Ex-CFP Board Official Says Board Punished Her & Ex-Board Chair Amid Lawsuit Fears

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A former member of the CFP Board’s disciplinary and ethics commission says the board punished her and the board’s former Chairman Alan Goldfarb to avert the threat of a lawsuit from a pair of planners in Florida.

“They sacrificed us,” says Tina Florence of the dually registered firm Lane Florence in Folsom, Calif. “I think they panicked at [the planners’] allegation that they were being singled out and [the board] rushed to create the appearance that they were being tough on anyone found to be misrepresenting their fees.”

Florence and another commission member were sanctioned privately – and Goldfarb was reprimanded publicly – for misrepresenting how they were compensated, the central issue in the Florida couple’s lawsuit. The couple threatened legal action after learning they would receive a public sanction in the form of a letter of reprimand to be posted online. Two years later, a letter has not been released, but the lawsuit was filed and the case continues.

CFP Board spokesman Dan Drummond would not discuss whether the disciplinary actions came in response to the threat of the lawsuit. He did say in an email that a board committee “found sufficient merit” to warrant the sanctions before the planners resigned from the board or its disciplinary panel.

If a commission member is disciplined or even investigated by the board, Drummond adds, the organization’s charter forbids them from serving. The CFP Board “maintains these strict criteria to ensure that its disciplinary process is consistent and fair to all participants, and credible to the public.”

Conflicts of Interest?

Husband-and-wife planners Jeffrey and Kimberly Camarda of Fleming Island, Fla., prompted the three investigations after the board began an inquiry of the Camardas’ practices in 2011, according to Florence, as well as Sally Hurme, who still serves on the disciplinary commission, and three other current or former members who asked not to be named.

The Camardas pointed out to the board that a number of people with board affiliations appeared to have conflicts of interest similar to ones the board alleged against them. The Carmardas’ spokesman, Donald Hannaford, says board officials asked them to file complaints against other board volunteers, but they did not.

“We never had any desire to see anyone disciplined,” the Camardas said through Hannaford. “We did some research on Google and provided specific examples of inconsistencies we found, and used these to demonstrate to staff what we thought was wrong with the system, not only to defend ourselves but in hopes of fixing it.”

The Camardas first filed suit, which called the board’s disciplinary process “unfair and capricious,” in Florida in January, about two months after the board announced the resignations of the three officials. The couple later dropped the suit in Florida and refiled it in June in U.S. District Court in Washington, D.C., where the board is based.

The Camardas are asking the court to stop the board from posting a public letter of sanction against them for calling their wealth management firm fee-only, while they also own an insurance agency. The board’s rules forbid the use of the term fee-only when planners have associations with any “related parties,” including insurance agencies, that work for commissions.

“Full and accurate disclosure to clients regarding compensation from all sources is important information that allows clients and prospective clients to evaluate their advisor’s potential conflicts of interest and make a fully informed decision to work with the CFP professional,” Drummond says.

The board has described the Camardas’ suit as being “without merit.” Drummond adds: “We believe we have a fair, credible and legally defensible process.”

A Change in Practice

Florence and Goldfarb say the sanctions taken against them amounted to a change in board practice. The board acknowledges the Goldfarb case was a first.

“The only public sanction for fee disclosure is Alan Goldfarb,” says Kevin Keller, the board’s CEO. “There are no public sanctions for any cases that predate Alan Goldfarb.”

Goldfarb, who sat on the disciplinary commission for years before becoming board chairman, says that in the past the board only issued public sanctions in serious cases. If the board had concerns about a member who wasn’t “hurting the public,” the matter would be dealt with privately, he says.

There continues to be widespread confusion among CFP holders about how the board’s compensation disclosure rules are applied and enforced.

The board investigates when it receives complaints, when information comes to light in public sources of information or when the SEC, FINRA and state regulators take action, Drummond says, adding that the organization does not audit all of its members.

“The absence of a [case history] on this specific issue does not mean that these rules have not been in place or that CFP Board has not been enforcing them. It simply means no allegation related to this issue has gone through our process and culminated in a decision by the disciplinary and ethics commission,” Drummond says. The fee-only designation was highlighted during an Aug. 7 board web seminar designed to clarify the rules.

‘I Was Naïve’

When the CFP Board asked Florence to serve on its unpaid disciplinary commission in February 2011, she now says she didn’t understand the risk she was assuming when she agreed. “I was just trying to help. I was naïve.”

She says her path to joining the disciplinary commission began when two prospective clients asked her for help with their broker and she discovered inconsistencies between FINRA’s website, which revealed lawsuits alleging the broker misused client funds, and the CFP Board’s site, showing the broker in good standing.

She says she eventually contacted Michael Shaw, the board’s managing director of professional standards and legal matters, who suggested she consider joining the panel on an interim basis. She was vetted in a months-long process and was cleared.

The nine appointed members of the commission meet three times a year to render judgment on cases. The group is composed of CFP holders and at least one non-CFP member of the public, who is currently Hurme, a lawyer with AARP. Florence says she enjoyed her experience and later accepted an invitation to serve a full, four-year term.

Asked to Resign

Sometime in summer 2012, Florence says, the Camardas sent her a certified letter; she refused to sign for it, having heard that they had raised the issue of conflicts of interest among board officials and deciding that she didn’t want to engage with them.

On Oct. 26, Florence was preparing to fly to Washington the next morning for disciplinary panel hearings when she says she received a call from Keller and Shaw telling her she was being investigated. She saysd Keller requested her resignation.

“I said, ‘Well, I serve at your pleasure and if you are asking for my resignation I guess I will give it,’ ” she says. “I said, ‘I don’t understand what the problem is and I haven’t been given the opportunity to rebut.’ ”

On Nov. 2, the board sent out a press release announcing that it was investigating “broad allegations” into Goldfarb and two unnamed commission members. The release also says that, “When presented with the committee’s findings, [the two unnamed commission members] decided to resign from their positions.”

Florence says that, in fact, she resigned due to Keller’s request and was not provided with any findings. Drummond says Florence was told of the charter’s requirement that commission members could not be under investigation and serve on the board, and that she chose to resign.

Identity Revealed

Florence’s situation was to remain private; Drummond says the board would not have commented about her case if she had not gone public. But Florence says her identity was revealed after the board removed her name and the name of another member from the disciplinary commission’s roster from its website.

“I was contacted by colleagues and members of the media asking if it was me,” she says.

After her resignation, a full investigation remained pending. Florence says she spent many hours preparing for a settlement panel that she had to pay $1,500 to convene.

Florence says the accusations against her centered on a sentence on her website that read: “Our fee-based approach means you get the help you need without worrying about commission-based advice or conflicts of interest.”

Florence says she told the committee the description referred to the financial planning side of her business. “If you want financial planning, it’s a separate product. You pay a separate fee,” Florence says, in contrast to the commission side of her practice.

As part of the settlement, she removed the sentence.

‘You Need Input’

Eight months later, Florence was surprised when she received the board’s Aug. 16 newsletter and read about the Aug. 7 web seminar and reviewed the description of the fee-only rules. She thought the description was overly broad and subject to conflicting interpretations.

“You are stepping into new territory here,” she says she wrote in an email to Shaw. “There’s a huge amount of confusion. You need input. You need to take a step back.” He did not reply, she says.

Florence believes most CFP holders don’t understand the risks if the board decides they have run afoul of its rules. “What happened to me and what happened to Alan Goldfarb could happen to them,” she says.

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