A federal judge ruled on Sunday that a case against the Certified Financial Planner Board of Standards Inc. revolving around compensation definitions can continue and expand in scope.
Judge Richard J. Leon of the U.S. District Court in the District of Columbia ruled that the plaintiffs, Jeffrey and Kimberly Camarda, can seek monetary damages and pursue antitrust violations against the CFP Board.
The Camardas originally filed a suit against the CFP Board last summer, alleging that the organization had unfairly disciplined them for violating its rules. The board found that the Camardas, who are managing members of Camarda Financial Advisors, held themselves out as fee-only advisers when an arm of their firm, Camarda Consultants, sells insurance.
In addition to allowing an expansion of the suit, Mr. Leon also rejected an effort by the CFP Board to prevent the Camardas from seeking subpoenas targeting members of its staff.
“We see [the ruling] as allowing the process to move forward, and that's good,” said Donald Hannaford, a spokesman for the Camardas.
The CFP Board said that it will eventually prevail in the case, despite the procedural setback.
“There has been no decision on the merits,” CFP Board spokesman Dan Drummond said in a statement. “CFP Board will continue to vigorously defend this case.”
But an industry observer said that the ruling creates a new threat for the CFP Board.
“In the process of accepting the Camardas' amended complaint, the court will now be considering issues that speak to the very legitimacy of the CFP Board as an organization seeking to promote the CFP certificant and oversee its CFP certificants,” Michael Kitces, a partner at Pinnacle Advisory Group, wrote Tuesday morning on his blog,
Nerd's Eye View.
In an interview, he said that the CFP Board faces a serious threat because the Camardas' amended suit includes allegations that the organization has misled the public about the CFP credential, which it is promoting in a four-year, $40 million awareness campaign.
“This is not just a case about the definition of fee-only anymore,” Mr. Kitces said. “It would be a serious blow to the organization if the court found it guilty of false advertising to the public about the standards of CFP certificants.”
The CFP Board has been struggling with controversies over compensation definitions ever since it first filed its case against the Camardas in March 2011.
In November 2012, the organization removed Alan Goldfarb as its chairman for mischaracterizing his compensation on the Financial Planning Association website.
Last September, the CFP Board temporarily removed the “fee-only” description from its website and told the 8,000 CFPs using the label to re-evaluate whether they complied with CFP rules before resetting the label on their profiles.
The CFP Board grants the CFP mark and upholds the ethical and education standards surrounding it. There are about 69,000 CFPs in the United States.
