Former CFP Board Chairman Alan Goldfarb was the first CFP holder ever to be publicly sanctioned for a compensation disclosure violation, the board has confirmed despite its assertion that he was not treated differently than other CFP holders.
The board opened an investigation into its former chairman last fall because he had stipulated that his planning practice was fee-only. The board began to investigate him and two other volunteer members of its disciplinary and ethics commission as a result of another similar investigation of two planners, Jeffrey and Kimberly Camarda, of Fleming Island, Fla., according to several current and former members of the disciplinary panel.
As with Goldfarb, the board in March 2011 found the Camardas inappropriately referred to themselves as fee-only in violation of CFP board rules, according to a lawsuit the couple filed against the board in June that seeks to prevent the board from officially sanctioning them. In the suit, the Camardas accuse the CFP Board of having an unfair and capricious disciplinary process.
Asked if the organization decided to make an example of Goldfarb, board spokesman Dan Drummond wrote in an email, Mr. Goldfarb was treated no differently than any other CFP professional.
Goldfarb thinks that fear of the Camardas suit and the desire to set an example motivated the board. I think it was a little of both, he says.
The board found that Goldfarb violated its rules because he had called himself a fee-only advisor on the FPA website and was also drawing a salary from his then-employer, Weaver Wealth Management, whose parent company also owns a broker-dealer in which Goldfarb owned a 1% stake.
THE DISCIPLINARY PROCESS
As for the Camardas suit, Drummond calls it without merit and says the organization would not comment on allegations raised by the pending litigation. But he did say the board takes issue with the Camardas calling its process unfair and capricious.
We believe we have a fair, credible and legally defensible process, Drummond says in an email. Our CFP Board staff thoroughly investigates specific allegations against CFP professionals. The majority of these are usually found to have no merit and staff dismisses them. When a case is found to have merit, both CFP Board staff and the Disciplinary Ethics Commission work diligently to ensure that every CFP professional has a full and fair hearing as well as ample time to provide information. There are also opportunities for CFP professionals to appeal, he adds.
In their suit, the Camardas say they pointed out to organization officials several other CFP Board-affiliated planners with alleged conflicts of interest similar to their own including Goldfarb and two disciplinary panel members, who later resigned in order to fix what they believe is a flawed disciplinary process. When the board asked the Camardas to file formal complaints against those individuals, they declined to do so, according to the couples suit.
We never had any desire to see anyone disciplined, they said through their spokesman, Donald Hannaford.
In a Nov. 2, 2012, press release, the board said it had received broad allegations that lead to the investigations. Asked about the source of those allegations, Drummond said the board generally does not disclose that information.
Tina Florence, a planner in Folsom, Calif., who was one of the members of the disciplinary panel who resigned as the result of those allegations, says the board is trying to make policy on the back of its certificate holders. Florence, who says she was sanctioned privately, adds, They sacrificed us.
Goldfarb adds: This should definitely be a concern for other CFP practitioners when the disciplinary process appears to be unfair and arbitrary [and] based on outside influences that can materially affect the process, Goldfarb says.
If the board has decided to begin publicly punishing CFP holders for alleged compensation disclosure transgression, it should have announced to its 68,000 CFP holders that it was entering a new phase of enhanced enforcement, Florence says.
Brian Hamburger, a securities compliance consultant with MarketCounsel who advises planners, agrees.
If the paradigm is now shifting, whereby there is public humiliation, then I think that that does change things, Hamburger says. I think that people have to rethink whether what they are getting out of that [CFP] mark is worth the risk of that type of humiliation because its damning, lets face it. The SEC knows that. FINRA knows that.
Thats why those larger and more powerful entities often levy huge fines, he says, and yet allow the firms that pay those fines to settle cases without admitting guilt.
Thats more palatable to many firms than having to post any kind of notice [of guilt] because it is the public trust that is the underpinning of this industry, he says. If the public cant trust those advisors, then it wont turn to those advisors anymore.
Register or login for access to this item and much more
All Financial Planning content is archived after seven days.
Community members receive:
- All recent and archived articles
- Conference offers and updates
- A full menu of enewsletter options
- Web seminars, white papers, ebooks
Already have an account? Log In
Don't have an account? Register for Free Unlimited Access