Thursday, November 3, 2022

Self-Regulatory Discipline

I've often been skeptical about how vigorously regulatory groups will police their members.   A recent membership revocation from the CFP Board showed little tolerance for one financial services professional's failure "to treat fellow professionals and others with dignity, courtesy, and respect in violation of Standard A.7 of the Code of Ethics and Standards of Conduct (Code and Standards). " 

That rule provides that "A CFP® professional must treat Clients, prospective Clients, fellow professionals, and others with dignity, courtesy, and respect."  What does that mean?  Well, I can tell one thing the CFP Board thinks it requires you not to do.

The public release details how David R. Nute of Sequim, Washington responded to a client who asked about dropping some documents off in person: 

a former prospective Client, who submitted a written grievance to CFP Board, asked Mr. Nute if she could drop off copies of documents needed for a potential transaction in person at his office, rather than transmit them electronically. When Mr. Nute responded that his time was “too valuable” to make the trip to his office to pick up the documents, the former prospective Client sent him an email stating that she no longer desired to work with him. Mr. Nute replied to her email, stating, among other things: “It is totally ridiculous to expect me to drive into town and waste a couple hours of $1,000 hourly time” and “I was only trying to help and your reactions tell me why your husband left you.” 

Max Schatzow memorably characterized the CFP Board as enforcing a "no asshole" rule.

The enforcement proceeding also noted a number of aggravating factors including findings that "Mr. Nute did not treat CFP Board Counsel with dignity, respect, or professional courtesy and frequently referred to CFP Board Counsel in derogatory terms and insulted them in written correspondence and verbally during the hearing."

The CFP Board is a pure self-regulatory organization.  It's essentially a private club.  This means it has much more freedom to enforce vague rules than more quasi-governmental self-regulatory group like FINRA, the NFA, or other registered SROs.

Out of curiosity, I looked up Mr. Nute's practice and found that he operates as a mortgage broker and investment adviser.  The URL to his website includes "reversemortgage." It also includes a number of testimonials from clients attesting to his acumen in procuring reverse mortgages.  He also offers prospective clients, and perhaps the public generally a free copy of his book "Maximize Your Retirement Income and the TRUTH about Reverse Mortgages!"  

He is registered as an investment adviser with Creative Retirement Planning, Inc.  You can find his Form ADV Brochure on the SEC's website.

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