Case 13 The Case of the Good Gone Bad A PLAY IN THREE SCENES To solve this case you must have access to Certified Financial Planner Board of Standards, Inc.(CFP Board) Stondards of Professional Conduct, including the Code of Etieics Profrssional Responsility, Ruies ef Conduct, Financial Planning Practice Standards, Disciplinery Rudles and Procedures, and Candidate Fitness Standards,which can be found at http://www.cfp.net/Downloads/2010Standardspdf. Information froem the Process Financial Plansing Dreeloping a Financial Plan, Second Edition, the companion teet to this book, can also be used to help answwer questions. Ashley: A CFP professional Bill Jackson Ashley's client and friend Jane Jackson: Bill's wife and Ashley's friend Phil Rheem A prominent attoncy in the area Ben Pyles: Ashley's broker/dealer representative Background Ashley has been a Certified Financial Planner (CFP professional and registered representative for more than 10 years She prides herself on her excellent work and ethical standards. Ashloy was recently ranked by her local nowspaper as one od the top 50 planners in her region, and she was recently recognized at an awards banquet 847 848 Case to Financial At 9.30 on a bright Thursday morning, Ashley reccived a phone call from a long time elient, Bill Jackson. Although Bill is married, Ashley manages only Bal's sizable investment portfolio. Bill is one of the wealthiest men in the area He and Ashley have had a long client/planner relationship, and he considers her to be worthy of his full trust. Ashley and Ball have long been good frienda, and dealing with Bll has always been a pleasure for her. When Ashley answers the phone, she is aware of Bill's altered mood and she inmediately becomes concerned Bill: a ushat tone) Ashley I need to talk with you about asset prodection. Narrator Ashley could sense that Bill was quite disturbed, and she wondered why this type of question might cause such panic in a person. Ashley Bill, your assets are fully protected. Your trust is fully securc, and your brokerage account has comprehensive SIPC coverage. Why the concern about asset probection all of a sudden? Bill: (More persistent) Listen Ashley, I just need to know how not to let anyone touch my investments or my property without my permission Narrator: Ashley was now getting annoyed, she could not figure out for the life of her what brought on this sudden panic about asset protection Ashley Bill, are you in some sort of trouble? What is going on? Narrator: There was silence on the other end of the line, and Ashley could sense the tension as she held the receiver. Finaly, a lang sigh eame from Bill, and Ashley was temporanily relieved Bill: (Paxses) Ashley, you and I have been friends for a long time. Our kids played with esch other. For heaven's sake. I couldn't even count the number od barbecu our two families have had in my backyard Those were the easy times, Ashley-everything was so simple back then Ashley, I don't know how to tell you this, ong pause) but I am leaving Jane. Another thing, she doesn't know yet Narrator Ashley was shocked. She and Jane had been good friends for years- frionds than she was with Hl better Ashley: Bil what are you talking about? Why would you and Jane aplkit up? Narraton Again, there was a long sigh on the other end of the line, then Ashley heard a voice-a female voice but it wasn't Jane's Ashley now knew why Bill wanted a divorce. He had met someone new. It wasn't a unique scenario for Ashley, she had n to a few ofher other 50-something friends "After Jane has supported Bill tor so long, he is going to trade her in for a newer model What a creep Jane thought to herself. Well, there was no way she was going to let Bill leave Jane with nothing, In fact, Ashley thought to hersele, "T'llx itso that Jane is better off than she has ever been, and I'll make that slimeball pay Ashley: il,you know Twill do anything to help you out Imean, after al, you have been so good to me over the year. Let me look into the situation, and I will call you backe Inday mornin Can you wait that loeng Narrator: Ashley smiled on the other end of the line as she waited for Bill's response She leaned back in her chair and began planning out her strategy. Bilr's voice came back over the line a lot calmer than it had been at the beginning of their conversation Bill: Thanks Ashley, Monday will be fine....T really didn't think you would understand, T mean you know.. since you and Jane have been such good friends Ashley: Well, Bil, yoa aze my client, and what you do with your personal life is not a prodessional concern of mine. Il call you on Monday. Have a good weekend Ashley (Talking to hrself.) Yeah, have a great weekend. you weasel because it is the last good one you'll have after I get through with you Narrator: As soon as she hung up the club. Ashley knew Jane always played tennis on Thursday mornings with a group of other "housies," as they liked to refer to themselves. When Jane finally got to the phone she sounded winded from the run uptothe clubhouse Ashley immediately called Jane at the Jane: r1R4 derful ice.) Hello Ashley, what in the world has given me the pleasure of hearing froen you this morning? Ashley:Jae, listen, 1 think thhere are some things we need to diseuss; is there any way you can meet me for lunch this afbernoon? Jane: (Saddenly seriousWell, normally I have lunch with my tennis group, but Im sure they won't mind if I cancel. What is this about? Ashleyi Jane, I'1l talk to you about it at lunch. Does Le Marie sound good to you.. say 1:00 Jane: Yes, that will be fine. I'll see you there at 1:00 Narrator: Later that afternoon when Ashley and Jane were at Le Marie for lunch Ashley finally looked Jane in the eye and began to tell her the whole story Ashley: Listen, Jane, this is really hand for me to say. I dant even know where to begin. But, this morning I got a phone call from your husband. Can I just ask you one question? 850 Case to Financial Jane: (Concerned)Ashley you know you can talk to me about anything. What is it? Ashley: Jane, how is your marriage? Jane: Ashle, what is this about? What do you mean how is my marriage Ashley: Bl is having an affair Jane: (Suddeny angry) What are you talking about? Bill has always been faithful and for your indormation our marrisge is fine. Now, if you have nothing else to say I will be leaving. Narrator As Jane is getting up to kave, Ashleys voice softens and she touches Jane's Ashley: (More softly Jane,I lnow Bill is having an affair Today when he called me I heard her volice in the background. And Bill was calling to figure out how he could protect his assets from Narrator Jane sat down quietly and leaned her head in her hands She was clearly shaken but didn't seem to be too surprised Jane: Ob, Ashley.. if you only knew how hard it's been these last few years. Bill has been so distant. But, I never expected him to be unfaithful. I mean after all of this time Afber everything I have given him.I mean I gave up my life and my career to be his peefect "trophy wife Narrator Jane was suddenly struck with anger. She didn't know what she could do, but there was no way she was going to let Bill leave her with nothing. After all she had sacrificed, she was not going to let him make her a poor little old lady without a penny to her name! Jane: So, what can you do to help me? Would you act as my financial advisor? Ashley: I thought you woald ver ask. First, Ineed some insormation Who is your lawyer? Yoru know you are going to need to hire a good divorce attorney-do you have someone in mind? Jane: I have always wceked with Phil Rheem He was a dear friend od my father, and he was the one who handled my Eather's estate when he passed away; normally all he handles are divorce cases.I wil stop by hisofce er Tleave hene Ashley Also, I will be setting up a trust for your assets Jane: Are you qualified to do that sort of thing Financial Case Studios 851 Ashley: Oh doe't worry,Ican take care of it Ive got a lot of experiance with trusts and it will ave us some time inatead of having to worey about jumping theough all the legal hoopa. Narrator On the way back troen lunch, Ashley was thinking aboat where to begin. She knew she wanted to leave Ball with nothing, but she also needed to make sure Jane was able to continue living the life she had become accustomed to. Scene II Narrator Later that afternoon Ashley retumed to her office. She knew that the day ahead was going to be a long one. The aftemoon before, after she had left the office she stopped by Phil Rheem's law practice. Even though Ashley did not know Phil on a casual basis, she had worked with hm on a number of different occasions when she had clients with complicated estate matters Ashley hed told Phil's secretary that the matter was urgent and she needed to see him immediately. When she entered Phil's office he was reviewing a case file that he placed to the side as he stood up to greet her Phil: Wel. Good aftemoon, Ashley. What is it that gives me the good fortune to see your pretty face in my office today? Narrator Ashley had never really cared for Phil's charming style-she found it to be condescending and irritating. Nevertheless, he was the perfect type of attomey who had the power and connections to do what she needed him to do for her Ashley: (Sounding carming hersel Good afternoon to you too, Phil. You know it is always my pleasure when I have a chance to work with you. Narrator Phil motioned for Ashley to sit down in one of the overstuffed leather chairs in front of his giant mahogany desk. As Ashley took a seat, she noticed the open file on Phil's desk. She glanced at it only briely but she noticed the name typed at the top o the for Ball Jackson's trusts Of eourse, she also had & copy of twm, but these wene the ceiginals and the man who had signed and prepared them was sitting right in frone of het. She slently croased hee fingers that Me Rheem would be as helpful as she was hoping, sAshley then realized that the Eile contained all of the legal documents Ashley: Phal, (Pausing, then speaking iadiect towe.)I am going to get right down to business here Pasing again)Tam here about Jane Jackson. Her hushand has beenaclient of mine for more than 10 years. Iam sure you are acquainbed with B Phil: Yes, 1have worked with Bill on a few pecvious businesa matter Ashley: Well, this morning Bill contacted me. He was interested in probecting his assets. When talked to him he seemed so frantic that I was concerned, of course. I could not understand where this sudden panic had come from, and it wasn't untill I found out that he was going to leave his 852 Case to Financial wife that it all made sense to me Ball wants to make sure that his wife, Jane, will not be able to lay a Einger on any of his wealth, which-ifT may say say-Jane helped him to build. Sa, as you can see, this little situation has put me in quite a bind Phil: Ye Ican see where it would. Well, (pause) as Jane may have told you, Ihave been acquainted with her family for a long time. Her tatheer and I used to play golf togethee out at the club. He was a great man. He helped me get my start in this peofession It saddened me greatly to see him pass away Leingback i his chair and siging) Iust tell you that I would have done anything for that man I would be willing to do whatever it takes to protect Mrs Jackson she deserves at least that much. back hry dair) Thank you, Phil knew you would understand. Jane and I have talked, and she is willing to do whatever it takes also. Iknow she will be getting in touch with you soon about filing for divonce, but T felt like T needed to see you myself-I am sure you understand Phil: Oourse I understand. (Pae)Now doet you worry your pectty little head about a thing I will make suse Jane is compleeely taken care of. Now, if you'll eeuse me Il make a fow calla and see what I can do for you. Ashley: Thank you, Phil. And you knonw that if you ever need anything, just give me a call Iwill ahways be glad to retum the favor Scene IIl Narrator: Lator that night, Ashley sat dewn in hor stil, dark oEfice and pulled a file out of her briefcase. She switched on the desk lamp and opened the fle containing Bill Jackson's original trust documents. Yesberday, when she was in Phil's office, she had sacreely alipped them into her beiefease when he momentarily steppedout to talk with his secretary. She lnew that she was treading in deep waters here, but it secemed so simple to her. Slowly, Ashley stood up and walked over to the shredding machine in the corner of the room, and one by one, she fed each sheet into the metal seeth Chat ground up the oeiginal documentation that Bill Jacksoe had ever established a trust The following m aming (he returned to her office. She picked up th plume and hit the speed dial. She was directly eoennected with Ben Pyles, her beokerdealer opresentative Ashley: Ben, ys, hello? And how are you this moming? Yes, it isearly Well, you know Twanted to get a jump on a few thinga betore heading off for the weekend. Listen, I need to make a fow teades for a dient-his name ie Bill lacksot. His account manber 9008765. (Pausing, miling for to avsY) Yes, that's right. I want to go ahead and liquidate the account. Pause) No, I do not Wand to reinvest the procoeds into a moewy market account. Just make a check out to Bil and Jane Jackson and sendto ther home address. Secondly, i would like for you to liquidate Bara second account and invest the procceds in the following penny stocks Financlal Case Studies 853 listed several penny stocks, directing Ben to split the assets evenly she had given him Ashley was fully aware that by moving the assets Enom the second account into penny stocks that Bill would almost certainly ncur a los.She also lnew that this could hurt Jane by reducing the amount of asscta available in the divonce, but she suspected that the account was nothing more than a place where Bill stashed money to pay for his own personal experses She felt justified Narrator among the in taking the action Ashley (Pausing and seytlygglieg)Now, Ben, you know I wouldn't do anything that wasn't in the best inberest of my chent. Itried to talk him out of these trades, but he was inwistent. Iguess he read some artidle in a personal iwesting magazine. Te is all a bunch af bologna if you ask me, but I work for hin so I have to do what he wants. You know...that's just the way the business goes. Pawsing again) Well, I guess that will be all for me. You have a nice weekend. Tell your wife hello for me. Take care now. Goodbye to you, too Narraton: When the receiver finally clicked down, Ashley leaned back in her chair. She ighed to herself. She hated to see Bill and Jane's marriage end, it seemed like they were always so happy But she wasn't going to allow Bill to make a mackery of all of Jane's sacrifice and devotion No, Bill Jackson was going to be the oery one in the end. By Monday morning he wouldn't know what had hit him Case Questions 1. When asked later about her actioe, Ashley firmed that se did what she thought was rig at the time becaase it served the interest of ber friend. She argued that even though her actions might be wrong, the consequences for Jane were pesitive. Her view of the ethical situation was driven by which ethical outlook? a Normative ethics b. Teloological ethics c. Deontological ethics d. Declosure ethics Which of the following statements is true? I. Ashley is in violation of CFP Boand Pratice Standands and Cale of Eis IL Ashley ia in violation of SEC financial adviser ules . Although s ene of Ashley's actions are quesonable, nothing she did would fall under the rule making of the FINRA (NASD) I only b. I only C. I and Ionly d. L IL, and I11 854 Case A to Financial 3. Which od the following will peovide liability peotection for Ashley in this case? a. ElO insurance. b The arbitration clause in investment management contracts . Disdaiming fiduciary status as a registered representative d. None of the above 4. Acconding to the delieition of what eoeatitules a cliest, foand in the terminology od financial planning practice standards section of CP Board Practice Standards ad Code of Ethies, who among the folkowing is not corsidered Ashley's dlient b Jane d. Both a and b Both b and c e. 5. Did Ashley break CFP Board Practice Stmalands and Code of Ethis confidentiality rules when she coetacsed Phil Rhoem without the consent of Jane-ewen thouagh Jane was most likely not going to be upact with Ashley a. Yes, because personal information was given without Jane's consent, a violation occurred b No, because Jane coald not be harmed by the use of her personal information c. No, because Ashley is allowed to share client information with other professional advisans d. Because Jane is only afriend of Ashleys the CHP Boand Practice Standards ed Code oEtiis do not appy 6. Would Jane's attorney, Phil Rheem, need to follow the CFP Boand Practice Stswdards and Code of Etbice? Yes, because any professional who deals with a CFP prodessional must also fallow thw b. No, becouse Phal is not a CFP proessional. c. Yes, because as an attorney, he must abide by all applicable and published ethical standaeds d. Attoeneys have no ethical standards, so he does not haveto follow CFP Baard rules-oe any tandards other nales, for that matter Financial Planning Case Studies 857 3 CFP Board Practice Standards and Code ofEics state that a CFP professional wust aheays make timely disclosures od all material information to clients. Which of the following torms wl mect this requirement? SEC Form ADV, Part II b. Form FPD Disclosure Form provided by CFP Board Astatement of the planners'lhfe and business phakosophy All od the above e Only a and b d 14 In which of the following situations is it impemissible to reveal personal information about chent? To ctabh a beokerage account for a clien b. While the plannce is being aadited for is ce her own tax return c To delend the CHP professional against charges of wrongdoing d. In a civil dispuse between the CFP professional and the client 15. After inding out what Aay had done, Ball serminated his woeking rlationship with her and requested that she return all documents about his account immediately. Is Ashley in violation of any rale under the P oniginal doeuments used in the financial planning peocess of Profesionalism if one year goes by and she fails to return B.l's a. es, because she ia not allowed urd the rules to hold oeiginal dient documents. b.No, CHP Board gives planners at least two years to return files to terminated clients. e Yen, because prirciples and rules require that she return the documents in a timely fashion. e No, a CFP prodessional is under no logal, moral, or ethical respoesibility to neturn dlieed data. In fact, this information must be retained by the planner in case of an audit. 858 Caso to Financial 6 Which of the allewing statements ite? L Acconding to the Principle of Professionalism, a CFF peofessioeal is not allowed to practice any peofession unless a license is required by law IL. The Principle of Confidentiality states that the same standards of confidentiality must be haeld betwoen the CFPproessional, omploywrs, and clients IIL The Principle o Diligence states that a planner must make only reccenmendations that are suitable for e ach chent b. II only . 11 and ILI only 7 Ashley as a CFP proessional, is required to peoperly supervise subordinates when dealing following would be with the subordinate's delivery of tnancial planning services Which of considered properly supervised? An intem makes recommendations that have not been reviewed by Ashley to a dient. b. Ashley's office manager, Marge, who is not licensed, is wolked to reaearch and suggest stocks to be included in a dient's portfolio. G. A licensed intern, before making a cient recommendation, reviews the recommendation with Ashley d. An intem, who is nt licenacd makes a trade, with Ashlcys pemision, in a client's account Which of the following statements is true? a. hen Ashley contacted Jane about Bill's divorce plan she was alao toquired by CFP Board while Ashley is at lunch Practice Stanfards and Code of Etkics to disclose conflicts of interest in writing b Instructing the broker to parchase penny stocks was a violation of the CFP Board Prectice Stanlunds ena Coe o Elis, which roquire implementing strategies suitable foe the client Sharing informcion about Bull and Jane with Fhil Eheem is a diract violation CFP Board Practice Stanfards and Code of Etkics c. d. All of the above are true e Only a and e aze true. Financial Planning Case Studies 859 19. Which of the following statements is true in relation to Ashley's reallocation of Bill Jackson's investment assets? a. FINRA would find that these investments were unsuitable for Bill. b. Ashley would be held harmless against a claim of unsuitability because she, in fact,conducted some research on the stocks before making the purchases. c. Her actions are a prime example of churning. d. If Ashley had discretion over Bil's account, she was entirely within her rights to make the penny stock purchases 20. CFP Board Practice Standards and Code of Ethics rules state that a CFP professional must offer advice only in the areas in which he or she is competent to do so. Ashley has obviously broken rules related to Principle 3. Why? Choose the best possible answer Ashley did not gain enough information from Bill before entering into the relationship with a. Jane. b. Jane should have recognized Ashley's conflict of interest. c. Ashley was unable to meet Bill's needs and objectives adequately d. Ashley was unable to provide competent services because of the conflict of interest concerning her friendship with Jane. Case 13 The Case of the Good Gone Bad A PLAY IN THREE SCENES To solve this case you must have access to Certified Financial Planner Board of Standards, Inc.(CFP Board) Stondards of Professional Conduct, including the Code of Etieics Profrssional Responsility, Ruies ef Conduct, Financial Planning Practice Standards, Disciplinery Rudles and Procedures, and Candidate Fitness Standards,which can be found at http://www.cfp.net/Downloads/2010Standardspdf. Information froem the Process Financial Plansing Dreeloping a Financial Plan, Second Edition, the companion teet to this book, can also be used to help answwer questions. Ashley: A CFP professional Bill Jackson Ashley's client and friend Jane Jackson: Bill's wife and Ashley's friend Phil Rheem A prominent attoncy in the area Ben Pyles: Ashley's broker/dealer representative Background Ashley has been a Certified Financial Planner (CFP professional and registered representative for more than 10 years She prides herself on her excellent work and ethical standards. Ashloy was recently ranked by her local nowspaper as one od the top 50 planners in her region, and she was recently recognized at an awards banquet 847 848 Case to Financial At 9.30 on a bright Thursday morning, Ashley reccived a phone call from a long time elient, Bill Jackson. Although Bill is married, Ashley manages only Bal's sizable investment portfolio. Bill is one of the wealthiest men in the area He and Ashley have had a long client/planner relationship, and he considers her to be worthy of his full trust. Ashley and Ball have long been good frienda, and dealing with Bll has always been a pleasure for her. When Ashley answers the phone, she is aware of Bill's altered mood and she inmediately becomes concerned Bill: a ushat tone) Ashley I need to talk with you about asset prodection. Narrator Ashley could sense that Bill was quite disturbed, and she wondered why this type of question might cause such panic in a person. Ashley Bill, your assets are fully protected. Your trust is fully securc, and your brokerage account has comprehensive SIPC coverage. Why the concern about asset probection all of a sudden? Bill: (More persistent) Listen Ashley, I just need to know how not to let anyone touch my investments or my property without my permission Narrator: Ashley was now getting annoyed, she could not figure out for the life of her what brought on this sudden panic about asset protection Ashley Bill, are you in some sort of trouble? What is going on? Narrator: There was silence on the other end of the line, and Ashley could sense the tension as she held the receiver. Finaly, a lang sigh eame from Bill, and Ashley was temporanily relieved Bill: (Paxses) Ashley, you and I have been friends for a long time. Our kids played with esch other. For heaven's sake. I couldn't even count the number od barbecu our two families have had in my backyard Those were the easy times, Ashley-everything was so simple back then Ashley, I don't know how to tell you this, ong pause) but I am leaving Jane. Another thing, she doesn't know yet Narrator Ashley was shocked. She and Jane had been good friends for years- frionds than she was with Hl better Ashley: Bil what are you talking about? Why would you and Jane aplkit up? Narraton Again, there was a long sigh on the other end of the line, then Ashley heard a voice-a female voice but it wasn't Jane's Ashley now knew why Bill wanted a divorce. He had met someone new. It wasn't a unique scenario for Ashley, she had n to a few ofher other 50-something friends "After Jane has supported Bill tor so long, he is going to trade her in for a newer model What a creep Jane thought to herself. Well, there was no way she was going to let Bill leave Jane with nothing, In fact, Ashley thought to hersele, "T'llx itso that Jane is better off than she has ever been, and I'll make that slimeball pay Ashley: il,you know Twill do anything to help you out Imean, after al, you have been so good to me over the year. Let me look into the situation, and I will call you backe Inday mornin Can you wait that loeng Narrator: Ashley smiled on the other end of the line as she waited for Bill's response She leaned back in her chair and began planning out her strategy. Bilr's voice came back over the line a lot calmer than it had been at the beginning of their conversation Bill: Thanks Ashley, Monday will be fine....T really didn't think you would understand, T mean you know.. since you and Jane have been such good friends Ashley: Well, Bil, yoa aze my client, and what you do with your personal life is not a prodessional concern of mine. Il call you on Monday. Have a good weekend Ashley (Talking to hrself.) Yeah, have a great weekend. you weasel because it is the last good one you'll have after I get through with you Narrator: As soon as she hung up the club. Ashley knew Jane always played tennis on Thursday mornings with a group of other "housies," as they liked to refer to themselves. When Jane finally got to the phone she sounded winded from the run uptothe clubhouse Ashley immediately called Jane at the Jane: r1R4 derful ice.) Hello Ashley, what in the world has given me the pleasure of hearing froen you this morning? Ashley:Jae, listen, 1 think thhere are some things we need to diseuss; is there any way you can meet me for lunch this afbernoon? Jane: (Saddenly seriousWell, normally I have lunch with my tennis group, but Im sure they won't mind if I cancel. What is this about? Ashleyi Jane, I'1l talk to you about it at lunch. Does Le Marie sound good to you.. say 1:00 Jane: Yes, that will be fine. I'll see you there at 1:00 Narrator: Later that afternoon when Ashley and Jane were at Le Marie for lunch Ashley finally looked Jane in the eye and began to tell her the whole story Ashley: Listen, Jane, this is really hand for me to say. I dant even know where to begin. But, this morning I got a phone call from your husband. Can I just ask you one question? 850 Case to Financial Jane: (Concerned)Ashley you know you can talk to me about anything. What is it? Ashley: Jane, how is your marriage? Jane: Ashle, what is this about? What do you mean how is my marriage Ashley: Bl is having an affair Jane: (Suddeny angry) What are you talking about? Bill has always been faithful and for your indormation our marrisge is fine. Now, if you have nothing else to say I will be leaving. Narrator As Jane is getting up to kave, Ashleys voice softens and she touches Jane's Ashley: (More softly Jane,I lnow Bill is having an affair Today when he called me I heard her volice in the background. And Bill was calling to figure out how he could protect his assets from Narrator Jane sat down quietly and leaned her head in her hands She was clearly shaken but didn't seem to be too surprised Jane: Ob, Ashley.. if you only knew how hard it's been these last few years. Bill has been so distant. But, I never expected him to be unfaithful. I mean after all of this time Afber everything I have given him.I mean I gave up my life and my career to be his peefect "trophy wife Narrator Jane was suddenly struck with anger. She didn't know what she could do, but there was no way she was going to let Bill leave her with nothing. After all she had sacrificed, she was not going to let him make her a poor little old lady without a penny to her name! Jane: So, what can you do to help me? Would you act as my financial advisor? Ashley: I thought you woald ver ask. First, Ineed some insormation Who is your lawyer? Yoru know you are going to need to hire a good divorce attorney-do you have someone in mind? Jane: I have always wceked with Phil Rheem He was a dear friend od my father, and he was the one who handled my Eather's estate when he passed away; normally all he handles are divorce cases.I wil stop by hisofce er Tleave hene Ashley Also, I will be setting up a trust for your assets Jane: Are you qualified to do that sort of thing Financial Case Studios 851 Ashley: Oh doe't worry,Ican take care of it Ive got a lot of experiance with trusts and it will ave us some time inatead of having to worey about jumping theough all the legal hoopa. Narrator On the way back troen lunch, Ashley was thinking aboat where to begin. She knew she wanted to leave Ball with nothing, but she also needed to make sure Jane was able to continue living the life she had become accustomed to. Scene II Narrator Later that afternoon Ashley retumed to her office. She knew that the day ahead was going to be a long one. The aftemoon before, after she had left the office she stopped by Phil Rheem's law practice. Even though Ashley did not know Phil on a casual basis, she had worked with hm on a number of different occasions when she had clients with complicated estate matters Ashley hed told Phil's secretary that the matter was urgent and she needed to see him immediately. When she entered Phil's office he was reviewing a case file that he placed to the side as he stood up to greet her Phil: Wel. Good aftemoon, Ashley. What is it that gives me the good fortune to see your pretty face in my office today? Narrator Ashley had never really cared for Phil's charming style-she found it to be condescending and irritating. Nevertheless, he was the perfect type of attomey who had the power and connections to do what she needed him to do for her Ashley: (Sounding carming hersel Good afternoon to you too, Phil. You know it is always my pleasure when I have a chance to work with you. Narrator Phil motioned for Ashley to sit down in one of the overstuffed leather chairs in front of his giant mahogany desk. As Ashley took a seat, she noticed the open file on Phil's desk. She glanced at it only briely but she noticed the name typed at the top o the for Ball Jackson's trusts Of eourse, she also had & copy of twm, but these wene the ceiginals and the man who had signed and prepared them was sitting right in frone of het. She slently croased hee fingers that Me Rheem would be as helpful as she was hoping, sAshley then realized that the Eile contained all of the legal documents Ashley: Phal, (Pausing, then speaking iadiect towe.)I am going to get right down to business here Pasing again)Tam here about Jane Jackson. Her hushand has beenaclient of mine for more than 10 years. Iam sure you are acquainbed with B Phil: Yes, 1have worked with Bill on a few pecvious businesa matter Ashley: Well, this morning Bill contacted me. He was interested in probecting his assets. When talked to him he seemed so frantic that I was concerned, of course. I could not understand where this sudden panic had come from, and it wasn't untill I found out that he was going to leave his 852 Case to Financial wife that it all made sense to me Ball wants to make sure that his wife, Jane, will not be able to lay a Einger on any of his wealth, which-ifT may say say-Jane helped him to build. Sa, as you can see, this little situation has put me in quite a bind Phil: Ye Ican see where it would. Well, (pause) as Jane may have told you, Ihave been acquainted with her family for a long time. Her tatheer and I used to play golf togethee out at the club. He was a great man. He helped me get my start in this peofession It saddened me greatly to see him pass away Leingback i his chair and siging) Iust tell you that I would have done anything for that man I would be willing to do whatever it takes to protect Mrs Jackson she deserves at least that much. back hry dair) Thank you, Phil knew you would understand. Jane and I have talked, and she is willing to do whatever it takes also. Iknow she will be getting in touch with you soon about filing for divonce, but T felt like T needed to see you myself-I am sure you understand Phil: Oourse I understand. (Pae)Now doet you worry your pectty little head about a thing I will make suse Jane is compleeely taken care of. Now, if you'll eeuse me Il make a fow calla and see what I can do for you. Ashley: Thank you, Phil. And you knonw that if you ever need anything, just give me a call Iwill ahways be glad to retum the favor Scene IIl Narrator: Lator that night, Ashley sat dewn in hor stil, dark oEfice and pulled a file out of her briefcase. She switched on the desk lamp and opened the fle containing Bill Jackson's original trust documents. Yesberday, when she was in Phil's office, she had sacreely alipped them into her beiefease when he momentarily steppedout to talk with his secretary. She lnew that she was treading in deep waters here, but it secemed so simple to her. Slowly, Ashley stood up and walked over to the shredding machine in the corner of the room, and one by one, she fed each sheet into the metal seeth Chat ground up the oeiginal documentation that Bill Jacksoe had ever established a trust The following m aming (he returned to her office. She picked up th plume and hit the speed dial. She was directly eoennected with Ben Pyles, her beokerdealer opresentative Ashley: Ben, ys, hello? And how are you this moming? Yes, it isearly Well, you know Twanted to get a jump on a few thinga betore heading off for the weekend. Listen, I need to make a fow teades for a dient-his name ie Bill lacksot. His account manber 9008765. (Pausing, miling for to avsY) Yes, that's right. I want to go ahead and liquidate the account. Pause) No, I do not Wand to reinvest the procoeds into a moewy market account. Just make a check out to Bil and Jane Jackson and sendto ther home address. Secondly, i would like for you to liquidate Bara second account and invest the procceds in the following penny stocks Financlal Case Studies 853 listed several penny stocks, directing Ben to split the assets evenly she had given him Ashley was fully aware that by moving the assets Enom the second account into penny stocks that Bill would almost certainly ncur a los.She also lnew that this could hurt Jane by reducing the amount of asscta available in the divonce, but she suspected that the account was nothing more than a place where Bill stashed money to pay for his own personal experses She felt justified Narrator among the in taking the action Ashley (Pausing and seytlygglieg)Now, Ben, you know I wouldn't do anything that wasn't in the best inberest of my chent. Itried to talk him out of these trades, but he was inwistent. Iguess he read some artidle in a personal iwesting magazine. Te is all a bunch af bologna if you ask me, but I work for hin so I have to do what he wants. You know...that's just the way the business goes. Pawsing again) Well, I guess that will be all for me. You have a nice weekend. Tell your wife hello for me. Take care now. Goodbye to you, too Narraton: When the receiver finally clicked down, Ashley leaned back in her chair. She ighed to herself. She hated to see Bill and Jane's marriage end, it seemed like they were always so happy But she wasn't going to allow Bill to make a mackery of all of Jane's sacrifice and devotion No, Bill Jackson was going to be the oery one in the end. By Monday morning he wouldn't know what had hit him Case Questions 1. When asked later about her actioe, Ashley firmed that se did what she thought was rig at the time becaase it served the interest of ber friend. She argued that even though her actions might be wrong, the consequences for Jane were pesitive. Her view of the ethical situation was driven by which ethical outlook? a Normative ethics b. Teloological ethics c. Deontological ethics d. Declosure ethics Which of the following statements is true? I. Ashley is in violation of CFP Boand Pratice Standands and Cale of Eis IL Ashley ia in violation of SEC financial adviser ules . Although s ene of Ashley's actions are quesonable, nothing she did would fall under the rule making of the FINRA (NASD) I only b. I only C. I and Ionly d. L IL, and I11 854 Case A to Financial 3. Which od the following will peovide liability peotection for Ashley in this case? a. ElO insurance. b The arbitration clause in investment management contracts . Disdaiming fiduciary status as a registered representative d. None of the above 4. Acconding to the delieition of what eoeatitules a cliest, foand in the terminology od financial planning practice standards section of CP Board Practice Standards ad Code of Ethies, who among the folkowing is not corsidered Ashley's dlient b Jane d. Both a and b Both b and c e. 5. Did Ashley break CFP Board Practice Stmalands and Code of Ethis confidentiality rules when she coetacsed Phil Rhoem without the consent of Jane-ewen thouagh Jane was most likely not going to be upact with Ashley a. Yes, because personal information was given without Jane's consent, a violation occurred b No, because Jane coald not be harmed by the use of her personal information c. No, because Ashley is allowed to share client information with other professional advisans d. Because Jane is only afriend of Ashleys the CHP Boand Practice Standards ed Code oEtiis do not appy 6. Would Jane's attorney, Phil Rheem, need to follow the CFP Boand Practice Stswdards and Code of Etbice? Yes, because any professional who deals with a CFP prodessional must also fallow thw b. No, becouse Phal is not a CFP proessional. c. Yes, because as an attorney, he must abide by all applicable and published ethical standaeds d. Attoeneys have no ethical standards, so he does not haveto follow CFP Baard rules-oe any tandards other nales, for that matter Financial Planning Case Studies 857 3 CFP Board Practice Standards and Code ofEics state that a CFP professional wust aheays make timely disclosures od all material information to clients. Which of the following torms wl mect this requirement? SEC Form ADV, Part II b. Form FPD Disclosure Form provided by CFP Board Astatement of the planners'lhfe and business phakosophy All od the above e Only a and b d 14 In which of the following situations is it impemissible to reveal personal information about chent? To ctabh a beokerage account for a clien b. While the plannce is being aadited for is ce her own tax return c To delend the CHP professional against charges of wrongdoing d. In a civil dispuse between the CFP professional and the client 15. After inding out what Aay had done, Ball serminated his woeking rlationship with her and requested that she return all documents about his account immediately. Is Ashley in violation of any rale under the P oniginal doeuments used in the financial planning peocess of Profesionalism if one year goes by and she fails to return B.l's a. es, because she ia not allowed urd the rules to hold oeiginal dient documents. b.No, CHP Board gives planners at least two years to return files to terminated clients. e Yen, because prirciples and rules require that she return the documents in a timely fashion. e No, a CFP prodessional is under no logal, moral, or ethical respoesibility to neturn dlieed data. In fact, this information must be retained by the planner in case of an audit. 858 Caso to Financial 6 Which of the allewing statements ite? L Acconding to the Principle of Professionalism, a CFF peofessioeal is not allowed to practice any peofession unless a license is required by law IL. The Principle of Confidentiality states that the same standards of confidentiality must be haeld betwoen the CFPproessional, omploywrs, and clients IIL The Principle o Diligence states that a planner must make only reccenmendations that are suitable for e ach chent b. II only . 11 and ILI only 7 Ashley as a CFP proessional, is required to peoperly supervise subordinates when dealing following would be with the subordinate's delivery of tnancial planning services Which of considered properly supervised? An intem makes recommendations that have not been reviewed by Ashley to a dient. b. Ashley's office manager, Marge, who is not licensed, is wolked to reaearch and suggest stocks to be included in a dient's portfolio. G. A licensed intern, before making a cient recommendation, reviews the recommendation with Ashley d. An intem, who is nt licenacd makes a trade, with Ashlcys pemision, in a client's account Which of the following statements is true? a. hen Ashley contacted Jane about Bill's divorce plan she was alao toquired by CFP Board while Ashley is at lunch Practice Stanfards and Code of Etkics to disclose conflicts of interest in writing b Instructing the broker to parchase penny stocks was a violation of the CFP Board Prectice Stanlunds ena Coe o Elis, which roquire implementing strategies suitable foe the client Sharing informcion about Bull and Jane with Fhil Eheem is a diract violation CFP Board Practice Stanfards and Code of Etkics c. d. All of the above are true e Only a and e aze true. Financial Planning Case Studies 859 19. Which of the following statements is true in relation to Ashley's reallocation of Bill Jackson's investment assets? a. FINRA would find that these investments were unsuitable for Bill. b. Ashley would be held harmless against a claim of unsuitability because she, in fact,conducted some research on the stocks before making the purchases. c. Her actions are a prime example of churning. d. If Ashley had discretion over Bil's account, she was entirely within her rights to make the penny stock purchases 20. CFP Board Practice Standards and Code of Ethics rules state that a CFP professional must offer advice only in the areas in which he or she is competent to do so. Ashley has obviously broken rules related to Principle 3. Why? Choose the best possible answer Ashley did not gain enough information from Bill before entering into the relationship with a. Jane. b. Jane should have recognized Ashley's conflict of interest. c. Ashley was unable to meet Bill's needs and objectives adequately d. Ashley was unable to provide competent services because of the conflict of interest concerning her friendship with Jane