A.4 SEC and Securities Regulation

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1 A. Professional Conduct and Regulation

A.1 Code of Ethics and Standards of Conduct A.1.1 The Six Ethical Principles A.2 Procedural Rules and Discipline A.2.1 Fitness Standards for Candidates A.3 Financial Institutions Overview A.3.1 Broker-Dealers vs. RIAs A.4 SEC and Securities Regulation A.4.1 FINRA and Broker-Dealer Regulation A.4.2 State Securities Regulation A.5 Consumer Protection Laws A.5.1 Privacy and Confidentiality Requirements A.6 Fiduciary Duty and Application

2 B. General Principles of Financial Planning

B.7 The Financial Planning Process B.7.1 Establishing the Client Relationship B.7.2 Gathering Client Data and Goals B.8 Personal Financial Statements B.8.1 Key Financial Ratios B.9 Cash Flow Management B.9.1 Emergency Fund Planning B.10 Debt Management Strategies B.10.1 Mortgage and Home Financing B.11 Economic Concepts B.11.1 Planning for Inflation B.12 Time Value of Money Concepts B.12.1 TVM Calculations and Applications B.12.2 Loan Amortization B.13 Education Needs Analysis B.14 Education Savings Vehicles B.14.1 529 Plans In-Depth B.15 Education Funding Strategies B.16 Gift/Income Tax Strategies

3 C. Risk Management and Insurance Planning

C.17 Principles of Risk and Insurance C.17.1 Risk Management Process C.18 Analysis of Risk Exposures C.19 Health Insurance Fundamentals C.19.1 Types of Health Insurance Plans C.20 Disability Income Insurance C.20.1 Disability Policy Features C.21 Long-Term Care Insurance C.22 Annuities Overview C.22.1 Fixed vs. Variable Annuities C.23 Life Insurance Fundamentals C.23.1 Types of Life Insurance C.24 Business Owner Insurance Solutions C.25 Insurance Needs Analysis C.26 Insurance Policy and Company Selection

4 D. Investment Planning

D.27 Equity Securities D.27.1 Fixed Income Securities D.27.2 Mutual Funds and ETFs D.27.3 Taxation of Investment Vehicles D.28 Systematic Risk D.28.1 Unsystematic Risk D.29 Economic and Market Cycles D.30 Measures of Risk and Return D.30.1 Investment Performance Measures D.31 Asset Allocation Strategies D.31.1 Portfolio Diversification D.32 Bond and Stock Valuation D.32.1 Stock Valuation Models D.33 Investment Policy Statement D.33.1 Modern Portfolio Theory D.34 Active vs. Passive Investing D.34.1 Common Investment Strategies D.35 Alternative Investments D.35.1 Options and Derivatives

5 E. Tax Planning

E.36 Income Tax Fundamentals E.36.1 Filing Status and Tax Brackets E.37 Types of Income E.37.1 Deductions and Credits E.37.2 Capital Gains and Losses E.38 Business Entity Taxation E.38.1 Self-Employment Tax E.39 Taxation of Trusts and Estates E.40 Tax Reduction Strategies E.40.1 Retirement Account Tax Strategies E.41 Property Transactions E.41.1 Basis Rules for Acquired Property E.42 AMT and NIIT E.42.1 Special Tax Situations E.43 Charitable Giving Strategies

6 F. Retirement Savings and Income Planning

F.44 Retirement Needs Analysis F.44.1 Sources of Retirement Income F.45 Social Security Benefits F.45.1 Social Security Claiming Strategies F.45.2 Medicare Planning F.46 Eldercare and Special Needs Planning F.47 Qualified Plan Overview F.47.1 Defined Benefit Pension Plans F.47.2 Defined Contribution Plans F.48 Eligibility and Vesting F.48.1 Coverage and Discrimination Testing F.48.2 Contribution and Benefit Limits F.48.3 401(k) Plan Features F.49 Non-Qualified Deferred Compensation F.49.1 Executive Compensation Plans F.50 Retirement Plan Selection for Businesses F.50.1 Individual Retirement Accounts F.51 Distribution Rules F.51.1 Required Minimum Distributions F.52 Retirement Income Strategies F.52.1 Tax-Efficient Withdrawal Strategies F.53 Business Succession Planning

7 G. Estate Planning

G.54 Property Titling and Beneficiary Designations G.54.1 Beneficiary Designations G.55 Strategies to Transfer Property G.55.1 Lifetime Gifting Strategies G.56 Wills and Estate Documents G.56.1 Powers of Attorney G.56.2 Advance Directives and Healthcare Documents G.57 Federal Gift Tax G.57.1 Federal Estate Tax G.57.2 Generation-Skipping Transfer Tax G.58 Sources for Estate Liquidity G.58.1 Life Insurance for Estate Liquidity G.59 Trust Fundamentals G.59.1 Revocable Living Trusts G.59.2 Irrevocable Trusts G.59.3 Trust Income Taxation G.60 Marital Deduction Planning G.60.1 QTIP Trusts G.60.2 Portability of Estate Tax Exemption G.61 Intra-family and Business Transfer Techniques G.61.1 Family Limited Partnerships G.61.2 GRATs and IDGTs G.62 Postmortem Estate Planning Techniques G.62.1 Disclaimer Planning G.62.2 Estate Tax Elections G.63 Planning for Divorce and Unmarried Couples G.63.1 Estate Planning for Unmarried Couples G.63.2 Planning for Blended Families G.64 Planning for Special Needs and Circumstances G.64.1 Special Needs Trusts G.64.2 ABLE Accounts

8 H. Psychology of Financial Planning

H.65 Client and Planner Attitudes, Values, Biases H.65.1 Money Scripts and Money Attitudes H.65.2 Planner Self-Awareness H.66 Behavioral Finance H.66.1 Cognitive Biases H.66.2 Emotional Biases H.66.3 Heuristics and Mental Accounting H.67 Sources of Money Conflict H.67.1 Couples and Money Conflict H.67.2 Family and Intergenerational Money Conflict H.68 Principles of Counseling H.68.1 Therapeutic Techniques in Financial Planning H.68.2 Professional Boundaries and Referrals H.69 General Principles of Effective Communication H.69.1 Listening and Questioning Skills H.69.2 Managing Difficult Conversations H.69.3 Non-Verbal Communication H.70 Crisis Events with Severe Consequences H.70.1 Death and Divorce H.70.2 Job Loss and Health Crisis H.70.3 Sudden Wealth and Sudden Loss H.70.4 Natural Disasters and Traumatic Events

A.4 SEC and Securities Regulation

Key Takeaways Explain This Topic AI

The SEC was created in 1934 with a three-part mission: protect investors, maintain fair markets, and facilitate capital formation

Investment advisers with $100 million+ AUM must register with the SEC; those under $100 million generally register with states

The Investment Advisers Act of 1940 establishes fiduciary duty requiring advisers to act in clients' best interests

SEC-registered advisers must file Form ADV, including Part 2A (Brochure) for client disclosure
Last updated: January 2026

SEC and Securities Regulation

The Securities and Exchange Commission (SEC) stands as the primary federal regulator of the U.S. securities industry. For CFP professionals, understanding the SEC's role and the foundational securities laws is essential—these regulations shape how financial advisers operate, what disclosures they must make, and how they serve their clients.

The SEC's Mission and Authority

The SEC was created by Congress in 1934 with a three-part mission: protect investors, maintain fair and efficient markets, and facilitate capital formation. The SEC accomplishes this mission through:

Rulemaking authority to implement securities laws
Examination programs to monitor compliance
Enforcement actions against violations
Investor education initiatives

The SEC has broad authority over all aspects of the securities industry, including the power to register and regulate brokerage firms, transfer agents, clearing agencies, and self-regulatory organizations (SROs) like FINRA and the national securities exchanges.

The Three Foundational Securities Laws

Three federal laws form the backbone of securities regulation in the United States. CFP professionals must understand each law's purpose and key requirements.

Securities Act of 1933: The "Truth in Securities" Law

The Securities Act of 1933 addresses primary market transactions—when companies first offer securities to the public. Congress enacted this law in response to the 1929 stock market crash and the Great Depression.

Two Core Objectives:

Disclosure - Investors must receive financial and other significant information about securities being offered for public sale

Anti-fraud - Prohibit deceit, misrepresentations, and other fraud in the sale of securities

Key Requirements:

Requirement Description
Registration Statement Companies must file Form S-1 (or similar) with the SEC before offering securities
Prospectus Investors must receive a prospectus containing material information about the offering
Waiting Period A 20-day cooling-off period between filing and the effective date
Exemptions Private placements (Regulation D), intrastate offerings, and certain small offerings are exempt

Prior to the 1933 Act, securities regulation was governed primarily by state laws known as "blue sky laws." The federal law created a uniform national standard while preserving state enforcement authority.

Securities Exchange Act of 1934: Regulating Secondary Markets

While the 1933 Act governs new issuances, the Securities Exchange Act of 1934 regulates secondary market trading—transactions between investors after the initial offering. This Act also created the SEC itself.

Key Provisions:

Provision Purpose
Company Registration Public companies must register their securities with the SEC
Periodic Reporting Registered companies must file annual (10-K), quarterly (10-Q), and current (8-K) reports
Proxy Rules Regulate solicitation of shareholder votes
Insider Trading Prohibit trading on material, non-public information
Market Manipulation Ban schemes to artificially inflate or deflate security prices

The 1934 Act empowers the SEC to oversee securities exchanges (NYSE, NASDAQ), broker-dealers, and SROs. The SEC can delegate regulatory authority to SROs like FINRA while maintaining oversight responsibility.

Investment Advisers Act of 1940: Fiduciary Standards for Advisers

The Investment Advisers Act of 1940 regulates persons or firms in the business of advising others about securities investments for compensation. This law is particularly relevant for CFP professionals who provide investment advice.

Key Principles:

Fiduciary Duty - Investment advisers are fiduciaries who must act in their clients' best interests
Full Disclosure - Advisers must disclose all material conflicts of interest
Best Execution - Advisers must seek the most favorable terms for client transactions
Reasonable Basis - Recommendations must have a reasonable basis

Registration Thresholds:

The Dodd-Frank Act of 2010 established the current registration framework:

AUM Level Registration
Under $25 million State registration only (no SEC)
$25-$100 million State registration (unless state does not require or examine)
$100 million+ SEC registration required

Since the Dodd-Frank requirements took effect in 2012, the number of SEC-registered advisers has grown by approximately 45%. As of 2025, there are over 15,400 SEC-registered investment advisers, with nearly 9,000 managing between $100 million and $1 billion in assets.

The SEC Registration Process

Investment advisers register with the SEC by filing Form ADV through the Investment Adviser Registration Depository (IARD) system. Form ADV has two parts:

Part 1 : Firm information, business practices, and disciplinary history (used by regulators)
Part 2A ("Brochure") : Plain-English disclosure document delivered to clients
Part 2B ("Brochure Supplement") : Information about specific advisory personnel

Advisers must update Form ADV at least annually and promptly when material changes occur.

SEC Enforcement

The SEC's Division of Enforcement investigates potential violations and brings civil actions. Common enforcement areas include:

Insider trading
Accounting fraud
Investment adviser misconduct
Broker-dealer violations
Market manipulation

The SEC can impose civil penalties, disgorgement of ill-gotten gains, injunctions, and industry bars. Criminal prosecutions are referred to the Department of Justice.

2025 Regulatory Developments

The securities regulatory landscape continues to evolve. In July 2025, Congress amended both the Securities Act of 1933 and the Securities Exchange Act of 1934 through the GENIUS Act (P.L. 119-27), which clarified that certain payment stablecoins issued by permitted issuers are not considered "securities" under federal law. This represents a significant development in digital asset regulation.

SEC 2026 Examination Priorities

The SEC's Division of Examinations released its 2026 examination priorities, signaling key focus areas for registered investment advisers:

Key Priority Areas:

Area Focus
Fiduciary Duty Compliance Fee structures, conflicts of interest, best execution obligations

Information Security Implementation of amended Regulation S-P requirements (incident response, breach notification)

Regulation S-P Compliance Large entities subject to December 2025 compliance deadline; smaller entities by June 2026

Marketing Rule Compliance Testimonials, endorsements, and performance advertising under the 2020 Marketing Rule

Private Fund Advisers Fee transparency, preferential treatment disclosures, quarterly statements

Regulation S-P Enforcement Focus:

Following the December 3, 2025 compliance deadline for large entities, the SEC signaled heightened attention to:

Written incident response programs
30-day customer notification procedures
72-hour service provider notification requirements
Documentation of safeguards programs
For CFP Professionals

Understanding SEC regulation helps CFP professionals:

Navigate registration requirements based on AUM and business structure
Maintain required disclosures through Form ADV and client communications
Fulfill fiduciary obligations under the Investment Advisers Act
Recognize potential violations that could affect clients or employers
Stay current with regulatory developments affecting financial planning practice