At the heart of the debate surrounding the Department of Labor's effort to enforce a fiduciary standard of care throughout the retirement services industry is the question of whether or not brokers of retirement products should be regulated as advisors, especially if they market themselves as such.

But what happens when an RIA makes a commission on a retirement product after marketing themselves as a fee-only advisor?

In the case of advisors designated to carry credentials from the Certified Financial Planner Board of Standards, the consequences of a fee-only advisory misrepresenting itself were made clear when a federal judge recently threw out a claim against the standards board.

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For more than two decades, Jeff and Kim Camarda operated their advisory businesses under the CFP designation.

As part of being a certified CFP, both advisors were beholden to the CFPB's standards of professional conduct, one of which says advisors can only market themselves as fee-only providers if they are just that—meaning they cannot be compensated by commission on the products they recommend.

In 2011, CFPB notified the Camardas, alleging breaches of that standard, because Camarda Financial Advisors and Camarda Consultants LLC shared common ownership, and the former advertised itself as a fee-only CFP advisory, while the latter accepted commissions for selling insurance products.

The two entities had a mutual referral arrangement, according to court documents.

Ultimately, CFPB's disciplinary and ethics commission found that the Camardas had inappropriately marketed themselves as fee-only, a decision the CFPB upheld on appeal in 2013.

That authorized the CFPB to issue a public letter rebuke, a disciplinary measure allowed under the CFP charter.

The Camardas then sued in U.S. District Court for the District of Columbia, in part on the grounds that CFPB breached its contract and violated the Lanham Act, the federal statute governing false advertising laws. They argued throughout the process that their two businesses were "separate and distinct legally formed and organized entities under Florida law," according to court documents.

But the court found that CFPB had not breached its own rules and regulations when citing the Camardas for the conflict of interest, and that they failed to provide any evidence that the CFPB wasn't following its own procedures.

"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, wrote Judge Richard Leon, in reasoning to throw out the Camardas' claim.

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Nick Thornton

Nick Thornton is a financial writer covering retirement and health care issues for BenefitsPRO and ALM Media. He greatly enjoys learning from the vast minds in the legal, academic, advisory and money management communities when covering the retirement space. He's also written on international marketing trends, financial institution risk management, defense and energy issues, the restaurant industry in New York City, surfing, cigars, rum, travel, and fishing. When not writing, he's pushing into some land or water.