Question

Case Study:

Steve was a certified professional planner who was a general partner of a hedge fund. He placed most of his clients in that hedge fund without telling them of his ownership in it. When the results seemed to be disappointing, he sold his ownership and personal holdings in the fund and thereafter told his clients to get out.

Questions:

1) Which SEC and CFP violations were violated? What would you recommend he do to try to rectify the situation? What would you do if Steve was your partner or employee?

2) List the seven principles of the CFP Code of Ethics. Describe and define each of the seven principles. Describe how Steve violated several of the principles.

Answer 1

Seven Principals Of CFP code of Ethics.

Principal 1.

integrity: provide professional services integrity.

integrity demand honesty and candor which must not subordinated to personal gain and advantages.certification are placed in position of trust by clients.and the ultimate sources of that trust is the certificate personal integrity,allowances can be made for innocent error and legitimate differences of opinion,but integrity can not co-exist with deceit or subordination of principal.

Principal 2.

Objectivity: provide professional services objectively.

objectivity requires intellectual honesty and impartiality .regardless of particular services render or capacity in which a certificate function,certificate should protect the integrity of their work.

Principal 3.

competence: maintain the knowledge and skill necessary to provide professional services competently.

Competence means attaining and maintaining an adequate level of knowledge and skill and application of that knowledge and skill in providing services to client.

Principal 4.

Confidentiality:protect the confidentiality of all clients information,confidentiality means ensuring that information is accessible only to those authorized to have access.

Principals 5.

Fairness: be fair and reasonable in all professional relationships and disclose conflict of interest.

Principal 6.

Professionalism: act in a manner that demonstrates exemplary professional conduct.

professionalism requires behaving with dignity and cortesy to client fellow professional and others in business related activities.

Principal 7.

Diligence: provide professional services diligently.

diligence is the provision of services in a reasonably prompt and thorough manner.including the proper planning for and supervision of rendering of professional services.

As per above scenario:

Steve was the owner of hedge fund and he was an CFP and he was also an general partner of hedge fund .and he also placed most of his clients in that hedge fund without telling them of his ownership.and after such disappointing result he sold all such hedge fund,so we conclude that Steve violated all such Principals of CFP code of ethics.

some of the violation done by steve is professional disclosure,professional disciplines,