In December 2015, the Institute updated its Code of Professional Responsibility to reflect the ongoing changes in the investment and private wealth advisory professions. Below are 10 frequently asked questions. If you have additional questions, please contact the Institute’s Standards and Legal Counsel, Rob Frankel, at rfrankel@i-w.org or 303-850-3082.
What is the Code of Professional Responsibility?
The Code of Professional Responsibility was adopted to promote and maintain the highest standard of personal and professional conduct in the investment and wealth management profession. All Institute members are expected to adhere to the Code, which serves to assure public confidence in the integrity and service offered by professional investment and wealth advisors. Adherence to the Code is required of all Institute members, CIMA and CPWA candidates, and Institute-certified professionals.
Why was the Code revised?
Job task analyses for the Institute’s CIMA and CPWA certifications are implemented periodically to identify the latest knowledge and skills required for effective practice. A 2012 job task analysis for CPWA certification revealed that the Code lacked content to guide today’s private wealth advisors. This revelation fueled the current update, and the Code will continue to be revised as necessary to reflect the ongoing changes in the investment and private wealth advisory professions.
What changed in the Code?
An aspirational Preamble was added to explain how the principles were derived, along with Guidance for the Code to provide additional clarification of the principles’ meanings. In addition, the number of principles has increased to 9 (from 7). More content is focused on services provided by The Institute professionals, including emphasis on competency, and a standalone principle now focuses on how to disclose, resolve and manage conflicts of interest. Finally, the Standards of Practice have been discontinued and replaced by the Preamble and Guidance documents mentioned above.
How does the revised Code translate to today’s fiduciary debate?
The Institute and its members have long supported the cardinal principle of putting the interest of the client first. The Institute’s members span all segments of the advisor community, and through its Code of Professional Responsibility, first approved in 1987, the Institute has maintained (and enforced through a public disciplinary process) a principle requiring its members and certificants to always “act in the best interest of the client.” The Institute’s Code of Professional Responsibility promotes integrity, loyalty, objectivity, and ethical conduct. The Institute’s articles of incorporation, written 30 years ago, place great emphasis on ensuring “quality service to the public through developing and encouraging high standards and best practices for the investment and wealth management disciplines.” Based on these principles, the Institute appreciates the broad goal of the U.S. Department of Labor (DOL) and the SEC in drafting client-centered rules and principles, which ensure that clients’ interests are put first, and that the advice they receive is objective, impartial, and devoid of conflicts of interest.
What does the Institute’s Code of Professional Responsibility entail?
The Institute’s Code requires members, candidates and certificants to:
1. Act in the best interest of the client.
2. Disclose services to be offered and provided, related charges, and compensation.
3. Disclose the existence of actual, potential, and/or perceived conflicts of interest and relevant financial relationships, direct and/or indirect. Take appropriate action to resolve or manage any such conflicts.
4. Provide clients information needed to make informed decisions.
5. Respond to client inquiries and instructions appropriately, promptly, completely, and truthfully.
6. Maintain confidentiality of client information, however acquired, consistent with legal and regulatory requirements and firm policies.
7. Provide competent service by truthful representation of competency, maintenance and/or development of professional capabilities, and, when appropriate, the recommendation of other professionals.
8. Comply with legal and regulatory requirements related to one’s practice of his or her profession.
9. Maintain a high level of ethical conduct.
Who changed the Code?
In early-2014, the Institute appointed a task force of volunteers from several of the Institute’s policy bodies and key committees, representing all membership types, to review and offer proposed revisions to the Code and its supporting documents. Additional groups of volunteers have been engaged in these revisions since that time. All told, more than 50 Institute volunteers and seven committees have been involved in editing and reviewing the changes to the Code.
Why doesn’t membership vote on it?
The Institute’s bylaws do not require membership to vote on or approve revisions to the Code.
How does this apply to Institute members and certificants and what happens if I violate the Code?
Adherence to the Code is required of all Institute members, CIMA and CPWA candidates, and Institute certified professionals. When an Institute professional violates the Code, the Institute’s Professional Review Board can take four types of disciplinary actions, including suspension of an individual’s certification. Three of the disciplinary actions are public; one is private:
- A private letter of censure.
- A public censure.
- A suspension of the individual’s certification, and/or:
- A termination of an individual’s certification, depending on a number of factors, including, without limitation, the severity of the violation, any mitigating circumstances, and the individual’s cooperation with the investigation of the Professional Review Board or Hearing Panel.
When did CIMA certification and CPWA certification exams change to include the revised Code?
Exams administered on or after May 1, 2016 cover the revised Code.
As a candidate for CIMA certification or CPWA certification, what should I study?
You will be tested on the Code of Professional Responsibility, including the related Preamble and Guidance sections.
Who should I contact with questions about the revisions to the Code?
The Institute’s Standards and Legal Counsel, Rob Frankel, at rfrankel@i-w.org or 303-850-3082.