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Financial planners granted appeal in CFP Board compensation disclosure case

By Carrie Salls | Jul 14, 2016

WASHINGTON – Florida financial planners Jeffrey and Kimberly Camarda are scheduled to present oral arguments to the U.S. Court of Appeals for the District of Columbia in September in a case filed against the Certified Financial Planner Board of Standards Inc. (CFP Board) that could have serious implications for the financial planning industry.

The appeal asks the court to schedule a public trial in the Camardas’ legal battle against the CFP Board.

The Camardas, who are husband and wife, appealed a July 2015 ruling made by the U.S. District Court for the District of Columbia that dismissed the Camardas’ breach-of-contract lawsuit filed against the CFP Board in connection with a dispute over how they disclose their compensation.

“If the Camardas are ultimately victorious, it would be a severe blow against the CFP Board’s ability to exert authority on CFP certificants and (publicly) discipline them for misdeeds,” Michael Kitces, partner and director of wealth management at Pinnacle Advisory Group Inc. and a financial planner blogger and editor, told the Florida Record.

The Camardas filed the lawsuit that was dismissed on July 6, 2015, by U.S. District Judge Richard J. Leon after they were disciplined by the CFP Board amid allegations that they improperly advertised their services as “fee-only.” The CFP Board said one of the Camardas’ two firms, Camarda Financial Advisors, was advertised as fee-only, even though Camarda Consultants was commonly owned by the couple and did not perform services on a fee-only basis.

According to court documents, Camarda Financial Advisors is offers fee-only investment advice, while Camarda Consultants is a “licensed insurance agency and financial consulting firm providing business planning, tax, estate planning, insurance and other noninvestment advisory services to its clients for both fees and commissions.” The couple argued in court documents that Camarda Financial Advisors and Camarda Consultants “were two separate and distinct legally formed and organized entities under Florida law.”

“The Camardas allege that the CFP Board did not properly adhere to its own processes and procedures and treated them unfairly,” Kitces said.

Meanwhile, Kitces said the CFP Board maintains that it acted appropriately and that the courts should not have jurisdiction to intercede, “given that CFP certificants ultimately sign an agreement with the CFP Board to adhere to their standards.”

“Generally speaking, the ultimate issue at hand in the Camarda case is the CFP Board’s authority to promulgate and then enforce its own practice standards,” Kitces said.

In his ruling dismissing the case, Leon said: “In reviewing a disciplinary action by a private organization, courts do not ‘second-guess’ the organization's interpretation of its own rules or its evaluation of the evidence.”

The CFP board said in a statement following the unsealing of the July 2015 ruling that Leon noted in his decision that the CFP Board “followed its own rules throughout the disciplinary proceedings” against the Camardas and that the court found “no evidence that [CFP Board] was motivated by bad faith or ill will” in disciplining the Camardas.

In addition to the breach-of-contract allegations, the Camardas claimed the CFP Board unfairly competed against them and engaged in false advertising by stating that it fairly enforces its disciplinary rules.

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