CFP Board Code of Ethics Case Study 2: Conflicts of Interest When Dealing With M

Question

CFP Board Code of Ethics

Case Study 2: Conflicts of Interest When Dealing With Multiple Client

Husband and Wife retained a CFP® professional to represent the couple’s combined interests, although the majority of the assets in the couple’s portfolio were brought to the marriage by Husband. The CFP® professional advised the couple to invest the majority of the assets (over a million dollars) in an IRA in Husband’s name only, with the Wife as beneficiary. The CFP® professional also recommended that the residue of the couple’s assets be placed in a joint checking account, to address short and medium term income needs and cash management. Because the couple was happily married at the time, this did not pose an immediate problem. Wife claimed she never knew there was a separation of ownership of the couple’s assets into two separate accounts as the CFP® professional had always corresponded with Husband and Wife regarding both accounts. Several years later, the couple began experiencing marital difficulties and started divorce proceedings. After divorce proceedings began, Wife wrote a check in an attempt to withdraw almost all of the funds from the joint account. CFP® professional immediately contacted Husband and informed him that Wife was attempting to remove all of the money from the joint account and asked him if was willing to sell securities to 3 cover the check. Husband indicated that he was not, and the CFP® professional directed the bank not to process the check. When Wife inquired as to whether the check had cleared, CFP® professional represented to Wife that the check had cleared. The CFP® professional did not inform Wife that he had contacted Husband and that Husband had refused to sell any securities to allow the check to clear.

What rule(s) of conduct were broken? Explain the rule(s) and how it was broken in the case study

How might you handle this situation differently?

Explanation / Answer

The rules of conduct were broken when Wife has made an attempt to withdraw all money from the joint account without Husbands knowledge and secondly when Husband refused to clear the check.

Both the rules of conduct were broken as the assets were brought in couple’s portfolio on marriage. No action can be taken without information to both Husband and Wife. But Wife write the check without Husband’s knowledge and Husband stopped clearing of the Check without the knowledge of Wife.

In such situation, the correct action would be to take action while considering the other party and intimating the action taken to the other party. As the portfolio is constructed on marriage so both parties to marriage have equal right. As per suggestion from CFP professional to open a joint account which brought to the marriage.

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