr. Licciardello’s right to use the CFP® marks is suspended pending CFP Board’s completed investigation and possible further disciplinary proceedings.  The interim suspension order became effective on July 11, 2013. 


SUSPENSIONS

COLORADO

Scott B. Nelson (Lone Tree): In August 2013, following a hearing before CFP Board’s Disciplinary and Ethics Commission, CFP Board issued an order suspending Mr. Nelson’s right to use the CFP® certification marks for two calendar months. This discipline followed the Commission’s determination that Mr. Nelson solicited and sold a fixed indexed annuity to a client outside of the scope of his employment with his firm and without informing his firm of the activity.  Mr. Nelson represented that he recommended the transaction because he could not wait to be paid for the transaction through his firm’s normal compensation channels. The Commission determined that Mr. Nelson: 1) failed to notify his client that he had a conflict of interest when recommending the fixed indexed annuity because he stood to receive his compensation more quickly; 2)engaged in an outside business activity without providing notice and receiving prior written approval from his firm; and 3) falsely certified to his firm that he was not engaged in an outside business activity.  The Financial Industry Regulatory Authority, Inc. (FINRA, formerly known as the National Association of Securities Dealers or NASD) determined that Mr. Nelson’s conduct violated NASD Conduct Rule 3030 and FINRA Rules 2010 and 3270.  FINRA suspended Mr. Nelson from association with any FINRA member in any capacity for two months and fined him $5,000.  The Commission determined that Mr. Nelson’s conduct violated Rules 2.2(b), 4.3, 5.1 and 6.5 of CFP Board’s Rules of Conduct, providing grounds for discipline pursuant to Articles 3(a) and 3(d) of CFP Board’s Disciplinary Rules and Procedures (Disciplinary Rules). Accordingly, the Commission suspended Mr. Nelson’s right to use the CFP® certification marks for two calendar months, pursuant to Article 4.3 of the Disciplinary Rules. Mr. Nelson’s suspension is effective from September 8, 2013 to November 8, 2013.

IOWA

Dwight W. Moats (Cherokee): In August 2013, following a review by CFP Board’s Disciplinary and Ethics Commission, CFP Board issued an order suspending Mr. Moats’ right to use the CFP® certification marks for four years. This discipline followed the Commission’s determination that Mr. Moats failed to place his client’s interest ahead of his own and failed to act with the care of a fiduciary when he: 1) misrepresented that a client could triple her money in a variable universal life insurance policy; 2) erroneously relied on a non-guaranteed projected rate of return to determine how long the variable universal life insurance policy would remain in force; and 3) recommended that the client purchase a variable universal life insurance policy that had a short no-lapse period when the client’s goal was insurance that would last her entire life.  The Commission determined that Mr. Moats was in a financial planning relationship with the client and that the client sought life insurance that would last her lifetime.  The Commission determined that Mr. Moats: 1) should not have represented that the money the client invested in the variable universal life insurance policy would triple; 2) should have used a more conservative rate of return when running projections on how long the policy would remain in force due to the client’s advanced age; and 3) considered a policy with a smaller face value or a whole life policy.  The Commission determined that Mr. Moats’ conduct violated Rules 1.4, 2.1, 4.3, 4.4, 4.5 and 6.5 of CFP Board’s Rules of Conduct and Standards 300-1, 400-2, 400-3 and 500-2 of CFP Board’s Financial Planning Practice Standards, providing grounds for discipline pursuant to Articles 3(a) and 3(b) of CFP Board’s Disciplinary Rules and Procedures (Disciplinary Rules).  Accordingly, the Commission suspended Mr. Moats’ right to use the CFP® certification marks for four years, pursuant to Article 4.3 of the Disciplinary Rules.  Mr. Moats’ suspension is effective from September 8, 2013 to September 8, 2017.

MARYLAND

Lisa A. Herman (Bethesda): In July 2013, following a hearing before CFP Board’s Disciplinary and Ethics Commission, CFP Board issued an order suspending Ms. Herman’s right to use the CFP® certification marks for six months. This discipline followed Ms. Herman’s entry into a settlement agreement with CFP Board in which she consented to CFP Board’s findings that she provided false and misleading information to a client’s creditors at his request.  CFP Board determined that the client frequently used the account he maintained with Ms. Herman to transfer money to various creditors.  On the occasion in question, Ms. Herman represented in emails to various creditors that the client would be making a wire transfer to the creditors when the account the client held with Ms. Herman did not have sufficient funding to make the transfers.  As a result of Ms. Herman’s actions, her firm terminated her employment and the Financial Industry Regulatory Authority, Inc. (FINRA) suspended her from association with any FINRA member in any capacity for a period of six months and fined her $5,000 for violation of FINRA Rule 2010.  CFP Board determined that Ms. Herman’s conduct violated Rules 2.1, 4.3, 4.4, 5.1 and 6.5 of CFP Board’s Rules of Conduct, providing grounds for discipline pursuant to Article 3(a) of CFP Board’s Disciplinary Rules and Procedures (Disciplinary Rules). Accordingly, the Commission suspended Ms. Herman’s right to use the CFP® certification marks for six months, pursuant to Article 4.3 of the Disciplinary Rules.  Ms. Herman’s suspension is effective from July 31, 2013 to January 31, 2014.

MICHIGAN

Christopher T. Reid (Rochester Hills): In July 2013, following a hearing before CFP Board’s Disciplinary and Ethics Commission, CFP Board issued an order suspending Mr. Reid’s right to use the CFP® certification marks for 60 calendar days. This discipline followed Mr. Reid’s entry into a settlement agreement with CFP Board in which he consented to CFP Board’s findings that he used discretion to buy and sell approximately 120 inverse floater collateralized mortgage obligations for his clients’ accounts without obtaining prior written authorization from the clients and prior written acceptance of the clients’ accounts as discretionary by his firm.  As a result of Mr. Reid’s actions, the Financial Industry Regulatory Authority, Inc. (FINRA, formerly known as the National Association of Securities Dealers or NASD) suspended him from association with any FINRA member in any capacity for 15 business days and fined him $7,500 for violation of NASD Rule 2510 and FINRA Rule 2010.  CFP Board determined that Mr. Reid’s conduct violated Rules 1.4, 4.3, 4.4, 5.1 and 6.5 of CFP Board’s Rules of Conduct, providing grounds for discipline pursuant to Article 3(a) of CFP Board’s Disciplinary Rules and Procedures (Disciplinary Rules). Accordingly, the Commission suspended Mr. Reid’s right to use the CFP® certification marks for 60 calendar days, pursuant to Article 4.3 of the Disciplinary Rules.  Mr. Reid’s suspension was effective from July 31, 2013 to September 29, 2013.

NEVADA

Michael D. Bayliss (Carson City): In October 2013, following a hearing before CFP Board’s Appeals Committee, CFP Board issued an order suspending Mr. Bayliss’s right to use the CFP® certification marks for 18 months.  CFP Board’s Disciplinary and Ethics Commission found that Mr. Bayliss: 1) recommended that a trust make an investment into two Funds run by Mr. Bayliss when he knew, or should have known, that the Funds were having liquidity and financial problems at a time when the trustee was trying to liquidate the Trust; 2) failed to liquidate the Trust in a timely manner; 3) recommended that the trustee purchase the Funds without disclosing that there was an inherent conflict of interest in the recommendation due to Mr. Bayliss’s interest in Funds and the allocation of income received by Mr. Bayliss equal to a percentage of the assets held in the Funds; and 4) filed a 2008 income tax return for the Trust that failed to comply with accounting standards. Mr. Bayliss stipulated to identical findings with the State of Nevada, which ordered Mr. Bayliss to serve five years of probation, to repay the trust, to complete additional hours of continuing education, to send conflict of interest letters to clients, to pay fees, costs and fines in excess of $35,000 and issued Mr. Bayliss a letter of reprimand.  The Commission determined that Mr. Bayliss’s conduct violated Rules 201, 202, 401(a), 606(b), 607, 701 and 703 of the Code of Ethics and Standards 100-1, 400-1 and 500-2 of CFP Board’s Financial Planning Practice Standards, which provided grounds for discipline pursuant to Articles 3(a), 3(b) and 3(e) of CFP Board’s Disciplinary Rules and Procedures (Disciplinary Rules). The Appeals Committee affirmed the Commission’s rule violations and imposition of an 18-month suspension, but modified the Commission’s finding that Mr. Bayliss filed a 2008 tax return for the Trust that failed to comply with accounting standards. The Appeals Committee determined that the Commission did not have sufficient evidence to make this finding.  Accordingly, the Appeals Committee modified the Commission’s findings to exclude any reference to the 2008 tax return failing to comply with accounting standards.  Accordingly, Mr. Bayliss’s right to use the CFP® certification marks is suspended for 18 months, pursuant to Article 4.3 of the Disciplinary Rules.  Mr. Bayliss’s suspension is effective from October 7, 2013 to April 7, 2015.

NORTH CAROLINA

Ryan R. Poterack (Charlotte): In June 2013, following a hearing before CFP Board’s Disciplinary and Ethics Commission, CFP Board issued an order suspending Mr. Poterack’s right to use the CFP® certification marks for two years.  CFP Board’s Disciplinary and Ethics Commission found that Mr. Poterack failed to act with the care of a fiduciary while in a financial planning relationship with a client because he recommended that a client purchase two equity-indexed annuities that had surrender charges starting at 20% for 16 years from the date of purchase, until the client was 92 years old, and maturity dates in 2049, when the client would be 114 years old, which greatly exceeded the client’s time horizon of eight to ten years.  The Commission also determined that Mr. Poterack failed to disclose material information pertaining to the sale of the equity-indexed annuities, including the portion of the bonus he received, the surrender charges to the client, information regarding the tax consequences of owning the annuities and his compensation due to the sale of the equity indexed annuity.  The Commission determined that Mr. Poterack’s conduct violated Rules 1.4, 2.1, 2.2(a), 4.1, 4.4 and 6.5 of the Rules of Conduct and Standards 100-1, 400-1, 400-2 and 500-