Free CFP Exam Professional Conduct and Regulation Practice Questions
Professional conduct and regulation on the CFP exam covers the CFP Board's Code of Ethics, Standards of Conduct, fiduciary duty, and regulatory requirements for financial planners. This domain tests the ethical foundation required of all CFP professionals (CFP Board).
Sample Questions
Question 1
Easy
A CFP® professional must act as a fiduciary when providing which type of service?
Solution
A is correct.
CFP® professionals must act as fiduciaries when providing both financial planning and financial advice. The CFP Board's Standards of Conduct require the fiduciary duty to apply at all times when these services are rendered, not just during formal financial planning engagements.
CFP® professionals must act as fiduciaries when providing both financial planning and financial advice. The CFP Board's Standards of Conduct require the fiduciary duty to apply at all times when these services are rendered, not just during formal financial planning engagements.
Question 2
Medium
Which of the following is LEAST likely to constitute grounds for discipline under the CFP Board's Procedural Rules?
Solution
A is correct.
Filing for personal bankruptcy, while a financial matter that must be disclosed to the CFP Board, is not inherently a violation of the CFP Board's Standards and is not automatic grounds for discipline.
Filing for personal bankruptcy, while a financial matter that must be disclosed to the CFP Board, is not inherently a violation of the CFP Board's Standards and is not automatic grounds for discipline.
Question 3
Hard
A planner's client wants to purchase a variable annuity. The client assumes that because the product is sold by an insurance company, it is covered by FDIC insurance. Which response BEST addresses the client's misunderstanding?
Solution
B is correct.
Variable annuities are insurance products with a securities component — the subaccounts are registered as securities with the SEC, and the product must be sold by a registered representative through a broker-dealer. They are NOT bank deposits and have no FDIC coverage. However, if the issuing insurance company becomes insolvent, the state guaranty association in the client's state of residence may provide limited protection (coverage levels vary by state, commonly $250,000 for annuity values).
Variable annuities are insurance products with a securities component — the subaccounts are registered as securities with the SEC, and the product must be sold by a registered representative through a broker-dealer. They are NOT bank deposits and have no FDIC coverage. However, if the issuing insurance company becomes insolvent, the state guaranty association in the client's state of residence may provide limited protection (coverage levels vary by state, commonly $250,000 for annuity values).