CFP Board CEO Teslik Resigns
Sarah Ball Teslik has resigned as CEO of the Certified Financial Planner Board of Standards to assume a policy position with a Houston-based oil and gas company. Her resignation comes just two years after she was hired, marking the second time in three years the organization has had to deal with the abrupt departure of its chief administrator.
Apache Corp., an oil and gas company, announced Teslik will join the company as a senior vice president of policy and governance. An unidentified CFP Board employee is expected to leave to join Teslik at Apache, according to CFP Board officials. Teslik's resignation as CFP Board CEO will be effective October 31.
Her departure will mark the end of a leadership reign that has been punctuated by controversy since she was appointed to the post two years ago. In recent months, her administration has sparked a firestorm of debate with the release of proposed revisions to the code of ethics and practice standards for the organization's CFP mark certificants.
Under the new rules, CFP certificants would be allowed to opt out of having to serve as fiduciaries for their clients-a provision that has been harshly criticized by advisors, including the Financial Planning Association and its members, who say a fiduciary standard should be a uniform requirement of all CFP certified advisors.
She also raised eyebrows earlier this year when she told a Senate committee that the nation's savings rate crisis could be addressed through the use of medication.
CFP Board officials, however, lauded Teslik for streamlining the board's operation and putting together a quality management team. "If you take a look at her track record, the board was pleased with her-the board wanted her," says CFP Board Chairman Barton C. Francis. "She did a great job of restructuring things and putting together a great team."
Francis says an interim CEO will be appointed to replace Teslik on or around October 24, when the board will be holding a regularly scheduled meeting in Nashville. The interim appointee will come from outside the CFP Board and will not be a candidate for the permanent position, Francis adds.
The board is also expected to begin the process of finding a permanent CEO at the Nashville meeting, with the selection of a search committee. Francis would not speculate on how long the search process will take. Neither would CFP chair-elect Karen P. Schaeffer, who will take over as chair January 1.
Based on prior searches, however, the search could be lengthy. The search that led to the hiring of Teslik, after the sudden resignation of CEO Louis Garday in 2003, took almost 18 months. In fact, since the resignation of longtime President and CEO Robert Goss in 2000, the board has spent about the same amount of time looking for CEOs as it has had CEOs in office.
"Anything is possible," Francis said. "I don't know whether it will take three months or a year or longer."
Given the difficulty of the board to hold onto a CEO for a lengthy period of time, compensation could become a key issue in hiring a replacement. Sources say Teslik was making at least double the compensation of Garday, who, according to the board's 2002 tax filings, received total annual compensation of about $244,000.
In a written statement released by the CFP Board, Teslik said, "It was an exciting period of time to be at CFP Board and I enjoyed the opportunity to shape the future. I want to thank the Board of Governors, the many volunteers, staff and all the stakeholders who supported me in my efforts. I achieved many of the goals I set out when I accepted the position, and I am confident that CFP Board is strong and well positioned to continue to fulfill its mission."
Her critics are looking forward to the change. Harold Evensky, former chair of the CFP Board, says, "I'm much more optimistic about the future now. I look forward to a CFP Board that is sensitive to its past as well as to its future."
Another former CFP Board chair remarked, "There is a God."
Both the interim and permanent CEOs will have their hands full. In her two years, Teslik slashed the staff by more than 50%. While some cuts were justified, it is generally thought she went too far and weakened the organization.
FPA Ponders Prospects For A Win Against The SEC
U.S. appeals court could hand down decision by end of the year.
Trying to predict which way a U.S. appellate court
will rule is a lot like trying to read tea leaves. And attorneys who
work with the Financial Planning Association (FPA) are the first to
admit that, as they await a decision in their longstanding case against
the Securities and Exchange Commission (SEC) and its so-called Merrill
Lynch rule. Still, there is notable optimism among industry executives
who attended the October 5 oral arguments before the U.S. Court of
Appeals in Washington, D.C.
"It's an uphill battle when you're litigating with the federal government, let alone the SEC," says Neil Simon, an attorney who is FPA's director of government relations. "But I was encouraged that the hearing went so long and that the judges asked so many questions."
Particularly interesting, Simon says, was the fact the panel hammered home the point that in 66 years the SEC has never before amended the exceptions that Congress carved out for brokers and others when it wrote the Investment Advisers Act back in 1940.
In fact, the FPA's case centers on the argument that the SEC doesn't have the authority to change Congressional intent. Only Congress does, they argue.
An SEC spokesman declined to comment on the pending case. But industry executives are wondering aloud why the SEC is fighting so fiercely to preserve its regulatory carve-out for brokers when commission staffers admit they're unsure about its impact on consumers. In fact, the SEC just awarded a contract to the Rand Corporation for a major study comparing how different brokerage and advisory regulations affect investors.
FPA officials said after the hearing that they are hopeful that the appeals panel will overturn the SEC's rule, so that brokers who offer financial plans and other advice-oriented programs will have to register as advisors. "We'd like to see the judges vacate the rule, so that brokers who provide advisory services have to live by advisor rules, " said Duane Thompson, the FPA's Group Director of Advocacy. "We'd love for this to be decided on whether or not consumers are adequately protected when brokers get exceptions, but the real issue before the court is whether or not the SEC crafted a rule in violation of Congress's intent."
The FPA appeared to score some major points on this issue with the three members of the appeals panel, who each grilled SEC Senior Litigation Specialist Rada Lynn Potts about whether the SEC has ever before rewritten or expanded the exceptions Congress laid out in the Investment Advisers Act of 1940. "In 66 years has the SEC ever created new or broadened exceptions for one of the 13 people who received exceptions in the original 1940s Act?" Judge Brett Kavanaugh asked the SEC attorney.
Potts, who appeared flustered at several junctures, was forced to answer: "No, it would be consistent with practice, but the SEC has never done it." The appeals panel also appeared to have problems with the SEC's use of the term "special compensation," which Potts seemed to suggest was a reason not to give exceptions to brokers later adding "only these new fee-based accounts would fall into this [lack of exception]."
"Legal history suggests that if you're defining special compensation as anything other than commissions, it hurts your case," Kavanaugh responded.
Merril Hirsh, an attorney with the law firm of Ross Dixon & Bell LLP in Washington, D.C., represented the FPA. While Thompson declined to put a dollar amount on the FPA's legal bill to date, he did say Hirsh agreed to take on the case for a flat fee. Earlier estimates put the FPA's legal tab at $100,000.
Lawyers Don't Like New Law
Nearly a year into the federal government's overhaul of the nation's bankruptcy laws, attorneys say the changes have done more harm than good. In a survey of 700 members of the National Association of Consumer Bankruptcy Attorneys (NACBA), respondents state that bankruptcy filings have increased since the law was adopted.
More than two-thirds, 68.5%, say their bankruptcy filings were up in the third quarter compared to the first half of the year. More than half of the attorneys, 57.5%, expect filings to reach their pre-reform levels by the time the one-year anniversary of the measure arrived October 17.
Attorneys indicated that the bankruptcy law changes have made it harder for consumers by increasing expenses and paperwork involved with bankruptcy filings. More than three-quarters of bankruptcy attorneys say the time involved in preparing a bankruptcy filing has gone up by 50% or more.
An overwhelming majority of respondents, 92.8%, say that bankruptcy reform has mostly increased costs, compared with 0.7% who say it has mostly improved results.
Among the other survey findings:
Fewer than a third of bankruptcy attorneys are seeing an increase in forced Chapter 13 repayment filings, which is contrary to what proponents of the changes projected.
More than 60% of bankruptcy attorneys report a jump in consumer inquiries about bankruptcy.
Attorneys say the "vast majority" of bankruptcy cases involve unforeseen expenses rather than wasteful spending. Among the most common causes of bankruptcy filings, they say, are medical expenses, unemployment, home-related debt and increased credit card interest rates.