A federal judge has declared the CFP Board "above the law" when it comes to its treatment of CFPs, say two planners who sued the board, after reading the judge's decision to dismiss their case.
"We think it paramount at this juncture to emphasize this decision was not at all about the merits of our case or the fairness of the CFPBoard's rules," the married Fleming Island, Fla., planners Jeffrey and Kimberly Camarda say in a statement.
The pair released a statement based on their reading of the opinion, which they received previously. Although the judge has unsealed the document, it has yet to be released publicly.
Two years after the Camardas sued the board in a fee only case, Judge Richard Leon, of District Court in Washington D.C., threw the case out this month. The court will not insert itself in the affairs of a voluntary, private organization, Leon decided, according to the Camardas' statement.
The board declined to respond to questions until the ruling was unsealed. Although the judge so ordered on Monday, the court did not immediately release the document.
"I don't think that CFP certificants can find much to like in the decision to grant the CFP Board broad, quasi-regulatory authority that is not reviewable by a court of law," says Brian Hamburger, founder of MarketCounsel, a New Jersey law firm that advises RIAs on compliance and other issues and who has represented clients in cases against the CFP Board. Hamburger emphasized that he has not yet read the judge's decision.
DISMISSAL 'NOT REMARKABLE'
"It's not remarkable that the case was dismissed," says Tom Hazen, a law professor at University of North Carolina, who specializes in nonprofit and corporate governance issues. "Courts generally don't want to get in the business of second-guessing the judgment of managers of nonprofit or, for that matter, for-profit organizations. There is a doctrine known as the 'internal affairs doctrine' that basically does tell courts to stay out of internal affairs. On the other hand, if the lawsuit alleges wrongdoing such as self-dealing or violation of the nonprofit's purpose, then the court might not dispute a claim. But, if the plaintiff is saying, 'I dont like the way you manage this,' then the court will stay out of it."
The Camardas sued the board to stop it from publicly sanctioning them for using the term fee only to describe their practice, while owning a small insurance operation. At the same time, the board had been allowing hundreds of commission-based advisors in wirehouses to call themselves fee only on its own site with impunity. Later, it gave those advisors amnesty from punishment, which it did not extend to the Camardas or other planners who the board sanctioned privately for the same reason.
Threatened sanctions from the board can be time-consuming and costly for CFPs to defend and, once made public, can steer prospective clients away from those planners. In some cases, sanctions can lead planners to lose their jobs.
"This legal decision will give [the CFP Board] even more power and leeway to act as it sees fit," says securities lawyer Andrew Stoltmann of Chicago, while saying the Camardas' attitude amounts to nothing more than "sour grapes" for not accepting the board's discipline.
LIKE A SORORITY
In the lawsuit, the board likened its authority to that of numerous private organizations, such as sororities, country clubs, masonic lodges and other trade organizations. Courts regularly decide not to interfere in the management of these and other voluntary, private organizations, the board told the court.
"For the CFP Board to have found refuge in a private club classification marks a sad day for an organization that has touted itself as being interested in the advancement of financial planning as a profession and the protection of client interests," Hamburger says.
The board's nonprofit tax-exempt status is based on its claim that it benefits the public by promoting the profession of ethical financial planning.
In their statement, the Camardas say they disagree with the judge's logic.
"[T]he court's decision was completely confined to the simplistic ruling that the CFP Board as a social-club-like private organization can treat its licensees any way it wishes," they wrote in a statement. "We believe this is very wrong, and ominous, given the CFP Board's regulatory ambitions, and that its $50 million advertising campaign has made its license the preeminent planning credential."
NO REVIEW OF MERITS
Given that the court decided not to hear the case, no decision has been made on the merits of their complaints, the planners say.
Describing themselves as "weary" from the "staggering" emotional toll of the case, the Camardas say they lack the financial resources to fight the well-funded CFP Board in a campaign they say they took on, not only for themselves, but on behalf of all CFPs.
The pair has not yet decided whether to appeal.
"The Court may have ruled against us," they say, "but it was only due to a reading of the law [saying] that none of more than 70,000 certificants are entitled to their day in court if the CFP Board mistreats them during the CFP Board's self-administered internal proceedings or otherwise. The fact still remains that we were very unfairly treated throughout the entire process, and no one outside of us and the Board knows the details."
Most of the testimony and evidence in the case remains confidential, they add.
"We hope that one day soon these restrictions are removed and we can share our story," their statement says.
"We strongly believe," they add, that "the sealed record overwhelmingly shows that the board ignored its own rules and procedural requirements, to reach a predetermined conclusion. Sadly, the evidence of this and much more remains sealed."
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