Effective Date: 6/17/2013
In April 2013, following a review by CFP Board’s Ad Hoc Disciplinary and Ethics Commission (Ad Hoc Commission), CFP Board issued a Letter of Admonition to Mr. Goldfarb. The Ad Hoc Commission determined that Mr. Goldfarb misrepresented his compensation, first as “fee-only” and later as “salary,” on an online financial planner database. CFP Board’s Terminology Section of its Standards of Professional Conduct (Standards) states that compensation is “any non-trivial economic benefit” that a “[CFP® professional] or related-party receives or is entitled to receive for providing professional activities.” Further, under the definition of “fee-only” in the Terminology Section, a CFP® professional may describe “his or her practice as ‘fee-only’ if, and only if, all of the [CFP® professional]’s compensation from all of his or her client work comes exclusively from the clients in the form of fixed, flat, hourly, percentage or performance-based fees.” CFP Board’s definitions of “compensation” and “fee-only” prohibit a CFP® professional from referring to his or her practice as “fee-only” if any of the compensation received by the CFP® professional and any related-party, such as the CFP® professional’s employer, is comprised of compensation other than the types of fees identified in CFP Board’s definition of “fee-only.” The Ad Hoc Commission determined that Mr. Goldfarb was an employee and part owner of a registered investment adviser (RIA), registered with the Securities and Exchange Commission, and that Mr. Goldfarb was a registered representative and part owner of a broker-dealer affiliated with the RIA. Based on public regulatory filings and information received from Mr. Goldfarb, the Ad Hoc Commission determined that the RIA and the broker-dealer received or were entitled to receive compensation such as commissions and 12b-1 fees. Therefore, the Ad Hoc Commission determined that Mr. Goldfarb misrepresented his compensation model as “fee-only” because he and/or his employer received or were entitled to receive compensation that did not come from clients exclusively in the form of fixed, flat, hourly, percentage or performance-based fees. In addition, the Ad Hoc Commission determined that when Mr. Goldfarb changed his compensation method from “fee-only” to “salary”, “salary” was not “an accurate and understandable description of the compensation arrangements being offered,” as is required by the Standards. The Ad Hoc Commission determined that Mr. Goldfarb’s clients paid commissions and/or fees and not a salary for services rendered by Mr. Goldfarb and/or his employer. The Ad Hoc Commission determined that Mr. Goldfarb’s conduct violated Rules 2.1, 2.2 and 6.5 of CFP Board’s Rules of Conduct, providing grounds for discipline pursuant to Article 3(a) of CFP Board’s Disciplinary Rules and Procedures. Accordingly, the Ad Hoc Commission admonished Mr. Goldfarb with regard to the above-mentioned conduct.