Certified Financial Planners Now Subject to Mandatory Arbitration

The Certified Financial Planner Board of Standards Inc. (“CFP Board”) recently added a provision to the Certified Financial Planner (“CFP”) designation that will require CFPs to resolve disputes surrounding disciplinary actions through mandatory arbitration, effective May 2, 2016. Under the new rule, arbitration would serve as the fourth level of review and would occur after the CFP Board completes its initial and appellate disciplinary review processes. The CFP Board-mandated arbitrations will be similar to arbitrations conducted by the Financial Industry Regulatory Authority Inc. (“FINRA”).

While having many similarities to FINRA’s process, CFP Board general counsel, Leo Rydewski (“Rydewski”), was quick to point out that there will be some notable differences.  For example, the CFP Board’s arbitration process would be the fourth step of adjudicating a claim, while FINRA arbitration is the first step. Also, arbitrations for CFPs will be presided over by a three-member panel of arbitrators selected by the American Arbitration Association (“AAA”), with input from the CFP as well as the CFP Board.  The arbitrators will be chosen from a list of 15 judges with at least five years of federal or state experience. By contrast, FINRA arbitrators do not need to have prior experience as judges.

The CFP Board’s decision comes in the midst of multi-year court case involving two Florida financial planners disputing a disciplinary action brought against them by the CFP Board. Rydewski stated that rather than “cut off an avenue,” the arbitration mandate will provide CFPs with “a different avenue” to pursue appeals of the CFP Board’s disciplinary decisions.

More information on the CFP Board’s decision can be found here.

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About Christine Goodrich

Christine E. Goodrich is a Senior Associate with Faruqi & Faruqi, LLP’s New York City office.  Ms. Goodrich’s practice is focused in securities arbitration, litigation and regulation.