PRINTER'S NO. 3018
No. 2179 Session of 2005
INTRODUCED BY CRAHALLA, BELFANTI, FICHTER, ARMSTRONG, BEBKO-
JONES, BEYER, CALTAGIRONE, COHEN, DeLUCA, FRANKEL, GINGRICH,
GRUCELA, HARHART, LEDERER, MARKOSEK, MUSTIO, NAILOR, O'NEILL,
PICKETT, PYLE, REICHLEY, SCHRODER, SHANER, SOLOBAY,
E. Z. TAYLOR, TIGUE, WALKO, WOJNAROSKI AND YOUNGBLOOD,
NOVEMBER 1, 2005
REFERRED TO COMMITTEE ON PROFESSIONAL LICENSURE,
NOVEMBER 1, 2005
AN ACT
1 Providing for the licensing and regulation of financial
2 planners; establishing the State Board of Financial Planners
3 and providing for its powers and duties; and imposing
4 penalties.
5 TABLE OF CONTENTS
6 Chapter 1. Preliminary Provisions
7 Section 101. Short title.
8 Section 102. Definitions.
9 Chapter 3. Board
10 Section 301. State Board of Financial Planners.
11 Section 302. General powers of board.
12 Chapter 5. Certificate of Financial Planner
13 Section 501. Examination and issuance of certificate.
14 Section 502. Education requirements.
15 Section 503. Experience requirements.
16 Section 504. Domestic reciprocity.
1 Section 505. Foreign reciprocity.
2 Section 506. Fees.
3 Section 507. Status of existing rights preserved.
4 Section 508. Licenses to practice.
5 Chapter 7. Licensing of Firms
6 Section 701. Licensing of firms.
7 Section 702. Peer review.
8 Chapter 9. Discipline
9 Section 901. Disciplinary procedure.
10 Section 902. Grounds for discipline.
11 Section 903. Reinstatement.
12 Chapter 11. Records and Communications
13 Section 1101. Owners of working papers.
14 Section 1102. Privileged communications.
15 Chapter 13. Violations and Enforcement
16 Section 1301. Unlawful acts.
17 Section 1302. Acts not unlawful.
18 Section 1303. Injunction against unlawful act.
19 Section 1304. Single act evidence of practice.
20 Section 1305. Penalties.
21 Section 1306. Audits limited to financial planners.
22 Chapter 21. Miscellaneous Provisions
23 Section 2101. Regulations.
24 Section 2102. Effective date.
25 The General Assembly of the Commonwealth of Pennsylvania
26 hereby enacts as follows:
27 CHAPTER 1
28 PRELIMINARY PROVISIONS
29 Section 101. Short title.
30 This act shall be known and may be cited as the Financial
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1 Planner Licensure Act.
2 Section 102. Definitions.
3 The following words and phrases when used in this act shall
4 have the meanings given to them in this section unless the
5 context clearly indicates otherwise:
6 "Attest activity." An examination, audit, review,
7 compilation or other agreed-upon procedure with respect to
8 financial information, together with the issuance of a report
9 expressing or disclaiming an opinion or other assurance on the
10 information. The term does not include a promise, guarantee,
11 claim or statement of an absolute outcome of any investments.
12 "Board." The State Board of Financial Planners.
13 "Bureau." The Bureau of Professional and Occupational
14 Affairs of the Department of State.
15 "Business unit." A functional group of individuals in a firm
16 or a sole practitioner performing attest activity.
17 "Commission." Compensation for recommending or referring a
18 product or service to be supplied by another person. The term
19 does not include a referral fee.
20 "Commissioner." The Commissioner of Professional and
21 Occupational Affairs of the Department of State.
22 "Department." The Department of State of the Commonwealth
23 acting through the Commissioner of Professional and Occupational
24 Affairs.
25 "Equity interest." Any type of ownership interest in a firm.
26 The term includes the right to vote with respect to any issue,
27 whether or not the right to vote is coupled with an interest in
28 the profits or assets of the firm.
29 "Examination." The examination for the certificate of
30 financial planner provided for in this act.
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1 "Financial planner." An individual to whom a certificate of
2 financial planner has been issued under the laws of this
3 Commonwealth or another state.
4 "Financial planning." Offering to perform or performing for
5 a client or potential client:
6 (1) Attest activity.
7 (2) Other professional services involving the use of
8 financial planning skills, including, but not limited to,
9 management advisory or consulting services, business
10 valuations, accountancy, preparation of tax returns or
11 furnishing of services as a financial analyst, financial
12 advisor, financial consultant, financial planner, investment
13 consultant or wealth manager, advice on tax matters by a
14 person holding out as a financial planner or firm.
15 "Firm." A qualified association that is a licensee.
16 "Holding out" or "hold out." Any representative of the fact
17 that a person, or an individual associated in any way with a
18 person, holds a certificate of financial planner, a registration
19 as a financial planner or a license, made in connection with the
20 performance of, or an offer to perform, services for the public.
21 A representation shall be deemed to include any oral or written
22 communication conveying the fact that the person or individual
23 holds a certificate, registration or license, including, without
24 limitation, the use of titles or legends on letterheads,
25 business cards, office doors, advertisements and listings or the
26 displaying of a certificate, registration or license.
27 "Internal auditor." An individual within a governmental or
28 private entity who performs an audit function that requires the
29 individual to be independent of the activities being audited.
30 "Licensee." An individual certified by or registered with
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1 the State Board of Financial Planners or the Certified Financial
2 Planner Board of Standards. The term does not include a person
3 on inactive status under this act or otherwise not holding a
4 current license.
5 "Peer review." A study, appraisal or review of one or more
6 aspects of the professional work of an individual or firm in the
7 practice of financial planning to determine the degree of
8 compliance by the individual or firm with generally accepted
9 financial planning principles and auditing standards and other
10 generally accepted technical standards, conducted by persons who
11 hold current licenses to practice financial planning under the
12 laws of this Commonwealth or another state and who are not
13 affiliated with the individual or firm being reviewed.
14 "Qualified association." An association as defined in 15
15 Pa.C.S. § 102 (relating to definitions) that is incorporated or
16 organized under the laws of this Commonwealth or any other state
17 or foreign jurisdiction if the organic law under which the
18 association is incorporated or organized does not afford the
19 shareholders, partners, members or other owners of equity
20 interests in the association or the officers, employees or
21 agents of the association greater immunity than is available to
22 the shareholders, officers, employees or agents of a
23 professional corporation under 15 Pa.C.S. § 2925 (relating to
24 professional relationship retained).
25 "Qualified nonlicensee." An individual who does not hold a
26 current license or permit to practice financial planning in this
27 Commonwealth or any other state or foreign jurisdiction.
28 "Referral fee." Compensation paid to a licensee for
29 recommending another licensee to, or referring to another
30 licensee, any person for the performance by the other licensee
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1 of financial planning.
2 "Report." Any opinion, statement or other form of written
3 communication that states or implies assurance as to the
4 reliability of any financial information or assessment of the
5 status or performance of any person and that also implies or is
6 accompanied by any statement or implication that the person
7 issuing it has a special knowledge or competence in financial
8 planning or auditing. A statement or implication of special
9 knowledge or competence may arise from use by the issuer of the
10 communication of names or titles indicating that the issuer or
11 any individual employed by or affiliated with it is a financial
12 planner or auditor or may arise from the language of the
13 communication itself. The term includes any form of language
14 which disclaims an opinion when the form of language is
15 conventionally understood to imply any positive assurance as to
16 the reliability of the financial information referred to or
17 special competence on the part of the person issuing the
18 language. The term also includes any other form of language that
19 is conventionally understood to imply assurance or special
20 knowledge or competence. The term does not include a promise,
21 guarantee, claim or statement of an absolute outcome of any
22 investments.
23 CHAPTER 3
24 BOARD
25 Section 301. State Board of Financial Planners.
26 (a) Composition.--The State Board of Financial Planners is
27 established and shall consist of members as follows:
28 (1) The Commissioner of Professional and Occupational
29 Affairs or a designee.
30 (2) The Director of the Bureau of Consumer Protection in
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1 the Office of Attorney General or a designee.
2 (3) Members appointed by the Governor, subject to the
3 consent of the Senate, as follows:
4 (i) Eight members shall be financial planners, all
5 of whom are licensees and at least six of whom are
6 actively engaged in the practice of financial planning as
7 their principal occupation at the time of their
8 appointment. Two of these members shall be appointed from
9 any geographic area in this Commonwealth, and two each
10 shall be appointed from the eastern, western and central
11 region of this Commonwealth. At least two of the members
12 who are financial planners shall be actively engaged at
13 the time of their appointment in the practice of
14 financial planning with firms that have five or fewer
15 licensees participating in the firms's practice.
16 (ii) Three members shall be persons who are not
17 affiliated in any manner with the profession, who shall
18 represent the public at large.
19 (iii) Two members shall be financial planners who
20 are licensees engaged in the practice of financial
21 planning as their principal occupation at the time of
22 their appointment.
23 (b) Term.--A full term of a member of the board shall be
24 four years from the date of appointment, except that a member
25 may continue to serve for a period not to exceed six months
26 beyond the expiration of the member's term, if a successor has
27 yet to be appointed and qualified according to law. A board
28 member shall not serve more than two consecutive four-year terms
29 and shall not be eligible for reappointment until after four
30 years have elapsed.
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1 (c) Quorum.--A majority of the duly appointed and qualified
2 members of the board shall constitute a quorum. The board may
3 act by a majority of the members present and voting at a meeting
4 at which a quorum is present, except that action by the board
5 under section 901, 1303 or 1305(c) may only be taken by either:
6 (1) A minimum number of eight affirmative votes if there
7 are no vacancies on the board at the time.
8 (2) A minimum number of seven affirmative votes if the
9 current membership of the board is less than its full
10 authorized membership.
11 (d) Compensation and expense.--Each member of the board
12 shall be paid reasonable traveling and other expenses and per
13 diem compensation at the rate of $60 for each day of actual
14 service while on board business.
15 (e) Attendance.--A member who fails to attend three
16 consecutive meetings shall forfeit the member's seat unless the
17 commissioner, upon written request from the member, finds that
18 the member should be excused from a meeting because of illness
19 or the death of an immediate family member.
20 (f) Vacancies.--In the event that any of the members of the
21 board shall die, resign or be removed during his term of office,
22 a successor shall be appointed in the same way and with the same
23 qualifications as set forth in this section and shall hold
24 office for the unexpired term.
25 (g) Restrictions.--A member of the board shall not:
26 (1) Serve as peer reviewer in a peer review of a
27 licensee.
28 (2) Be a teacher or instructor in a coaching school that
29 has as its primary purpose preparation for the examination or
30 have a financial interest in a coaching school so described.
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1 (h) Officers.--The board shall select from among its number
2 a chairperson, vice chairperson and secretary.
3 (i) Staff.--The department shall assign to the board agents,
4 clerks, stenographers, assistants and investigators as may be
5 necessary to administer this act.
6 Section 302. General powers of board.
7 The board shall have the power:
8 (1) To provide for, regulate and approve the issuance of
9 a certificate of financial planner to any person:
10 (i) who meets the requirements for the issuance of a
11 certificate in section 501; or
12 (ii) who meets the requirements for the issuance of
13 a certificate by reciprocity in section 504 or 505.
14 (2) To contract with a professional testing organization
15 for the preparation and administration of the examination in
16 accordance with section 812.1(a) of the act of April 9, 1929
17 (P.L.177, No.175), known as The Administrative Code of 1929,
18 and to establish prior to the administration of each
19 examination an appropriate minimum passing score, in keeping
20 with the purposes of this act.
21 (3) To keep a record showing the names and places of
22 business of persons to whom a certificate of financial
23 planner has been issued under this act or prior laws and all
24 other persons registered or holding licenses under this act
25 or prior laws. The department shall furnish copies of the
26 record to the public upon request and may establish a
27 reasonable fee for copies which shall not exceed the cost of
28 reproduction.
29 (4) To revoke, suspend, limit or otherwise restrict the
30 certificate or license of any financial planner or the
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1 license of any firm under this act; to censure or publicly
2 reprimand the holder of any certificate, registration or
3 license; to require completion of general or a specific
4 number of continuing professional education courses; to
5 require more frequent peer review or other remedial action;
6 and to impose civil penalties as provided in section 1305 for
7 violation of this act.
8 (5) To collect fees as provided for in this act and to
9 submit annually to the department an estimate of the
10 financial requirements of the board for its administrative,
11 investigative, legal and miscellaneous expenses.
12 (6) To arrange for assistance in the performance of its
13 duties; to administer and enforce the laws of this
14 Commonwealth relating to certification, registration,
15 licensing and practice by financial planners and firms; and
16 to instruct and require its agents to seek an injunction or
17 bring a prosecution for a violation of this act.
18 (7) To keep minutes and records of all its transactions
19 and proceedings. To the extent required by the act of June
20 21, 1957 (P.L.390, No.212), referred to as the Right-to-Know
21 Law, the department shall furnish copies of minutes and
22 records to the public upon request and may establish a
23 reasonable fee for copies which shall not exceed the cost of
24 reproduction.
25 (8) To become a member of the Certified Financial
26 Planner Board of Standards or a similar organization and pay
27 dues as that organization shall establish, and to send
28 members of the board and staff as delegates to the meetings
29 of that organization and defray their expenses.
30 (9) To adopt, promulgate and enforce rules and
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1 regulations consistent with this act establishing
2 requirements of continuing education and peer review to be
3 met by financial planners and firms as a condition for
4 renewal of biennial licenses to engage in the practice of
5 financial planning in this Commonwealth. Rules and
6 regulations shall include, but not be limited to, analysis of
7 continuing education records by a consultant whose analysis
8 shall cover licensee forms and records of continuing
9 education sponsors. The analysis shall be designed to
10 determine compliance with all continuing education
11 regulations of the board, including attendance of licensees,
12 qualifications of sponsors and qualifications of courses for
13 credit.
14 (10) To promulgate and amend rules of professional
15 conduct, uniformly applicable to financial planners,
16 appropriate to establish and maintain a high standard of
17 integrity, objectivity and dignity by financial planners and
18 firms.
19 (11) To adopt, promulgate and enforce administrative
20 rules and regulations not inconsistent with this act, or
21 other acts, as are necessary and proper to carry into effect
22 the provisions of this act.
23 (12) To submit annually to the Appropriations Committee
24 of the Senate and the Appropriations Committee of the House
25 of Representatives, not later than 15 days after the Governor
26 has submitted a budget to the General Assembly, a copy of the
27 budget request for the upcoming year that the board
28 previously submitted to the department.
29 (13) To engage consultants as may be deemed necessary to
30 carry out and enforce the provisions of this act.
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1 CHAPTER 5
2 CERTIFICATE OF FINANCIAL PLANNER
3 Section 501. Examination and issuance of certificate.
4 (a) Qualifications.--An individual shall be permitted to
5 take the examination for the certificate of financial planner if
6 the individual:
7 (1) Is a resident of this Commonwealth.
8 (2) Has attained 18 years of age.
9 (3) Is of good moral character.
10 (4) Meets the education requirements of section 502.
11 (b) Examination.--The examination shall be held at least
12 twice in each calendar year and simultaneously in at least two
13 counties of this Commonwealth and shall be a written examination
14 in the following:
15 (1) General principles of financial planning.
16 (2) Insurance planning and risk management.
17 (3) Employee benefits planning.
18 (4) Investment planning.
19 (5) Income tax planning.
20 (6) Retirement planning.
21 (7) Estate planning.
22 (c) Reexamination.--Subject to such regulations as the board
23 may adopt governing reexaminations, a candidate shall be
24 entitled to retake the examination.
25 (d) Photograph.--The board shall not require a photograph as
26 part of an application for a certificate of financial planner.
27 (e) Issuance.--A certificate of financial planner shall be
28 issued by the board upon application by an individual who has
29 passed the examination and meets the experience requirements
30 provided for in section 503.
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1 Section 502. Education requirements.
2 Before an individual is permitted to take the examination the
3 board shall be satisfied that the individual meets any of the
4 following:
5 (1) Has attained the necessary education requirements as
6 established by the Certified Financial Planner Board of
7 Standards.
8 (2) Has attained the necessary education requirements
9 established by the board. The education requirements must
10 include not less than 150 hours of instruction.
11 (3) Holds one of the following or any equivalent
12 established by the board:
13 (i) C.P.A.
14 (ii) ChFC/CLU.
15 (iii) CFA.
16 (iv) Ph.D. in business or economics.
17 (v) Attorney's license.
18 Section 503. Experience requirements.
19 The following apply:
20 (1) Individuals taking the examination for the first
21 time after January 1, 2007, must obtain or be in the process
22 of obtaining at least a bachelor's degree in any discipline
23 as a condition to obtain certification and must acquire not
24 less than three years of personal financial planning
25 experience as provided in section 502.
26 (2) Individuals taking the examination prior to January
27 1, 2007, with at least a bachelor's degree must acquire not
28 less than three years of personal financial planning
29 experience, which is in addition to the education
30 requirements provided in section 502.
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1 (3) Individuals taking the examination for the first
2 time prior to January 1, 2007, with no undergraduate degree
3 must obtain not less than five years of personal financial
4 planning experience, which is in addition to the education
5 requirements provided in section 502.
6 (4) Individuals taking the examination for the first
7 time prior to January 1, 2007, with a master's degree must
8 acquire not less than one year of personal financial planning
9 experience, which is in addition to the education
10 requirements provided in section 502.
11 (5) Individuals with a doctoral degree in business or
12 economics are deemed to have achieved full experience for
13 certification.
14 Section 504. Domestic reciprocity.
15 (a) General rule.--Without requiring the examination
16 otherwise required under section 501(e), the board may, in its
17 discretion, issue a certificate of financial planner to a holder
18 of a certificate of financial planner then in full force and
19 effect issued by any other state following passage of a written
20 examination if the applicant shall submit evidence satisfactory
21 to the board that the applicant either:
22 (1) Possesses the general qualifications specified in
23 section 501(e), has passed the written examination required
24 to practice as a financial planner under the laws of the
25 other state, meets the continuing education requirements
26 specified in section 508(d) and has the experience required
27 under section 503 to receive the certificate in this
28 Commonwealth.
29 (2) Has passed the written examination required to
30 practice as a financial planner under the laws of the other
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1 state and has held a certificate and license to practice
2 financial planning for the immediately preceding five years
3 in another state.
4 (b) Disclosure.--An applicant for a financial planner
5 certificate under this section shall list in the application all
6 states and foreign jurisdictions in which the applicant has
7 applied for or holds a designation or certificate to practice
8 financial planning.
9 (c) Notification.--Each holder of a certificate issued under
10 this section shall notify the board in writing within 30 days
11 after its occurrence of any issuance, denial, revocation or
12 suspension of financial planning certification or the
13 commencement of a disciplinary or enforcement action against the
14 holder or the holder's firm by any state or foreign
15 jurisdiction.
16 Section 505. Foreign reciprocity.
17 (a) General rule.--Without requiring the examination
18 otherwise required under section 501(e), the board may in its
19 discretion issue a certificate of financial planner to a holder
20 of a foreign designation, granted and then in full force in a
21 foreign country or other jurisdiction that is not a state,
22 entitling the holder thereof to engage in the practice of
23 financial planning if all of the following conditions are
24 satisfied:
25 (1) Pursuant to a duly enacted free trade agreement, the
26 foreign jurisdiction that granted the designation makes
27 similar provision to allow an individual who holds a valid
28 certificate of financial planning issued by this Commonwealth
29 to obtain the foreign jurisdiction's comparable designation.
30 (2) The foreign designation:
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1 (i) Was duly issued by a duly constituted authority
2 within the foreign jurisdiction that regulates the
3 practice of financial planning and the foreign
4 designation has not expired or been revoked or suspended.
5 (ii) Entitles the holder to issue reports.
6 (iii) Was issued upon the basis of educational,
7 examination and experience requirements established by
8 the foreign authority or by law.
9 (3) The applicant:
10 (i) Received the designation based on educational
11 and examination standards substantially equivalent to
12 those in effect in this Commonwealth at the time the
13 foreign designation was granted.
14 (ii) Completed an experience requirement
15 substantially equivalent to the requirements set forth in
16 section 503 in the jurisdiction that granted the foreign
17 designation or has completed five years of experience in
18 the practice of financial planning in this Commonwealth
19 or meets other requirements as may be prescribed by the
20 board by rule within the ten years immediately preceding
21 the application.
22 (iii) Passed a uniform qualifying examination in
23 national standards.
24 (b) Disclosure.--An applicant for a certificate under this
25 section shall list in the application all states and foreign
26 jurisdictions in which the applicant has applied for or holds a
27 designation or certificate to practice financial planning.
28 (c) Notification.--Each holder of a certificate issued under
29 this section shall notify the board in writing within 30 days
30 after its occurrence of any issuance, denial, revocation or
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1 suspension of financial planning certification or the
2 commencement of a disciplinary or enforcement action against the
3 holder or the holder's firm by any state or foreign
4 jurisdiction.
5 Section 506. Fees.
6 (a) General rule.--All fees required under this act shall be
7 fixed by the board, by regulation, and shall be subject to
8 review in accordance with the act of June 25, 1982 (P.L.633,
9 No.181), known as the Regulatory Review Act.
10 (b) Increase by board.--If the revenues generated by fees,
11 fines and civil penalties imposed in accordance with this act
12 are not sufficient to match expenditures over a two-year period,
13 the board shall increase those fees by regulation, subject to
14 review in accordance with the Regulatory Review Act, such that
15 the projected revenues will meet or exceed projected
16 expenditures.
17 (c) Increase by bureau.--If the bureau determines that the
18 fees established by the board are inadequate to meet the minimum
19 enforcement efforts required, then the bureau, after
20 consultation with the board, shall increase the fees by
21 regulation, subject to review in accordance with the Regulatory
22 Review Act, such that adequate revenues are raised to meet the
23 required enforcement effort.
24 Section 507. Status of existing rights preserved.
25 Any person legally authorized to practice financial planning
26 in this Commonwealth on the effective date of this act shall
27 thereafter possess the same rights and privileges as persons to
28 whom certificates of financial planner shall be issued under
29 this act, subject, however, to the power of the board, as
30 provided in this act, to discipline that person for any of the
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1 causes set forth in this act and subject to the power of the
2 board to provide for and to require permits to practice.
3 Section 508. Licenses to practice.
4 (a) Issuance.--Biennial licenses to engage in the practice
5 of financial planning in this Commonwealth shall be issued by
6 the department, upon payment of the biennial licensing fee, to:
7 (1) Holders of a certificate of financial planning
8 issued by the Commonwealth and financial planners in this
9 Commonwealth who shall have furnished evidence satisfactory
10 to the board of compliance with the requirements of
11 subsection (d).
12 (2) Qualified associations licensed under section 701.
13 (b) Expiration.--Licenses to practice shall expire on the
14 last day of April of even-numbered years or on any other
15 biennial expiration dates as the department may fix.
16 (c) Inactive status.--A financial planner who is not engaged
17 in the practice of financial planning may request the board in
18 writing to place the financial planner's name on the inactive
19 roll and thus protect the right of the financial planner to
20 obtain a license at a time as the financial planner may become
21 engaged in the practice of financial planning.
22 (d) Continuing education.--Each financial planner filing an
23 application for a license or a renewal thereof to engage in the
24 practice of financial planning in this Commonwealth must, during
25 the reporting period immediately preceding the current biennial
26 period, complete 80 hours of continuing education in programs
27 approved by the board. The reporting period for licensees shall
28 be January 1 of even-numbered years to December 31 of odd-
29 numbered years. No carryover of credits shall be permitted from
30 one biennial license period to another. The continuing education
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1 requirement shall not apply to firms but shall apply to all
2 natural persons who apply for a license or renewal thereof under
3 this section.
4 (e) Grounds for denial or refusal to renew.--Failure by a
5 licensed financial planner applying for renewal of a biennial
6 license to furnish evidence of completion of the required number
7 of hours of acceptable continuing education shall constitute
8 grounds for denial or refusal to renew such license, unless the
9 board, in its discretion, shall determine the failure to have
10 been due to reasonable cause, in which case the board shall
11 grant an extension.
12 (f) Board.--In issuing rules, regulations and individual
13 orders with respect to requirements of continuing education, the
14 board:
15 (1) May rely upon guidelines and pronouncements of
16 recognized educational and professional organizations.
17 (2) May prescribe for content, duration and organization
18 of courses.
19 (3) Shall take into account the accessibility of
20 continuing education as it may require and any impediments to
21 interstate practice of financial planning which may result
22 from differences in requirements in other states.
23 (4) May provide for relaxation or suspension of
24 requirements in instances of individual hardship, such as for
25 reasons of health, military service or other good cause.
26 (g) Multiple certification, registration or licensure.--A
27 financial planner who is also certified, registered or licensed
28 to practice financial planning in any other state or foreign
29 jurisdiction shall report this information to the board on the
30 biennial renewal application. Any disciplinary action taken in
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1 any other state or foreign jurisdiction shall be reported to the
2 board on the biennial renewal application or within 30 days of
3 disposition, whichever is sooner. Multiple certification,
4 registration or licensure shall be noted by the board on the
5 record of the financial planner and the other state or foreign
6 jurisdiction shall be notified by the board within 30 days after
7 any disciplinary action is taken against the financial planner
8 in this Commonwealth.
9 (h) Sole practitioners.--An initial or renewal license shall
10 not be issued after April 30, 2006, to a financial planner
11 practicing as a sole practitioner unless he complies with the
12 requirement of section 702.
13 CHAPTER 7
14 LICENSING OF FIRMS
15 Section 701. Licensing of firms.
16 (a) General rule.--An association shall not practice
17 financial planning in this Commonwealth unless it is a qualified
18 association, has been granted a license to practice and
19 satisfies the requirements of this section while licensed. A new
20 firm shall apply for its initial license within 30 days after
21 its formation. Thereafter, the firm's license shall be subject
22 to renewal in accordance with section 508.
23 (b) Application contents.--The initial and all renewal
24 license applications by a firm shall:
25 (1) List the name, home address and license number of
26 each financial planner who owns an equity interest directly
27 or indirectly in the firm and who is a licensee.
28 (2) List the name and home address of each qualified
29 nonlicensee who owns an equity interest in the firm if the
30 principal residence or the office out of which the individual
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1 principally practices is located in this Commonwealth.
2 (3) Include a statement that the firm is in compliance
3 with subsections (d) and (e).
4 (c) Compliance generally.--An initial or renewal license
5 shall not be issued to a firm after April 30, 2006, unless the
6 firm complies with the requirements of section 702.
7 (d) Requirements.--A firm shall satisfy the following:
8 (1) At least one general partner if the firm is a
9 partnership, one record and beneficial owner of common shares
10 if the firm is a corporation or one owner of a similar equity
11 interest if the firm is any other form of qualified
12 association shall be a financial planner who is a licensee.
13 (2) Except as provided in subsections (e) and (f), each
14 shareholder, partner, member or other owner of an equity
15 interest in the firm must be the holder of a current license
16 to practice financial planning as a financial planner under
17 the laws of this Commonwealth or another jurisdiction. This
18 paragraph shall not:
19 (i) Apply in the case of a person who withdraws from
20 a firm for a period that is reasonable under the
21 circumstances to permit the firm to comply with this
22 requirement.
23 (ii) Prohibit payments by a firm to a former equity
24 owner or the owner's estate in connection with withdrawal
25 from the firm.
26 (3) Each individual in charge of an office that performs
27 any attest activity or business unit of the firm in this
28 Commonwealth shall be a financial planner who is a licensee.
29 (4) The principal executive officer of the firm shall be
30 a financial planner who holds a current license to practice
20050H2179B3018 - 21 -
1 financial planning in this Commonwealth or another state.
2 (5) An individual who does not hold a current license to
3 practice financial planning as a financial planner in this
4 Commonwealth or another jurisdiction shall not assume
5 ultimate responsibility for any attest activity.
6 (e) Exception.--Notwithstanding any other provision of law,
7 a qualified nonlicensee may own an equity interest in a firm if
8 all of the following conditions are met:
9 (1) The qualified nonlicensees owning equity interest in
10 the firm shall not:
11 (i) own in the aggregate equity interests in the
12 firm entitling them to cast more than one-third of the
13 votes on any issue or to receive more than one-third of
14 any dividend or other distribution of profits or assets
15 of the firm; or
16 (ii) constitute more than one-third in number of the
17 owners of equity interests in the firm.
18 (2) The qualified nonlicensee shall not hold himself out
19 as a financial planner.
20 (3) The qualified nonlicensee shall be permitted to
21 designate or refer to himself as a principal, owner, officer,
22 member or shareholder of the firm. The qualified nonlicensee
23 may also use other titles that may be authorized by
24 regulation of the board.
25 (4) The qualified nonlicensee shall not:
26 (i) Have pleaded guilty to, entered a plea of nolo
27 contendere to or been found guilty or been convicted of a
28 felony under the laws of this Commonwealth or any other
29 jurisdiction.
30 (ii) Be in violation of any regulation of the board
20050H2179B3018 - 22 -
1 regarding the character or conduct of a qualified
2 nonlicensee who is the owner of an equity interest in a
3 firm.
4 (5) The participation of the qualified nonlicensee in
5 the business of the firm must be the principal occupation of
6 the individual and shall be in the nature of providing
7 services to the firm or clients of the firm and not solely as
8 an investor or in another commercial or passive capacity.
9 (6) The qualified nonlicensee has graduated with a
10 baccalaureate or higher degree from a college or university
11 approved at the time of graduation by the Department of
12 Education.
13 (7) The qualified nonlicensee shall comply with all
14 applicable provisions of this act and the regulations of the
15 board.
16 (f) Indirect ownership.--An equity interest in a firm may be
17 owned indirectly but only if all of the ultimate, indirect
18 beneficial owners of the equity interest are licensees.
19 (g) Sanction.--In accordance with the procedure referred to
20 in section 901, the board may revoke the license to practice of
21 a firm if at any time it is in violation of this section.
22 Section 702. Peer review.
23 (a) General rule.--As a condition for granting a firm a
24 renewal license or an initial license in the case of a firm that
25 has previously been engaged in practice in another jurisdiction,
26 the board shall require that the firm undergo a peer review in
27 accordance with this section unless the firm meets one of the
28 exemptions in subsection (g). The firm shall submit to the board
29 with its license application a letter from the organization
30 administering the firm's most recent peer review stating the
20050H2179B3018 - 23 -
1 date on which the peer review was completed. The board shall not
2 require submittal of the letter of response or working papers
3 related to the peer review process.
4 (b) Frequency.--A firm with fewer than three licensees shall
5 not be required to undergo a peer review more frequently than
6 once every five years, and a firm with three or more licensees
7 shall not be required to undergo a peer review more frequently
8 than once every three years, except that:
9 (1) The board may order a firm that has been disciplined
10 under section 902 or that has been ordered to take remedial
11 action under subsection (e) to undergo a peer review more
12 frequently.
13 (2) A new firm that is not subject to subsection (j)
14 shall undergo its first peer review within 18 months after it
15 is granted its initial license.
16 (3) The regulations of the board may lengthen any of the
17 periods between required peer reviews prescribed in this
18 subsection in a manner, under circumstances or with respect
19 to any firms as the board in its discretion may consider
20 appropriate.
21 (c) Regulations.--The board shall adopt regulations
22 establishing guidelines for peer reviews which shall:
23 (1) Require that a peer review be conducted pursuant to
24 a program and standards approved by the board. The board
25 shall approve only peer review programs that the board finds
26 comply with established standards for performing and
27 reporting on peer reviews.
28 (2) Require that a peer review be conducted by a
29 reviewer that is independent of the firm reviewed, qualified
30 pursuant to board rules and approved by the organization
20050H2179B3018 - 24 -
1 administering the peer review program.
2 (3) Other than in the peer review process, prohibit the
3 use or public disclosure of information obtained by the
4 reviewer, any organization administering an approved peer
5 review program or the board during or in connection with the
6 peer review process. The requirement that information not be
7 publicly disclosed shall not apply to a hearing before the
8 board that the firm requests be public under subsection (e)
9 or to the information described in subsection (h)(3).
10 (d) Components.--
11 (1) The peer review of a firm that performs one or more
12 audits of historical financial statements or examinations of
13 prospective financial information shall include an onsite
14 study and evaluation of a representative selection of audit,
15 examination, review and compilation reports, the financial
16 information upon which those reports were based and the
17 associated working papers. The onsite review shall include
18 additional procedures relating to the firm's system of
19 quality control sufficient to provide the reviewer with a
20 reasonable basis upon which to issue a peer review report.
21 (2) The peer review of a firm that performs no audit or
22 examination engagements but does perform one or more review
23 engagements shall only be an offsite study and evaluation of
24 a representative selection of reports issued by the firm and
25 the financial information upon which those reports were
26 based, but, if the firm elects to have an onsite review, that
27 review shall also be acceptable. The offsite review need not
28 include a study of the associated working papers but shall
29 include procedures and inquiries sufficient to provide the
30 reviewer with a reasonable basis upon which to issue a peer
20050H2179B3018 - 25 -
1 review report.
2 (3) A firm that does not perform any audits or reviews,
3 regardless of whether or not the firm performs compilations,
4 shall be exempt from the requirement to undergo a peer review
5 to the extent provided in subsection (g)(2).
6 (e) Remedial action.--If a firm does not comply with any
7 remedial actions determined appropriate by the administering
8 organization, the administering organization shall refer the
9 matter to the board to determine if further action under this
10 subsection is warranted. The board may at its discretion or
11 shall upon submission of a written application by the firm hold
12 a hearing to determine whether the firm complies with the
13 appropriate professional standards and practices. The hearing
14 shall be confidential and shall not be open to the public unless
15 requested by the firm. If the board after conducting a hearing
16 determines that the firm complies with the appropriate
17 professional standards and practices, it shall issue an order
18 requiring the reviewer and the administering organization to
19 take any necessary action to record and implement the board's
20 determination and to restore the status of compliance of the
21 firm. However, if the board after conducting the hearing
22 determines that the firm does not comply with the appropriate
23 professional standards and practices, it may issue an order that
24 requires the following:
25 (1) Remedial action, which may include any of the
26 following:
27 (i) Requiring employees of the firm to complete
28 general or specific continuing professional education
29 courses.
30 (ii) Requiring the firm to undergo a peer review
20050H2179B3018 - 26 -
1 more frequently than every three years.
2 (iii) Any other remedial action specified by the
3 board.
4 (2) An affidavit from the firm submitted within the time
5 specified by the board indicating completion of the required
6 remedial actions.
7 (f) Costs.--The firm reviewed shall pay for any peer review
8 performed.
9 (g) Exemption.--The firm shall be exempt from the
10 requirement to undergo a peer review if all of the following
11 apply:
12 (1) Within three years before the date of application
13 for initial or renewal licensure, the firm has undergone a
14 peer review conducted in another state or foreign
15 jurisdiction which meets the requirements of subsection
16 (c)(1) and (2). The firm shall submit to the board a letter
17 from the organization administering the firm's most recent
18 peer review stating the date on which the peer review was
19 completed.
20 (2) The firm satisfies all of the following conditions:
21 (i) During the preceding two years, the firm has not
22 accepted or performed any audit or review engagement.
23 (ii) Within the next two years, the firm does not
24 intend to accept or perform any audit or review
25 engagement.
26 (iii) The firm agrees to notify the board within 30
27 days of accepting an audit or review engagement and to
28 undergo a peer review within 18 months of commencing
29 these activities.
30 (3) For reasons of personal health, military service or
20050H2179B3018 - 27 -
1 other good cause, the board determines that the firm is
2 entitled to an exemption for a period of time not to exceed
3 12 months.
4 (h) Proceedings.--In any civil action, arbitration or
5 administrative proceeding, regardless of whether a licensee is a
6 party thereto, all of the following shall apply:
7 (1) The proceedings, records, including, without
8 limitation, letter of acceptance, peer review reports,
9 letters of comment and letters of response, and working
10 papers related to the peer review process of any reviewer,
11 administering organization or board member privileged and not
12 subject to discovery, subpoena or other means of legal
13 process and may not be introduced into evidence.
14 (2) No employee, member or agent of an administering
15 organization, reviewer or board member shall be permitted or
16 required to testify as to any matters produced, presented,
17 disclosed or discussed during or in connection with the peer
18 review process or be required to testify to any finding,
19 recommendation, evaluation, opinion or other actions of any
20 person in connection with the peer review process.
21 (3) No privilege exists under this subsection:
22 (i) For information presented or considered in the
23 peer review process that was otherwise available to the
24 public.
25 (ii) For material not prepared in connection with a
26 peer review merely because it subsequently is presented
27 or considered as part of the peer review process.
28 (iii) In connection with an administrative
29 proceeding or related civil action brought for the
30 purpose of enforcing this section.
20050H2179B3018 - 28 -
1 (i) Retention of documents.--If a peer review report
2 indicates that a firm complies with the appropriate professional
3 standards and practices set forth in the regulations of the
4 board, the administering organization shall destroy all working
5 papers and documents, other than report-related documents,
6 related to the peer review within 90 days after issuance to the
7 firm of the letter of acceptance by the administering
8 organization. If a peer review letter of acceptance indicates
9 that corrective action by a firm is required, the administering
10 organization may retain documents and reports related to the
11 peer review until completion of the next peer review or other
12 agreed-to corrective actions.
13 (j) Special circumstances.--In the event the practices of
14 two or more firms are merged or otherwise combined, the
15 surviving firm shall retain the peer review year of the largest
16 firm, as determined by the number of accounting and auditing
17 hours of each of the practices. In the event that the practice
18 of a firm is divided or a portion of its practice is sold or
19 otherwise transferred, any firm acquiring some or all of the
20 practice that does not already have its own review year shall
21 retain the review year of the former firm. In the event that the
22 first peer review of a firm that would otherwise be required by
23 this subsection would be less than 12 months after its previous
24 review, a review year shall be assigned by the administering
25 organization so that the firm's next peer review occurs after
26 not less than 12 months of operation, but not later than 18
27 months of operation.
28 (k) Limitation of liability.--
29 (1) None of the following persons shall be held to have
30 violated any criminal law or to be civilly liable by reason
20050H2179B3018 - 29 -
1 of the performance by the person of any duty, function or
2 activity under this section so long as the person has not
3 engaged in recklessness or willful misconduct:
4 (i) Reviewers.
5 (ii) The administering organization or any of its
6 members, employees or agents or any person furnishing
7 professional counsel or services to the administering
8 organization.
9 (iii) Board members.
10 (2) Subsection (h) shall not apply to the defense of a
11 claim alleging conduct not protected under paragraph (1).
12 (l) Applicability.--This section shall apply as follows:
13 (1) Except as provided in paragraph (2), this section
14 shall apply on and after February 3, 2006. This paragraph
15 includes without limitation applicability for the purposes of
16 permitting the board to promulgate the regulations under
17 subsection (c) and of applying subsections (h) and (k).
18 (2) This section shall not become applicable to firms
19 and no firm shall be required to undergo a peer review under
20 this section until May 1, 2009, except that this section
21 shall not become applicable until May 1, 2013, to a firm that
22 has not accepted or performed any audit engagements during
23 the period May 1, 2007, through April 30, 2013.
24 (m) Definition.--As used in this section, the term "firm"
25 includes, but is not limited to, a sole practitioner.
26 CHAPTER 9
27 DISCIPLINE
28 Section 901. Disciplinary procedure.
29 (a) Procedure.--Except as provided in section 301(c), the
30 procedure to be followed in the revocation of a firm's license
20050H2179B3018 - 30 -
1 under section 701(g) or the imposition of discipline under
2 section 902 and in appeals taken from disciplinary actions of
3 the board shall be that prescribed under:
4 (1) 2 Pa.C.S. Ch. 5 Subch. A (relating to practice and
5 procedure of Commonwealth agencies) and 7 Subch. A (relating
6 to judicial review of Commonwealth agency action).
7 (2) The provisions of 1 Pa. Code Pt. II (relating to
8 general rules of administrative practice and procedure).
9 (3) Applicable regulations promulgated by the board.
10 (b) Return of certificate.--The board shall require an
11 individual whose certification has been suspended or revoked to
12 return the certificate or to certify in a manner as the board
13 directs that it was lost, stolen or destroyed. Failure to comply
14 with the board's directions shall be a misdemeanor of the third
15 degree.
16 Section 902. Grounds for discipline.
17 (a) General rule.--In accordance with the procedure provided
18 in section 901, the board may take any of the following actions
19 for cause as provided in subsection (b):
20 (1) Revoke, suspend, limit or otherwise restrict the
21 certificate of a financial planner.
22 (2) Revoke, suspend, limit or otherwise restrict any
23 license issued under this act.
24 (3) Censure or publicly reprimand the holder of any
25 certificate, registration or license.
26 (4) Require completion of general or a specific number
27 of continuing professional education courses.
28 (5) Require more frequent peer review or other remedial
29 action.
30 (b) Cause for discipline.--The board may act as described in
20050H2179B3018 - 31 -
1 subsection (a) for any of the following:
2 (1) Fraud or deceit in obtaining a certificate of
3 financial planner or in obtaining registration under this act
4 or in obtaining a license to practice under this act.
5 (2) Dishonesty, fraud or gross negligence in the
6 practice of financial planning.
7 (3) Violation of any of the provisions of section 1301.
8 (4) Violation of a rule of professional conduct
9 promulgated by the board under the authority granted by this
10 act.
11 (5) Pleading guilty to, entering a plea of nolo
12 contendere to or being found guilty of a felony under any
13 Federal or State law or the laws of any foreign jurisdiction.
14 (6) Pleading guilty to, entering a plea of nolo
15 contendere to or being found guilty of any crime, an element
16 of which is dishonesty or fraud under any Federal or State
17 law or the laws of any foreign jurisdiction.
18 (7) Pleading guilty to, entering a plea of nolo
19 contendere to or being found guilty of violating any Federal
20 or State revenue law or the revenue laws of any foreign
21 jurisdiction.
22 (8) Cancellation, revocation, suspension or refusal to
23 renew the authority to practice as a financial planner by any
24 other state or foreign jurisdiction for any cause other than
25 failure to pay a registration or other fee in the other state
26 or foreign jurisdiction.
27 (9) Suspension or revocation of the right to practice
28 before any Federal or State governmental agency.
29 (10) Failure of financial planner to furnish evidence of
30 completion of the requirements for continuing education under
20050H2179B3018 - 32 -
1 section 508 or to meet any conditions with respect to
2 continuing education that the board may have ordered in
3 respect to the financial planner under that section.
4 (11) Failure of a firm or sole proprietorship to satisfy
5 the peer review requirements in section 702.
6 (12) Failure of a firm to satisfy any of the
7 organizational requirements in section 701(d).
8 (13) Conduct that brings the profession of financial
9 planning into disrepute or that lowers public esteem for the
10 profession.
11 (14) Violation of an order of the board.
12 (15) Engaging in unprofessional conduct. Discipline may
13 be imposed under this paragraph whether or not actual injury
14 or loss to a client is established.
15 (c) Inactive status.--The fact that a financial planner is
16 on inactive status under section 508(c) or that a person does
17 not hold a current license for any reason shall not limit or
18 otherwise affect the power of the board to discipline the person
19 as provided in subsection (a).
20 (d) Definition.--As used in this section, the term
21 "unprofessional conduct" means:
22 (1) Undertaking to perform professional service that the
23 financial planner or firm cannot reasonably expect to
24 complete with professional competence.
25 (2) Failure to exercise due professional care in the
26 performance of professional services.
27 (3) Failure to adequately plan and supervise the
28 performance of professional services.
29 (4) Failure to obtain sufficient data to afford a
30 reasonable basis for conclusions or recommendations in
20050H2179B3018 - 33 -
1 relation to any professional services performed.
2 (5) Failure to comply with any standard promulgated by
3 any recognized public or private standard-setting body that
4 is applicable to the professional service being performed.
5 Section 903. Reinstatement.
6 (a) Suspension generally.--Except as provided in subsection
7 (b), upon application in writing and after hearing pursuant to
8 notice, the board may reinstate or modify the suspension of any
9 license to practice which has been suspended. Reinstatement
10 shall not be granted under this subsection:
11 (1) To an individual unless the individual demonstrates
12 that the individual has completed the biennial continuing
13 education requirements that the individual would have been
14 required to complete during the immediately preceding
15 reporting period if the individual's license had not been
16 suspended.
17 (2) Unless the person seeking reinstatement pays the
18 current biennial licensing fee plus a reinstatement fee.
19 (b) Suspension of more than five years.--An individual whose
20 license has been suspended for more than five years shall not be
21 eligible to apply for reinstatement of the license, but instead
22 must take the examination and apply for a certificate of
23 financial planner in accordance with section 501.
24 (c) Revocation.--Unless ordered to do so by a court, the
25 board shall not reinstate the certificate of a person to
26 practice as a financial planner or the registration of a person
27 to practice as a financial planner which has been revoked. A
28 person whose certification or registration has been revoked may
29 take the examination and apply for a certificate in accordance
30 with section 501 not earlier than five years after the
20050H2179B3018 - 34 -
1 certificate or registration was revoked if the person desires to
2 resume the practice of financial planning.
3 (d) Expiration--A person whose license to practice has
4 expired for failure to make biennial registration or who has
5 been on the inactive roll under section 508(c) may have the
6 license reinstated upon compliance with the following:
7 (1) In the case of an individual, presentation to the
8 board of satisfactory evidence of having completed 80 hours
9 of continuing education in programs approved by the board
10 under section 508(d) within two years preceding the date of
11 the application for reinstatement.
12 (2) Payment of the current biennial licensing fee plus a
13 reinstatement fee.
14 CHAPTER 11
15 RECORDS AND COMMUNICATIONS
16 Section 1101. Owners of working papers.
17 (a) General rule.--All statements, records, schedules,
18 working papers and memoranda prepared by a licensee or a
19 partner, shareholder, member or other owner of an equity
20 interest in a firm, or an officer, director, employee or agent
21 or a licensee incident to or in the course of rendering services
22 to a client pursuant to the practice of financial planning,
23 except reports submitted to a firm, or an officer, director,
24 employee or agent of a licensee, shall be and remain the
25 property of the licensee in the absence of an express agreement
26 between the licensee and the client to the contrary. No
27 statement, record, schedule, working paper or memorandum shall
28 be sold, transferred or bequeathed, without the consent of the
29 client or the client's personal representative, successor or
30 assignee, to anyone other than one or more surviving or new
20050H2179B3018 - 35 -
1 partners, members, shareholders or other owners of an equity
2 interest of the licensee or any combined or merged firm or
3 successor in interest to the licensee. Nothing in this section
4 shall be construed as prohibiting any temporary transfer of
5 working papers or other material in the course of complying with
6 the peer review provisions of this act or as otherwise
7 interfering with the disclosure of information pursuant to
8 section 702.
9 (b) Other documents.--In addition to any statements,
10 records, schedules, working papers, memoranda or reports
11 required to be furnished or returned to the client in accordance
12 with subsection (a), a licensee shall furnish to the client or
13 former client upon request made within reasonable time after
14 original issuance of the document in question:
15 (1) A copy of a tax return of the client.
16 (2) A copy of any report or other document issued by the
17 licensee to or for the client and not formally withdrawn or
18 disavowed by the licensee prior to the request.
19 (3) A copy of the licensee's working papers to the
20 extent that the working papers include records that would
21 ordinarily constitute part of the client's records and are
22 not otherwise available to the client. However, a licensee
23 may require that fees due the licensee with respect to
24 completed engagements be paid before the information is
25 provided.
26 (4) Any accounting or other records belonging to or
27 obtained from or on behalf of the client that the licensee
28 removed from the client's premises or received for the
29 client's account. The licensee may make and retain copies of
30 the documents of the client whenever those documents form the
20050H2179B3018 - 36 -
1 basis for work done by the licensee.
2 (c) Subsequent requests.--If a licensee can document
3 compliance with the requirements under subsection (b), the
4 licensee need not comply with subsequent requests to again
5 provide the information.
6 Section 1102. Privileged communications.
7 Except by permission of the client engaging the licensee or
8 the heirs, successors or personal representatives of a client, a
9 licensee or a person employed by a licensee shall not be
10 required to and shall not voluntarily disclose or divulge
11 information which the licensee may have unless the sharing of
12 confidential information is within the peer review process. This
13 provision on confidentiality shall prevent the board from
14 receiving reports relative to and in connection with any
15 professional services as a financial planner or firm. The
16 information derived from or as the result of the professional
17 services shall be deemed confidential and privileged. Nothing in
18 this section shall be taken or construed as prohibiting the
19 disclosure of information required to be disclosed by the
20 standards of the profession in reporting on the examination of
21 financial statements or in making disclosures in a court of law
22 or in disciplinary investigations or proceedings when the
23 professional services of the financial planner or firm are at
24 issue in an action, investigation or proceeding in which the
25 financial planner or firm is a party.
26 CHAPTER 13
27 VIOLATIONS AND ENFORCEMENT
28 Section 1301. Unlawful acts.
29 (a) Unlawful acts.--It is unlawful:
30 (1) For any person to hold himself out as or otherwise
20050H2179B3018 - 37 -
1 use the title or designation "financial planner" or the
2 abbreviation "CFP" or "FP" or any other title, designation,
3 words, letters or abbreviation tending to indicate that the
4 person is a financial planner or engaged in the practice of
5 financial planning unless the person has received or has been
6 notified in writing by the board that he has qualified to
7 receive a certificate of financial planner issued by the
8 Commonwealth, which is not revoked or suspended.
9 (2) For any person to hold himself out or otherwise use
10 the title "financial planner," or any abbreviation thereof,
11 or the letters "CFP" or "FP" by virtue of any certificate,
12 registration or license illegally or fraudulently obtained by
13 the person, or issued unlawfully or through any fraudulent
14 representation or deceit, or misstatement of material fact or
15 fraudulent concealment of a material fact made or induced or
16 aided or abetted by the person.
17 (3) For any partnership, corporation or other
18 association to hold itself out as or otherwise use the title
19 or designation "financial planner" or the abbreviation "CFP"
20 or "FP" or any other title, designation, words, letters or
21 abbreviation tending to indicate that the partnership,
22 corporation or other association is composed of or includes
23 financial planners unless the partnership, corporation or
24 other association holds a current license under section 701.
25 (4) Except as provided in this paragraph or in paragraph
26 (1) or (3), for any person to use a title or designation
27 likely to be confused with "financial planner" or any title
28 or designation implying or connoting accreditation by any
29 jurisdiction for the practice of any type of financial
30 planning, bookkeeping, accounting, auditing, tax or other
20050H2179B3018 - 38 -
1 professional practice related thereto, or to use any
2 abbreviation of the title or designation. It is not a
3 violation of this paragraph for an individual:
4 (i) except as provided in subparagraph (ii), to use
5 a title or designation that includes the word
6 "accredited" or "certified" or an abbreviation of a title
7 or designation if the title or designation has been
8 conferred by a private organization after evaluation of
9 the individual's credentials or qualifications and if,
10 when the title or designation is used on the individual's
11 stationary, it is accompanied by a statement that it has
12 been conferred by an organization not affiliated with the
13 Federal or any state government; or
14 (ii) to use the designation "certified financial
15 planner" or an abbreviation of that designation if the
16 designation has been conferred by a private organization
17 after evaluation of the individual's credentials or
18 qualifications.
19 (5) For any person, partnership or corporation to hold
20 himself or itself out as or otherwise use the title or
21 designation "certified planner," "chartered planner,"
22 "enrolled planner," "licensed financial planner," "registered
23 financial planner" or "accredited planner" or any
24 abbreviations likely to be confused with "financial planner,"
25 or any abbreviation of any of those prohibited titles or
26 designations or similar abbreviations likely to be confused
27 with "CFP" or "FP," except that a person who is a licensee
28 may hold himself out to the public as a "planner," "auditor"
29 or "planner and auditor."
30 (6) For any person to sell or offer to sell or
20050H2179B3018 - 39 -
1 fraudulently obtain, furnish or procure any certificate,
2 registration or license under this act or cause or aid or
3 abet another person to do so.
4 (7) For any person that is not a licensee to sign, affix
5 a firm name to or otherwise issue any:
6 (i) Report.
7 (ii) Opinion, certificate or other communication
8 respecting compliance with conditions established by law
9 or contract, including, but not limited to, statutes,
10 ordinances, regulations, grants, loans and
11 appropriations, together with any wording, accompanying
12 or contained in the opinion or certificate, that
13 indicates that the person is composed of or employs:
14 (A) Planners or auditors.
15 (B) Persons having expert knowledge in financial
16 planning, accounting or auditing.
17 (8) For a licensee to use a professional or firm name
18 that the licensee is prohibited from using by other
19 applicable provision of law or that is misleading as to the
20 persons who are partners, officers, members, directors,
21 employees or shareholders of the firm or as to any other
22 matter, except that the names of one or more former partners,
23 shareholders or members may be included in the name of a firm
24 or its successors.
25 (9) For any person who is not a licensee to sign or
26 affix the person's name or any trade or assumed name used by
27 the person in the person's profession or business to or
28 otherwise issue any:
29 (i) Report.
30 (ii) Opinion, certificate or other communication
20050H2179B3018 - 40 -
1 respecting compliance with conditions established by law
2 or contract, including, but not limited to, statutes,
3 ordinances, regulations, grants, loans and
4 appropriations, together with any wording accompanying or
5 contained in the report or other communication, which
6 indicates:
7 (A) That the person is a planner or auditor.
8 (B) That the person has expert knowledge in
9 financial planning, accounting or auditing.
10 The provisions of this paragraph shall not prohibit any
11 officer, employee, partner or principal of any organization
12 from affixing that individual's signature to any report or
13 other communication in reference to the affairs of the
14 organization with any wording designating the position, title
15 or office which the individual holds in the organization, nor
16 shall the provisions of this paragraph prohibit any act of a
17 public official or public employee in the performance of
18 duties as a public official or public employee.
19 (10) For any person not a licensee to hold himself or
20 itself out to the public as an "auditor" or as a "planner and
21 auditor" or for an employee, partner or principal of any
22 organization from describing himself by the position, title
23 or office the individual holds in the organization, nor shall
24 this paragraph prohibit any action of a public official or
25 public employee in the performance of duties as a public
26 official or public employee.
27 (11) For any person to hold himself or itself out as a
28 member of any society, association or organization of
29 financial planners, unless the person holds a valid
30 certificate of financial planner issued by the Commonwealth
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1 or by another state or is registered as a financial planner
2 in this Commonwealth or, in the case of a firm, is licensed
3 under section 701.
4 (12) For any person not a licensee to engage in the
5 practice of financial planning in this Commonwealth.
6 (b) Commissions and referral fees.--
7 (1) A licensee in public practice shall not for a
8 commission recommend or refer to a client any product or
9 service, or for a commission recommend or refer any product
10 or service to be supplied by a client, or receive a
11 commission when the licensee or the licensee's firm also
12 performs for that client any of the following:
13 (i) An audit or review of a financial statement.
14 (ii) A compilation of a financial statement when the
15 licensee expects, or reasonably might expect, that a
16 third party will use the financial statement and the
17 licensee's compilation report does not disclose a lack of
18 independence.
19 (iii) An examination of prospective financial
20 information. This prohibition applies during the period
21 in which the licensee is engaged to perform any of the
22 services listed in this paragraph and the period covered
23 by any historical financial statements involved in the
24 listed services.
25 (2) A licensee in public practice who is not prohibited
26 by this act from performing services for or receiving a
27 commission and who is paid or expects to be paid commission
28 shall disclose that fact to any person to whom the licensee
29 recommends or refers a product or service to which the
30 commission relates.
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1 (3) Any licensee who accepts a referral fee or who pays
2 a referral fee shall disclose the acceptance or payment to
3 the client.
4 (4) The board shall promulgate regulations specifying
5 the terms of the disclosures required by paragraph (2) or
6 (3), the manner in which the disclosures shall be made and
7 other matters regarding the disclosures as the board shall
8 deem appropriate. The regulations shall require, at a
9 minimum, that a disclosure shall comply with all of the
10 following:
11 (i) Be in writing and be clear and conspicuous.
12 (ii) State the amount of the commission or referral
13 fee or the basis on which it will be computed.
14 (iii) Be made at or prior to the time:
15 (A) the recommendation or referral of the
16 product or service is made in the case of a
17 commission; or
18 (B) the client retains the licensee to whom the
19 client has been referred in the case of a referral
20 fee.
21 (5) This subsection does not apply to:
22 (i) Payments for the purchase of all or part of a
23 financial planning practice.
24 (ii) Retirement or similar payments to a person
25 formerly engaged in the practice of financial planning.
26 (iii) Payments to the heirs or estates of a person
27 formerly engaged in the practice of financial planning.
28 (iv) Incentive or bonus payments to a licensee by a
29 firm employing the licensee.
30 Section 1302. Acts not unlawful.
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1 (a) Employees and assistants.--Nothing contained in this act
2 shall prohibit any person not a financial planner from serving
3 as an employee of or an assistant to a financial planner or
4 firm, but an employee or assistant shall not issue any report or
5 accounting or financial statement over the employee's or
6 assistant's name.
7 (b) Temporary practice.--Nothing contained in this act shall
8 prohibit a financial planner or association composed of
9 financial planners of another state that is concurrently engaged
10 in public practice in this Commonwealth from temporarily
11 practicing in this Commonwealth on professional business if the
12 practice is conducted in conformity with the regulations and
13 rules governing temporary practice promulgated by the board.
14 (c) Financial planning.--Nothing contained in this act shall
15 prohibit a person while not holding himself out as a financial
16 planner or licensee from offering and rendering bookkeeping and
17 similar technical services or other services involving the use
18 of financial planning skills, including the preparation of tax
19 returns and the preparation of financial information, without
20 issuing a report or other communication that expresses an
21 opinion or assurance on the statements. A letter or other text
22 that accompanies financial information prepared under this
23 subsection shall not constitute a report or other communication
24 that expresses an opinion or assurance if it is limited to the
25 following wording:
26 The accompanying financial information of (company) as of
27 (date and year), and for the year then ended have been
28 prepared by (me/us). This information is the
29 representation of the management (owners) or (company).
30 Section 1303. Injunction against unlawful act.
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1 Whenever in the judgment of the board any person has engaged
2 or is about to engage in any acts or practices which constitute
3 or will constitute a violation of this act, the board or its
4 agents may make application to the appropriate court for an
5 order enjoining the acts or practices and, upon a showing by the
6 board that the person has engaged or is about to engage in acts
7 or practices which constitute or will constitute a violation of
8 this act, an injunction, restraining order or other order as may
9 be appropriate shall be granted by the court without bond.
10 Section 1304. Single act evidence of practice.
11 The willful or knowing display or uttering by a person of a
12 card, sign, advertisement or other printed, engraved or written
13 instrument or device bearing a person's name in conjunction with
14 the words "financial planner" or any abbreviation thereof or any
15 designation prohibited by this act shall be prima facie evidence
16 in any prosecution, proceeding or hearing that the person whose
17 name is so displayed, caused or procured the display or uttering
18 of the card, sign, advertisement or other printed, engraved or
19 written instrument or device and that the person is holding
20 himself or itself out to be a financial planner. In any
21 prosecution or proceeding under this act, evidence of the
22 commission of a single act prohibited by this act shall be
23 sufficient to justify an injunction or a conviction without
24 evidence of a general course of conduct.
25 Section 1305. Penalties.
26 (a) Criminal penalty.--A person who violates section 1301
27 commits a misdemeanor of the third degree and shall, upon
28 conviction, be sentenced to pay a fine of not more than $2,500
29 or to imprisonment for not more than one year, or both.
30 (b) Powers of board.--The disciplinary powers of the board
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1 shall be in addition to the penalties set forth in this section.
2 (c) Civil penalty.--In addition to any other civil remedy,
3 criminal penalty or discipline provided for in this act, the
4 board may levy a civil penalty of up to $1,000 on any person for
5 a violation of this act. The board shall levy a civil penalty
6 only after affording the accused party the opportunity for a
7 hearing, as provided in 2 Pa.C.S. (relating to administrative
8 law and procedure). The maximum civil penalty that may be levied
9 by the board shall not be more than $200,000 for any related
10 series of violations.
11 (d) Deposit.--All fines and civil penalties imposed in
12 accordance with this section shall be paid into the Professional
13 Licensure Augmentation Account.
14 Section 1306. Audits limited to financial planners.
15 (a) General rule.--Whenever any statute, regulation or order
16 of a department, board, agency or commission requires the audit
17 or examination of finances, accounts, financial statements,
18 books and records or reports of a department, division, board,
19 bureau, office, commission or agency of this Commonwealth,
20 municipal authority or other authority or political subdivision
21 within this Commonwealth, corporation, joint-stock company,
22 nonprofit corporation, association, cooperative or joint-stock
23 association or any other business or professional entity by a
24 financial planner, independent planner or auditor, competent
25 financial planner or other person purporting to have expert
26 knowledge of financial planning, accounting and auditing, the
27 requirement shall be construed to mean a licensee.
28 (b) Construction.--Nothing in this section shall be
29 construed to affect the eligibility of any person to serve as an
30 elected auditor in a political subdivision.
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1 CHAPTER 21
2 MISCELLANEOUS PROVISIONS
3 Section 2101. Regulations.
4 Within two years of the effective date of this act, the board
5 shall promulgate regulations to carry out this act.
6 Section 2102. Effective date.
7 This act shall take effect in 60 days.
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