Executive Summary
This week, the controversial case between Jeff and Kim Camarda and the CFP Board came to a conclusion, with the judge granting the CFP Board’s motion for summary judgment to throw out the case altogether.
Yet within the CFP Board’s victory, numerous questions remain. The judge’s ruling itself has been sealed for 14 days, giving the CFP Board (and the Camardas) an opportunity to make the case for why it should remain private indefinitely… which means we may ultimately never know on what basis the CFP Board was declared victorious. Did the judge decide that the CFP Board really administered its disciplinary process appropriately, or ironically was the decision actually that the CFP Board isn’t accountable in a court of law at all… a win for the organization, but a frightening precedent for us as CFP certificants.
In any event, though, the conclusion to the lawsuit means that the CFP Board’s high-stakes gamble was avoided. And an end to the lawsuit – at least if it’s not appealed – finally gives the CFP Board an opportunity to update its still-problematic fee-only, commission-only, and overly expansive commission-and-fee compensation disclosure definitions… and hopefully in a manner that more constructively engages CFP stakeholders (unlike the CFP Board’s recent action to reduce the CFP experience requirement, which was implemented without any opportunity for public comment!).
Judge Grants CFP Board’s Motion For Summary Judgment
On Monday, U.S. District Judge Richard Leon granted the CFP Board’s long-standing motion for summary judgment. Judge Leon agreed with the CFP Board’s assertion that the ongoing lawsuit filed by Jeff and Kim Camarda was legally deficient its charges, bringing an end to the ordeal that has been in the courts for over 2 years and is estimated to have racked up more than $600,000 in legal fees for the organization.
Notably, though, the details of the Camarda case have been shrouded in secrecy for much of the past two years, as the CFP Board has repeatedly sought to keep much of the case details confidential. And now the details of the Judge’s opinion in the ruling have been sealed for 14 days, as both the CFP Board (and the Camardas) have the opportunity to show cause as to why the opinion should (or should not) remain partially or fully in secret indefinitely.
What The Favorable Ruling For The CFP Board Does And Does Not Mean
It’s important to recognize that while Judge Leon ruled favorably for the CFP Board on the issue of whether the Camarda’s legal claims were deficient, the conclusion to the case still does not necessarily speak to the legitimacy of the CFP Board’s compensation definitions or its disciplinary process.
After all, the reality is that whether the Camardas actually were appropriately using the “fee-only” definition or not was never really at issue in the legal matter. As was noted on this blog last year, the Camardas’ actual substantive legal complaint was that the CFP Board did not honor its own rules and guidelines for investigating and prosecuting the disciplinary matter, and that the organization did not provide due process and use fair procedures when making its decision. In other words, it’s wasn’t about whether the Camardas were fee-only or not, but whether the CFP Board enforced the rules against them in an appropriate manner.
Which means regardless of whether the Camardas were “right” or “wrong” in their use of fee-only, or the appropriateness of the fee-only definition itself, the lawsuit itself would never directly render judgment on that issue. At the most, the outcome simply would have spoken to whether the CFP Board executed its disciplinary process appropriately.
And strictly speaking, one of the key issues of the Camarda case was whether or to what extent the CFP Board is even obligated to fully follow due process and apply fair procedures to its CFP certificants, given that it is ultimately a private organization overseeing the use of its own trademarked designation. So while it’s possible that the CFP Board was victorious because Judge Leon’s view was that the CFP Board clearly executed its process appropriately, it’s also entirely possible that the only reason the CFP Board was victorious in its motion for summary judgment was because Judge Leon agreed that as a private organization, the CFP Board is not actually accountable to being “fair” and giving due process in its disciplinary proceedings in the first place!
A Good Or Bad Legal Precedent For The CFP Board In Judge Leon’s Decision?
Until Judge Leon’s ruling in the matter is released to the public, we won’t entirely know whether the judge’s decision was actually to uphold the CFP Board’s process, or to rule that the CFP Board simply wasn’t accountable for what may or may not have been mistakes in its process, or perhaps just to rule that the Camarda’s didn’t have legal standing to sue the CFP Board over the issue. Or for all we know, the decision drew on some other issue entirely.
In point of fact, if Judge Leon really did uphold the CFP Board’s disciplinary process, ostensibly the CFP Board itself would want that ruling to become public, as it becomes a legal precedent the CFP Board can cite the next time a certificant challenges the organization’s disciplinary process and execution.
On the other hand, if Judge Leon’s decision was actually that the CFP Board was victorious because it’s not actually legally accountable in court for its disciplinary process in the first place, the “win” may be a dangerous one for us as CFP stakeholders – as it would imply that CFP certificants have no legal recourse in disputes with the CFP Board and that the organization has limited accountability in a court of law!
Ultimately, while many of the case details may never come to light, hopefully Judge Leon’s ruling itself at least will become public in 14 days, if only so we know what precedent really has been set by the case.
Moving Forward On Fee-Only Definitions From Here?
Regardless of the details of Judge Leon’s ruling and whether it’s made public, though, the fact remains that the CFP Board’s compensation disclosure definitions – or at least, the CFP Board’s odd “3-bucket” interpretation of those rules – have continued to be problematic for several years now, leading to one embarrassment after the other for the organization. And at this point, the CFP Board’s definition of commission-and-fee in particular is so overly broad as to be almost meaningless to consumers.
Understandably, the CFP Board was reluctant to modify any of its disciplinary rules during a lawsuit, but hopefully the fact that the Camarda case has been dismissed (unless the Camardas appeal the decision, which remains a possibility) means that the CFP Board can finally revisit and update the rules. In point of fact, given that the last-and-current change to the rules was implemented all the way back in 2008, we’re arguably “due” anyway, as our emerging profession has evolved significantly since then.
Notably, though, updating the compensation definitions this time around may be more challenges. The recent controversies around the Camarda case (and more recently problems like CNBC’s highly questionable “Top Fee-Only Advisors” list) have made fee-only compensation disclosures a far more polarizing issue than it ever was the last time around… which means the rulemaking process may be “messier” than it was in the past.
I suspect that some will even raise the question of whether the CFP Board should be involved in overseeing advisor compensation disclosure in the first place, or “just” focus on overseeing the educational integrity of the CFP marks. Though personally, I actually hope that the CFP Board does stay involved in disciplining advisors, for inaccurate compensation disclosures and other infractions as well. But with a more relevant and robust set of compensation definitions that doesn’t include the egregious flaws of the current fee-only definition!
Hopefully, though, if and when the CFP Board begins a process to update its compensation definitions, it will do so in a manner that engages CFP stakeholders, unlike the recent decision to reduce the CFP Experience requirement that was done without any public comment period for stakeholders to engage in the process. If the CFP Board wants to regain some of the legitimacy it has lost in the eyes of CFP certificants, and not continue to act like an organization that lacks accountability, it’s time to re-engage us as stakeholders.
The CFP Board Gambled, Lost, And Won
Ultimately, the CFP Board is undoubtedly happy with its victory in the Camarda lawsuit, as the outcome could have been far worse. In fact, some – including yours truly – raised the question last year of whether the CFP Board was gambling too much in even taking the risk of losing on any counts of the lawsuit, which would have been a severe blow to its credibility and its ability to influence legislation and regulation for our emerging profession.
Fortunately, then, the CFP Board was victorious in its continued gamble, though notably not without a number of ‘casualties’ along the way. Estimates last year were that the CFP Board had already racked up over $600,000 in legal fees on the case, and that was before depositions and expert witness testimony that occurred last fall. It’s not hard to imagine that the CFP Board’s lawsuit ended out with well over $1,000,000 of legal fees (though much of the legal costs may have ultimately fallen to the CFP Board’s own insurance coverage and not the organization’s cash reserves). Regardless of the financial cost, though, along the way the CFP Board also lost its Director of Investigations Rex Staples, and its Managing Director of Professional Standards and Legal Michael Shaw departed too. And of course, the CFP Board paid a significant toll in lost focus as an organization, lost momentum on its regulatory and advocacy efforts, and damaged trust with CFP stakeholders.
Still, the bottom line is that while the stakes were high, and the CFP Board could have had a catastrophic moment of hubris for the organization, the terrible moment thankfully didn’t occur. Still, the problematic compensation disclosure definitions remain, and trust between the CFP Board and its stakeholders was severely damaged along the way. So the question now is what the CFP Board’s next step will be, and whether the organization is ready to begin updating its rules, re-engaging its CFP stakeholders with a public comment and engagement process, and begin rebuilding its relationship with CFP certificants. And what will the CFP Board be able to accomplish in the coming years now that this massive "distraction" for the organization is finally coming to a conclusion?
So what do you think? Are you glad the Camarda lawsuit is over? Do you think Judge Leon's opinion should be allowed to remain sealed or turned open to the public? Where should the CFP Board go from here?
