CFP Exam 2022| 665 QUESTIONS| WITH
COMPLETE SOLUTION
CFP Standards of Conduct Sections (6) Correct Answer: A. Duties owed to clients.
B. Fin. Planning and Application of Practice Standards
C. Practice Standards for Fin. Planning Process
D. Duties owed to firms/subordinates
E. Duties owed to CFP Board
F. Prohibition on Circumvention
Section A of CFP Standards of Conduct Correct Answer: Duties owed to Client:
1. Fiduciary Duty
2. Integrity
3. Competence
4. Diligence
5. Disclose and Manage Conflicts of Interest
6. Sound and Objective Professional Judgment
7. Professionalism
8. Comply with the Law
9. Confidentiality and Privacy
10. Provide information to client
11. Duties when communicating with a client
12. Duties when representing compensation method
13. Duties when recommending/working with other persons
14. Duties when selecting/using Technology
15. Refrain from borrowing money/ commingling assets
Section B of CFP Standards of Conduct Correct Answer: Definition and standard for
compliance when practicing financial planning: Financial Planning is a collaborative process that
helps maximize a Client's potential for meeting life goals through Financial Advice that
integrates relevant elements of the Client's personal and financial circumstances. Must limit
scope of engagement if only giving financial ADVICE, not financial PLANNING.
Section C of CFP Standards of Conduct Correct Answer: Practice standards for the FP process
(7):
1. Understand Client's Personal and Financial circumstances
2. Identify and Select Goals
3. Analyse Current Course of Action and Potential Alternatives
4. Develop FP Recommendations
5. Present FP Recommendations
6. Implement FP Recommendations
7. Monitor Progress and Update
Section D of CFP Standards of Conduct Correct Answer: Duties owed to Firm/Subordinates (3):
,1. Use Reasonable Care when Supervising
2. Comply with Lawful Objectives of the Firm
3. Provide Notice of Public Discipline to the Firm
Section E of CFP Standards of Conduct Correct Answer: Duties owed to CFP Board:
Cannot engage in conduct that reflects adversely on CFP marks or upon the profession. 5 types
of conduct that violate CFP standard, 14 reportable events.
- Must report to CFP board within 30 days
- Provide Board with a narrative statement
- Cooperate with Board and comply with Certification and TM license and terms
Section F of CFP Standards of Conduct Correct Answer: Prohibition on Circumvention
Cannot act indirectly or through another person to violate CFP Practice Standards
Types of conduct that violate CFP practice standards (5) Correct Answer: 1. Felony or relevant
misdemeanor
2. Fraud, theft, misrepresentation, other dishonesty
3. Bankruptcy
4. Federal tax lien
5. Other lien or civil judgment that has not been satisfied
Chapter 7 Bankruptcy Exemptions (7) Correct Answer: 1. Primary homestead
2. Vehicle (limited)
3. Retirement savings/pension
4. Wages to provide for dependents
5. Limited personal property
6. Life insurance/annuity
7. Disability
Chapter 7 Bankruptcy NOT EXEMPTED assets (3) Correct Answer: 1. ESA/529s if
contributions are within 2 years of bankruptcy
2. Inherited IRAs
3. IRA assets over $1M
Can you use 529s for non-tuition? How about Coverdell ESAs? Correct Answer: NO - 529
tuition only.
YES - Coverdell can be used for almost all school related expenses
ERISA - what is it and who enforces it? Correct Answer: Employee Retirement Income Security
Act of 1974
- defines fiduciary conduct for ppl associated with qualified corporate retirement plans
- the DoL enforces ERISA
Types of Bankruptcy (3) Correct Answer: Chapter 7 (liquidation-closes business), Chapter 11
(reorganization -stays in business - if you exceed debt limitations for Ch 13), Chapter 13
(adjustment-arranges payment plan with debtors and tries to stay in business)
,FINRA Correct Answer: Financial Industry Regulatory Authority. Self imposed regulation
agency of NYSE NASDAQ and CFTC (Commodities Futures Trading Commission)
FINRA Licenses (6) Correct Answer: SIE (Securities Industry Essentials - prerequisite to 6 or 7)
Series 6 - can sell mutual funds, new UITs, variable life ins, variable annuities
Series 7 - can sell all securities except commodities
Series 63 - meets requirement to be licensed in states other than state of residence
Series 65 - RIA (state req)
Series 66 - Uniform Combined State Law exam (combines Series 63 and 65)
FINRA Series License exam procedure (4) Correct Answer: 1. Associate with broker/dealer
2. Register with FINRA through B/D on form U4
3. Pass appropriate exams
4. Register with CRD - Central Registration Depository - makes FINRA requirements uniform
across states
When and how does an investment advisor register with the SEC? Correct Answer: You can
start registering at $100M AUM. *Required* for RIAs >$110M AUM, must keep 5 years of
records
1. File ADV form
2. Pay $150 fee
3. File ADV Part 1 updates annually with SEC
How does an RIA withdraw from SEC? Correct Answer: File form ADV-W
To sell variable annuities, what licenses do you need? (2) Correct Answer: 1. Series 6 OR 7
2. appropriate state variable life insurance license
CFP suspension of marks is for how long? Correct Answer: Up to 5 years
After final order of discipline has been given by CFP Board, how long do you have to appeal?
Correct Answer: 15 days
Chapter 7 means test for income Correct Answer: 1 . Monthly income >$10k: NOT allowed
2. Monthly income <$6k: Allowed
3. Monthly income btw $6-10k: Allowed only if income < 25% of unsecured debts
Contract Requirements (5) Correct Answer: 1. Offer
2. Acceptance
3. Consideration
4. Lawful Purpose
5. Principal must have legal capacity (no incompetent/intoxicated adults, minors can only
contract for necessities)
NOTE: Contract is valid but voidable by the incompetent party only
, educational savings bonds rules and taxability Correct Answer: U.S. bonds whose proceeds are
used for qualified higher educational expenses for the taxpayer, the taxpayer's spouse, or a
dependent.
- Purchased in name of the parent (or other adult)
- Must be redeemed DURING college, only for tuition and fees (NOT room and board)
- The interest may be excluded from gross income, provided the taxpayer's adjusted gross
income does not exceed certain amounts.
Series EE vs Series I bonds Correct Answer: Series EE has fixed interest rate, doubles face
value at 20 year mark
Series I has fixed rate plus inflation adjustment
Both are exempt from state and local taxes. I bonds may also be exempt from federal taxes if
used for education.
Kiddie tax Correct Answer: Passive income, such as interest and dividends, that is recognized
by a child under age 19 (or under age 24 if a full-time student) is taxed to him or her at the rates
that would have applied had the income been incurred by the child's parents, generally to the
extent the income exceeds $2,200 for 2020. First $1100 is at 0%, next $1100 is at 10%, then the
rest is subject to the parent's marginal rate.
UGMA/UTMA Correct Answer: -ASSET OF THE CHILD for financial aid purposes
-UNEARNED INCOME:
a. taxed at child's rate if greater than 19
b. MAY be taxed at parent's rate if less than 19
-ASSETS:
a. UTMA: real estate, stocks, mutual funds, and bonds
b. UGMA: same but NO REAL ESTATE
-RISK:
-child uses assets for something other than education
- UTMA released up to age 25
- UGMA released at age of maturity (18 or 21)
Who regulates banks? (3) Correct Answer: 1. The OCC (Office of the Comptroller of Currency)
2. The Federal Reserve
3. The Federal Deposit Insurance Corporation (FDIC)
Who regulates mutual funds? Correct Answer: SEC (Securities and Exchange Commision)
Who regulates securities brokers? Correct Answer: FINRA (Financial INdustry Regulatory
Authority)
Investment Advisers Act of 1940 Correct Answer: Legislation governing who must register with
the SEC as an investment adviser. Defines "investment advice."
COMPLETE SOLUTION
CFP Standards of Conduct Sections (6) Correct Answer: A. Duties owed to clients.
B. Fin. Planning and Application of Practice Standards
C. Practice Standards for Fin. Planning Process
D. Duties owed to firms/subordinates
E. Duties owed to CFP Board
F. Prohibition on Circumvention
Section A of CFP Standards of Conduct Correct Answer: Duties owed to Client:
1. Fiduciary Duty
2. Integrity
3. Competence
4. Diligence
5. Disclose and Manage Conflicts of Interest
6. Sound and Objective Professional Judgment
7. Professionalism
8. Comply with the Law
9. Confidentiality and Privacy
10. Provide information to client
11. Duties when communicating with a client
12. Duties when representing compensation method
13. Duties when recommending/working with other persons
14. Duties when selecting/using Technology
15. Refrain from borrowing money/ commingling assets
Section B of CFP Standards of Conduct Correct Answer: Definition and standard for
compliance when practicing financial planning: Financial Planning is a collaborative process that
helps maximize a Client's potential for meeting life goals through Financial Advice that
integrates relevant elements of the Client's personal and financial circumstances. Must limit
scope of engagement if only giving financial ADVICE, not financial PLANNING.
Section C of CFP Standards of Conduct Correct Answer: Practice standards for the FP process
(7):
1. Understand Client's Personal and Financial circumstances
2. Identify and Select Goals
3. Analyse Current Course of Action and Potential Alternatives
4. Develop FP Recommendations
5. Present FP Recommendations
6. Implement FP Recommendations
7. Monitor Progress and Update
Section D of CFP Standards of Conduct Correct Answer: Duties owed to Firm/Subordinates (3):
,1. Use Reasonable Care when Supervising
2. Comply with Lawful Objectives of the Firm
3. Provide Notice of Public Discipline to the Firm
Section E of CFP Standards of Conduct Correct Answer: Duties owed to CFP Board:
Cannot engage in conduct that reflects adversely on CFP marks or upon the profession. 5 types
of conduct that violate CFP standard, 14 reportable events.
- Must report to CFP board within 30 days
- Provide Board with a narrative statement
- Cooperate with Board and comply with Certification and TM license and terms
Section F of CFP Standards of Conduct Correct Answer: Prohibition on Circumvention
Cannot act indirectly or through another person to violate CFP Practice Standards
Types of conduct that violate CFP practice standards (5) Correct Answer: 1. Felony or relevant
misdemeanor
2. Fraud, theft, misrepresentation, other dishonesty
3. Bankruptcy
4. Federal tax lien
5. Other lien or civil judgment that has not been satisfied
Chapter 7 Bankruptcy Exemptions (7) Correct Answer: 1. Primary homestead
2. Vehicle (limited)
3. Retirement savings/pension
4. Wages to provide for dependents
5. Limited personal property
6. Life insurance/annuity
7. Disability
Chapter 7 Bankruptcy NOT EXEMPTED assets (3) Correct Answer: 1. ESA/529s if
contributions are within 2 years of bankruptcy
2. Inherited IRAs
3. IRA assets over $1M
Can you use 529s for non-tuition? How about Coverdell ESAs? Correct Answer: NO - 529
tuition only.
YES - Coverdell can be used for almost all school related expenses
ERISA - what is it and who enforces it? Correct Answer: Employee Retirement Income Security
Act of 1974
- defines fiduciary conduct for ppl associated with qualified corporate retirement plans
- the DoL enforces ERISA
Types of Bankruptcy (3) Correct Answer: Chapter 7 (liquidation-closes business), Chapter 11
(reorganization -stays in business - if you exceed debt limitations for Ch 13), Chapter 13
(adjustment-arranges payment plan with debtors and tries to stay in business)
,FINRA Correct Answer: Financial Industry Regulatory Authority. Self imposed regulation
agency of NYSE NASDAQ and CFTC (Commodities Futures Trading Commission)
FINRA Licenses (6) Correct Answer: SIE (Securities Industry Essentials - prerequisite to 6 or 7)
Series 6 - can sell mutual funds, new UITs, variable life ins, variable annuities
Series 7 - can sell all securities except commodities
Series 63 - meets requirement to be licensed in states other than state of residence
Series 65 - RIA (state req)
Series 66 - Uniform Combined State Law exam (combines Series 63 and 65)
FINRA Series License exam procedure (4) Correct Answer: 1. Associate with broker/dealer
2. Register with FINRA through B/D on form U4
3. Pass appropriate exams
4. Register with CRD - Central Registration Depository - makes FINRA requirements uniform
across states
When and how does an investment advisor register with the SEC? Correct Answer: You can
start registering at $100M AUM. *Required* for RIAs >$110M AUM, must keep 5 years of
records
1. File ADV form
2. Pay $150 fee
3. File ADV Part 1 updates annually with SEC
How does an RIA withdraw from SEC? Correct Answer: File form ADV-W
To sell variable annuities, what licenses do you need? (2) Correct Answer: 1. Series 6 OR 7
2. appropriate state variable life insurance license
CFP suspension of marks is for how long? Correct Answer: Up to 5 years
After final order of discipline has been given by CFP Board, how long do you have to appeal?
Correct Answer: 15 days
Chapter 7 means test for income Correct Answer: 1 . Monthly income >$10k: NOT allowed
2. Monthly income <$6k: Allowed
3. Monthly income btw $6-10k: Allowed only if income < 25% of unsecured debts
Contract Requirements (5) Correct Answer: 1. Offer
2. Acceptance
3. Consideration
4. Lawful Purpose
5. Principal must have legal capacity (no incompetent/intoxicated adults, minors can only
contract for necessities)
NOTE: Contract is valid but voidable by the incompetent party only
, educational savings bonds rules and taxability Correct Answer: U.S. bonds whose proceeds are
used for qualified higher educational expenses for the taxpayer, the taxpayer's spouse, or a
dependent.
- Purchased in name of the parent (or other adult)
- Must be redeemed DURING college, only for tuition and fees (NOT room and board)
- The interest may be excluded from gross income, provided the taxpayer's adjusted gross
income does not exceed certain amounts.
Series EE vs Series I bonds Correct Answer: Series EE has fixed interest rate, doubles face
value at 20 year mark
Series I has fixed rate plus inflation adjustment
Both are exempt from state and local taxes. I bonds may also be exempt from federal taxes if
used for education.
Kiddie tax Correct Answer: Passive income, such as interest and dividends, that is recognized
by a child under age 19 (or under age 24 if a full-time student) is taxed to him or her at the rates
that would have applied had the income been incurred by the child's parents, generally to the
extent the income exceeds $2,200 for 2020. First $1100 is at 0%, next $1100 is at 10%, then the
rest is subject to the parent's marginal rate.
UGMA/UTMA Correct Answer: -ASSET OF THE CHILD for financial aid purposes
-UNEARNED INCOME:
a. taxed at child's rate if greater than 19
b. MAY be taxed at parent's rate if less than 19
-ASSETS:
a. UTMA: real estate, stocks, mutual funds, and bonds
b. UGMA: same but NO REAL ESTATE
-RISK:
-child uses assets for something other than education
- UTMA released up to age 25
- UGMA released at age of maturity (18 or 21)
Who regulates banks? (3) Correct Answer: 1. The OCC (Office of the Comptroller of Currency)
2. The Federal Reserve
3. The Federal Deposit Insurance Corporation (FDIC)
Who regulates mutual funds? Correct Answer: SEC (Securities and Exchange Commision)
Who regulates securities brokers? Correct Answer: FINRA (Financial INdustry Regulatory
Authority)
Investment Advisers Act of 1940 Correct Answer: Legislation governing who must register with
the SEC as an investment adviser. Defines "investment advice."
