Camardas consider an appeal of dismissed CFP Board case

Other advisers dinged by fee-only compensation definition weigh in on judge's decision

Jul 8, 2015 @ 5:16 pm

By Mark Schoeff Jr.

Two Florida financial planners whose controversial lawsuit against the CFP Board was thrown out by a federal court said they might continue their legal battle against the organization.

“At this time, we are considering an appeal, but need to review the court's actual opinion before making that call,” Jeffrey and Kimberly Camarda said in a statement Wednesday.

U.S. District Judge Richard J. Leon on Monday granted the Certified Financial Planner Board of Standards Inc.'s motion for summary judgment and dismissed the case, which centered on how the organization allows mark holders to define their compensation.

“We are clearly disappointed in the decision and do not think it is correct if it rules that the CFP Board — being a private organization — has the prerogative to treat its licensees any way it wishes without any meaningful legal recourse to the judicial system available to certificants,” the Camardas said.

The suit was filed in 2013 by the married financial planners, managing members of Camarda Financial Advisors, who accused the CFP Board of breach of contract, unfair competition and false advertising. This stemmed from a disciplinary case that the CFP Board brought against the couple in December 2011. The organization held that the Camardas represented themselves as fee-only advisers when an arm of their firm, Camarda Consultants, sells insurance for commissions.

Under CFP Board rules, advisers can claim fee-only status if they only charge fees for their services and are not affiliated with any entity that can charge commissions.

Mr. Leon's opinion will remain under seal for 14 days. The decision will be revealed at that point, unless the parties convince the judge to keep parts of it confidential.

The Camardas said they can't comment in detail until they read the full opinion, but they are concerned that Mr. Leon supports the argument that the CFP Board made in its motion to end the case, essentially that the court can't second-guess the organization's interpretation of its own rules.

A former CFP Board chairman whose disciplinary case has been at the heart of the board's struggles over compensation definitions said that the court ruling gives the organization too much power.

“There ought to be some recourse for certificants if they have an argument with the CFP Board,” said Alan Goldfarb, managing director of Financial Strategies Group. “This [decision] seems to take away all that.”

Mr. Goldfarb stepped down as CFP Board chairman in November 2012, as the board began an investigation into allegations that he mischaracterized his compensation on the Financial Planning Association website.

Another action that drew much attention revolved around the use of the fee-only description by Rick Kahler, the president of Kahler Financial Group. Mr. Kahler and the board reached a resolution in November that involved him giving his interest in a family real estate firm to his wife.

The court ruling “strengthens the CFP Board's position on fee-only; there's no question about that,” Mr. Kahler said. “Overall, it's a good thing for the profession. Fee-only needs to mean something.”

But the meaning of the CFP Board's compensation description is still up in the air, according to Mr. Kahler. Confusion still exists about terms such as “non-trivial economic benefit” and “related party” in the organization's rules.

“They remain undefined today,” Mr. Kahler said.

The CFP Board agrees that the ruling bolsters its authority when it comes to its own standards.

“CFP Board is very pleased that Judge Leon dismissed the case on the basis of deficient legal claims without the need for a trial,” Marilyn Mohrman-Gillis, the CFP Board's managing director of public policy and communications, said in a statement on Tuesday. “This ruling affirms CFP Board's authority to set and enforce its Standards of Professional Conduct, which serve as critical consumer protections.”

As part of an effort to underscore its current compensation terms, the CFP Board temporarily removed the fee-only description from its website in September 2013 and told the 8,000 CFPs using the label to reevaluate whether they complied with the CFP rules before resetting it on their profiles.

Now that the CFP Board is not embroiled in a court case, it should reconsider its punishment of mark holders who tripped up on the fee-only definition, said Mr. Goldfarb, who at one time headed the board's disciplinary body.

“It would be nice if they would go back and give retroactive amnesty to anyone that was affected by the unclear or misunderstood meaning of fee-only,” Mr. Goldfarb said. “To be sanctioned for a misunderstanding to me was over the top.”

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