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CFP Board opens up new mandatory arbitration to more scrutiny

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In March, the CFP Board took away its CFPs' rights to sue the board, without seeking public comment before making the change.

Now, in response to critics of its new mandatory arbitration policy, the board has made two changes intended to keep future arbitration disputes from disappearing entirely from public scrutiny.

Beginning Sept. 12, CFPs may speak publicly about their arbitration cases against the board and the board will create a public database of any arbitration cases, while keeping CFPs' identities anonymous. No such cases exist as of yet, the board says.


The first version of the board's new arbitration policy forbade parties to arbitration cases from discussing them publicly and kept the entire arbitration process under wraps.

The board's decision to create a public record of these disputes came after "a very specific concern that I raised when I brought up the issue in March," says widely followed CFP and Financial Planning contributor Michael Kitces.

When and if the board engages in arbitration behind closed doors, Kitces pointed out that the board "could be doing something wrong repeatedly and just settling the cases privately and no one would know."

Now, at a minimum, a public record will exist.

After Kitces blogged about his concerns, he says the board called him to discuss them.

Leo Rydzewski, the board's general counsel, says the changes came in response to complaints from a number of individuals in the CFP community.

"We believe it is appropriate to provide a public disclosure of those [arbitration] outcomes," Rydzewski says.

While the new changes allow CFPs to discuss their cases publicly, they also free the board to publicly discuss details of their cases.


The board stripped CFPs of the right to sue months after it won a costly lawsuit filed by two married Florida planners, Jeffrey and Kimberly Camarda. The Camardas have filed an appeal in their case, in which the board sought to sanction them for calling their firm fee only while operating an insurance practice.

When asked why the board omitted public comment periods both before introducing a mandatory arbitration requirement and, then again, before amending it, Rydzewski says it had not. Over the course of nine recent public meetings around the country the board had solicited broad impact into a wide variety proposed changes to its standards of conduct, he said.

"We believe we met with a substantial number of people in that process," Rydzewski says. "It was impossible for CFP Board to visit every town in America."

However, between 2007 and 2011, the board sought public comment at least six times on specific and sometimes heated topics, such as whether or not to publish CFP bankruptcies. In each case, those outreach efforts alerted CFPs to high-profile issues under debate and in isolation. Instead, according to Rydzewski, the board has folded discussion of controversial issues into broad-ranging policy discussions at a relatively small number of town hall-style meetings.

Kitces has written a new blog about this issue as it pertains to broader potential governance problems at the board.


Kitces says he remains concerned about the omission of a focused public comment period on these issues. "It was a significant failure of process not to involve stakeholders," he says.

The introduction of mandatory arbitration "basically is a way to prevent future Camardas situations," he adds.

In his conversations with Rydzewski, Kitces says he tried and failed to persuade the board to narrow the scope of its mandatory arbitration policy.

The new policy "says that any dispute I have with the CFP Board whatsoever has to go into mandatory arbitration," he says. "We still haven't had a public comment process to talk about why we need something so broad in the first place."

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