More transparency needed at CFP Board

In the two weeks since Alan Goldfarb, the now-former chairman of the CFP Board, resigned amid allegations of ethics violations, the rest of the board, and its Disciplinary and Ethics Commission, presumably have been investigating the situation diligently to find out what really happened.

But we may never know, and therein lies the problem.

The Certified Financial Planner Board of Standards Inc. holds itself — and its designation — out to be the gold standard for financial planners and wants the public to trust it and those who put the CFP mark next to their name on their business card.

That’s all well and good, but part and parcel of placing itself in that position is being fully transparent.

We demand transparency from our elected officials, from our regulators, from our corporate leaders, from our markets. Why not from our professional organizations that are supposed to have the public’s interests at heart?

The Goldfarb drama unfolded Nov. 2, when the CFP Board, to its credit, issued a news release announcing the resignation of Mr. Goldfarb and the two members of the Disciplinary and Ethics Commission.

According to the release, the CFP Board “became aware of broad allegations that members of the board and other volunteers may have violated provisions of CFP Board’s Standards of Professional Conduct.” Further investigations were made, and when presented with the findings, Mr. Goldfarb and the two commission members resigned.

Fair enough. The fact that the CFP Board has a disciplinary and enforcement process that it uses on its own board and management is to be commended.

But generally, from that point on, the situation becomes a black hole — or perhaps a brick wall — with the board saying that disciplinary rules and procedures are confidential, and that only if the proceedings result in a “public sanction” will they be opened for all to see.

That’s not good enough for an organization that is effectively telling the investing public: “Trust us, we know what we’re doing.”

DISCLOSURE CRITICAL

And the exchange between Mr. Goldfarb and CFP Board chief executive Kevin Keller after Mr. Goldfarb e-mailed a statement to InvestmentNews only makes full disclosure more critical.

In his e-mail, Mr. Goldfarb wrote that the alleged violations involved “representing my compensation as “salary,’ which it is, as opposed to “fee and income,’” since he’s also a broker-dealer. In a terse reply, Mr. Keller called Mr. Goldfarb’s claim “not correct.”

Well, which is it? Only the CFP Board can clear the air, which would nip in the bud any speculation about what’s going on.

If the CFP Board wants to meet its mission and not suffer a lingering stain on its reputation, it must come clean. What were the allegations against Mr. Goldfarb and the others (who remain anonymous for some unexplained reason)? How did the investigation unfold, and what specifically did it find? How did the alleged violators respond? Furthermore, what process ensures that a similar problem will not crop up again?

Clearly, investigations take time, and no one expects a full account immediately, even two weeks after Mr. Goldfarb and the others tendered their resignations. But one report of the incident suggested that the earliest that any details will emerge from the CFP Board is next March, when the Disciplinary and Ethics Commission next meets.

That’s not good enough.

Perhaps enough advisers can attend the board’s interestingly timed Nov. 29 webcast, “Disciplinary Trends & Compliance Tips,” to force some answers. After all, the presenters will be Rex Staples, the CFP Board’s director of investigations, and Martin Siesta, chairman of the 2013 Disciplinary and Ethics Commission.

Related Topics: Certified Financial Planner Board Of Standards Inc. (CFP Board)