Recently, Tom Sporkin, the CFP Board’s newly hired director of enforcement, contributed
As Mr. Sporkin pointed out, his 20 years of service as an SEC attorney make him eminently qualified to serve in the enforcement role the CFP Board adroitly created in the wake of the The Wall Street Journal’s July 30, 2019,
At the same time, Mr. Sporkin is far from the first person to earn a 20-year pension with the SEC and then return to private practice and/or private-sector consulting. As longtime fiduciary advocate and
None of this is intended to impugn Mr. Sporkin’s integrity. However, the CFP Board is now his employer, and the narrative he is spinning is the company line rather than the dogma of the SEC. It is through that lens that I offer the following counter-perspective on his recent public comments.
In his Voices column, Mr. Sporkin writes, “By the time I arrived, CFP Board had already addressed The Wall Street Journal’s primary criticism by adding links on its consumer-facing websites to SEC and FINRA disclosure information. CFP Board had also ended its heavy reliance on self-disclosure as a primary means of detection. It undertook the herculean task of conducting background checks and applied automated technology to cross reference the approximately 90,000 CFP professionals against public databases to identify potential misconduct that had not been self-reported to CFP Board.”
Over the years, the CFP Board has been relentless in its criticism of FINRA’s and the SEC’s enforcement capabilities and even went so far as to produce a
While the CFP Board’s inclusion of these links may be regarded as an improvement given consumers’ proclivity to overlook links embedded in long passages of text, a better solution might have been to add a column to each CFP’s verification page that includes a simple “Y” or “N” for the presence or absence of a regulatory disclosure event.
What is even more troubling about Mr. Sporkin’s remarks is his flippant dismissal of the more than 6,300 CFPs whom The Wall Street Journal reported had failed to report their regulatory disclosures to the CFP Board. The implication of Mr. Sporkin’s comments and of the CFP Board’s June 2021 press release,
From this masterfully spun narrative, one might conclude that only the tiniest fraction of the CFP Board’s members pose a threat to consumers and that the CFP Board has gotten serious about ridding them from its ranks.
Such a conclusion would be dangerously misguided. Aside from the fact that, per BrokerCheck, 23 of the 40 CFPs sanctioned left the industry long before the Board launched its investigations, the Board continues to be willfully blind to scores of CFPs with disclosure histories.
To support this assertion, here is a sample of 10 more CFPs with even scarier BrokerCheck profiles. This sample is a subset of a much larger list I have compiled of hundreds of CFPs with multiple disclosure events and no disciplinary history with the CFP Board as of 2021 — more than two years after The Wall Street Journal story broke. I have redacted the individual CFPs’ CRD #s.
With respect to Mr. Sporkin’s dramatic description of the “herculean” task of conducting background checks on its 90,000 members, for a few thousand dollars anyone can obtain the list of all FINRA- and SEC-registered financial advisors who have disclosure events on their U-4s.
Although the task of cross referencing this list against CFP Board’s membership is a bit labor-intensive for researchers because the CFP Board does not disclose its full membership to the the public, the Board obviously has the full list of its members and could easily run this list against the FINRA/SEC list of financial advisors with regulatory disclosure events in a matter of minutes in Excel.
Given the accessibility of the data, it is difficult to comprehend how the Board’s “historical review” of its members came with a
Beyond Mr. Sporkin’s apparent exaggeration of the extent and exhaustiveness of the Board’s internal investigations regulatory authorities, financial media and consumers should also be collectively concerned by his general downplaying of disclosure events in BrokerCheck. In his column, he claims that “CFP Board found a lot of the information on BrokerCheck (such as dismissed customer complaints) did not reveal wrongdoing.”
Yet when Mr. Sporkin worked for the SEC, he was surely aware that dismissed customer complaints do not necessarily exonerate the financial advisor and that the reason all client complaints remain on an FA’s disclosure record is that the agency errs on the side of the consumer, not the advisor. It is well known in the industry that client complaints are frequently dismissed because the client lacks the time, money and/or legal acumen to pursue the claim. In my own experience as a researcher, I have found that it is not uncommon for financial advisors, including CFPs, to have multiple dismissed complaints pertaining to misrepresentation in the sale of variable annuity products. Dismissals are not proof that the complaint was invalid and may very well be an indicator of a pattern of bad behavior. This view has ample academic support in
With respect to Mr. Sporkin’s dramatic description of the“herculean” task of conducting background checks on its 90,000 members, for a few thousand dollars anyone can obtain the list of all FINRA- and SEC-registered financial advisors who have disclosure events on their U-4s.
Although the task of cross referencing this list against CFP Board’s membership is a bit labor-intensive for researchers because the CFP Board does not disclose its full membership to the the public, the Board obviously has the full list of its members and could easily run this list against the FINRA/SEC list of financial advisors with regulatory disclosure events in a matter of minutes in Excel.
Given the accessibility of the data, it is difficult to comprehend how the Board’s “historical review” of its members came with a
Beyond Mr. Sporkin’s apparent exaggeration of the extent and exhaustiveness of the Board’s internal investigations regulatory authorities, financial media and consumers should also be collectively concerned by his general downplaying of disclosure events in BrokerCheck. In his column, he claims that “CFP Board found a lot of the information on BrokerCheck (such as dismissed customer complaints) did not reveal wrongdoing.”
Yet when Mr. Sporkin worked for the SEC, he was surely aware that dismissed customer complaints do not necessarily exonerate the financial advisor and that the reason all client complaints remain on an FA’s disclosure record is that the agency errs on the side of the consumer, not the advisor. It is well known in the industry that client complaints are frequently dismissed because the client lacks the time, money and/or legal acumen to pursue the claim. In my own experience as a researcher, I have found that it is not uncommon for financial advisors, including CFPs, to have multiple dismissed complaints pertaining to misrepresentation in the sale of variable annuity products. Dismissals are not proof that the complaint was invalid and may very well be an indicator of a pattern of bad behavior. This view has ample academic support in
In sum, the CFP Board has a long and well-documented history of placing its interests above those of the consumers it claims to protect. At issue is not just that there are bad actors among the CFP Board’s membership ranks, but rather that the Board has been consistently and willfully blind to them while, at the same time, spending millions of dollars on advertising campaigns telling consumers that all CFPs have been “thoroughly vetted” and that the CFP Board represents a higher authority and has better enforcement than the state and federal regulators. Such duplicity seems hardwired into the DNA of the organization.
Mr. Sporkin’s commentary is consistent with the pattern of corporate spin at the expense of transparency and consumer interests. His intention is to convince readers that the CFP Board is finally getting serious about enforcement. However, the inconvenient truth is that more than 6,300 CFPs intentionally violated a serious provision in the CFP Board’s Standards of Conduct that required them to self-report regulatory disclosure events. The fact that none of them have been sanctioned for this misconduct suggests once again that the CFP Board is concerned more about the appearance of enforcement than actual enforcement.
Winston Churchill once quipped that “America can always be counted upon to do the right thing … after trying everything else.” For all its efforts to promote itself as a bastion of the fiduciary standard and to create the appearance of zealous enforcement, it is tempting to apply this quote to the CFP Board, too.
However, to date there is scant evidence that the CFP Board will ever truly do the right thing.
