In a lengthy and well-supported blog post on ThinkAdvisor on Dec. 30, Michael Kitces explores the question: "Should the CFP Board Settle Camarda Case?" You might remember Jay and Kim Camarda as the CFPs froim Fleming Island, Florida who back in September 2013, sued the CFP Board to prevent it from publicly posting an admonition in their hometown for advertising their firm as "fee-only," after they had taken down the offending messages.
In short, Kitces argues that the Board should settle the Camarda suit for two reasons: both involving the consequences of losing. First, he suggests the Board's legal costs could run into the millions of dollars, and if the Camardas were awarded damages, they could reach tens of millions. Second, he wrote: "If the CFP Board loses, the door is open for virtually every other CFP certificant the CFP Board has ever brought before the [disciplinary committee] to question whether they, too, got a fair hearing with fair enforcement or not. Which means if the CFP Board loses, Camarda may just be the first of many (expensive) legal cases that could follow…"
To get an insider's perspective on how the CFP Board views the Camarda case and other recent events, I had a conversation with Folsom, California-based financial planner Tina Florence. You may remember Florence as one of the four CFP Board members who were forced to resign after the Camardas suggested in one of their court filings that they were also misleadingly describing themselves as "fee-only."
As a former member of the Board's discipline and ethics committee, Tina had some interesting insights into the Camarda case, Kitces' contentions and recent turnover in the Board's legal team that I suspect will be sobering to many CFPs.
While Florence is prohibited from commenting on disciplinary actions by the CFP Board, she does agree with Kitces that losing a case like the Camardas' could have a major impact on the Board's past and future disciplinary process.
But perhaps even more important, she says that Michael is wrong about the financial impact of the cost of that lawsuit on the Board: "What Michael doesn't take into account is that the CFP Board has liability insurance that covers their legal fees, and, although no Board member that I know has actually seen the policy, [it covers] probably any damages, except punitive damages. So the cost to the Board is only their deductible."
Got that? While the Camardas are probably shelling out into seven figures and climbing to sue the Board (by Kitces' estimate), the Board's costs are limited to a flat deductible. No wonder the Board has appeared little concerned about the Camardas' suit and seems unconcerned that an adverse decision in the suit might lead to a flood of similar lawsuits.
Other challenges are likely to cost CFPs—likely with more limited resources—similar sums. Most CFPs, then, have virtually no recourse to any actions taken against them by the CFP Board.
