JVC’s JBAR Standards

It was with interest that I reviewed the appraisal standards released by the Jewelers Vigilance Committee (JVC). Their set of standards is not in the least comprehensive. In light of this, one would expect that with so few standards, there would not be a problem with them.

After reading the standards for the fifth time, I was left with the impression that either a) none of the jewelers who embrace the JBAR standards will be able to render any appraisal whatsoever; or b) they will simply embrace the standards and assume they are qualified to appraise without knowing the laws or availing themselves of an appraisal education. Why do I say this?

First of all, the press release stated, “All JBAR appraisers undertake to become familiar with and comply with all laws and regulations applicable to the jewelry industry.” Appraisers do not need to become familiar with the laws that apply to the jewelry industry. They need to become familiar with the enormous body of regulations, codes, and case laws that specifically apply to valuations. I am not saying that jewelry laws are not important, but I am saying that valuation laws are more important. The Federal Trade Commission guidelines for the jewelry industry do not guide us on how to render an acceptable value conclusion, select the correct date of value, avoid being an advocate, avoid rendering a biased report, choose the proper valuation approach (i.e., cost or market data), or how to research a proper marketplace for the assignment. The JBAR’s compass is not pointing north.

I took special interest in the following three standards:

S.1 “Perform only those types of appraisals for which the appraiser has demonstrated appropriate knowledge, skill, and competency.”

P.1 “Ensure that they have the knowledge, skill, and competency to perform the appraisal for which they have been engaged and that all qualifications are disclosed to the recipient of the appraisal services.”

P.5 “Make reasonable efforts to educate self and staff on the skills and knowledge necessary to perform accurate and credible jewelry appraisals.”

Will the JBAR recognize and accept experience as a sole qualification? They will have to or face barring everyone without appraisal training from appraising. Experience is only useful after appraisal training. Almost every trained appraiser I know admits that they did not know how to appraise before they availed themselves of an appraisal education. If I were an untrained appraiser and could only state years selling and buying as qualifications, I would hang up my calculator.

The JBAR will be publishing a book that will include “Sample Legal Protection Language.” That indicates that this section of the book will contain various clauses, perhaps exculpation clauses or disclaimers, designed to protect the appraiser. Yet, the standards clearly state:

“Because JBAR appraisers understand that they take responsibility for the appraisal documents they author, they have agreed to the following standards and practices in performing appraisals of jewelry and gemstones.” So, is the JBAR going to teach untrained appraisers how to use “legal protection language” as a paper shield, or to be responsible for each and every appraisal they render? Are they going to lead the untrained appraiser to believe that he/she can avoid responsibility for bad appraisals by use of some magic language in the appraisal document?

I can almost predict the JBAR response—that jewelers are qualified to appraise jewelry for the purpose of obtaining insurance—indicating that all retailers are qualified because of their experience in the marketplace but only for insurance appraising. Appraisal for insurance purposes is the most misunderstood and abused appraisal assignment and requires as much training as any other assignment. If experience in the marketplace is a sole qualification, then why do we have a great appraisal mess in the first place since all jewelers have experience?

This brings me to another question: Will the JVC mandate that each and every member become qualified before rendering another appraisal? A standard without enforcement on one’s own membership is worthless.

William D. Hoefer Jr., Hoefers’ Gemological Services, Tampa, Fla.

JVC Replies: I am sure that, as a qualified appraiser, Mr. Hoefer understands that one cannot evaluate a product without seeing it, unless that has been fully disclosed. Most of his concerns about JBAR are expressed even though the product is still in development and has not yet been seen. However, JBAR has published its Standards and Practices, on which he makes his assumptions, and this is certainly fair comment.

The idea for JBAR developed from the Jewelers Vigilance Committee’s experience in the investigation and mediation of cases centered on incompetent or fraudulent appraisals written by retail jewelers with no education in the field. Many of these retailers are blissfully unaware of the legal consequences they expose themselves to by engaging in this activity. In past years, the JVC settled several cases before they went to court, where a retail jeweler was about to be sued for large amounts of money based on the appraisal he or she authored.

JVC advocates compliance with the law. JBAR also makes legal compliance a guiding principle for the production of appraisals. Appraisers must be aware that the FTC Guidelines address deception and misrepresentation in the jewelry industry, and that certainly applies to appraisals. Appraisals must be based on an uninfluenced evaluation of the value of an item. Anything else could be deceptive and therefore a violation of the Guidelines and any other state or local laws that apply to this activity. Nothing in the JBAR Standards contradicts the concept of full compliance with all laws applicable to this activity.

There are no plans for JBAR to accept experience as a sole qualification for appraising jewelry, although there is currently nothing to legally prevent such persons from doing jewelry appraisals. In order to encourage better education, JBAR is planning to require anyone seeking a listing in the Resource Book to pass a competency test. In order to train for the test, JBAR will offer a basic home study course in appraisal practice. That course is currently being developed with the assistance of accredited appraisers and is supported by a grant from the JCK Industry Fund.

JBAR contemplates including in its Resource Directory suggested legal language helping appraisers to stand behind their work. Further, the language suggested should disclose to the reader of the appraisal document the use for which it is intended. Since JBAR is still working on this, criticism based on a chapter title alone is surprising from such a respected member of the appraisal “bar” as Mr. Hoefer.

JBAR is intended to confront an existing problem that appraisal organizations and the jewelry industry already face—i.e., unqualified appraisers doing appraisals. JVC estimates that there are, at best, about 1,000 members of jewelry appraisal organizations such as ISA, ASA, NAJA, and AAA. JVC also estimates that there are 20,000 retail jewelers currently writing appraisals, many of them with no education whatsoever. This is the reality. It is not a solution to simply ask these jewelers to stop, especially since there is no legal prohibition, and their customers seek this service. However, one of the first lessons of the JBAR course will be to encourage jewelers to decline to perform appraisals that are beyond their expertise, for their own protection. Instead, they should refer such matters to a more qualified jewelry appraiser such as Mr. Hoefer.

JBAR intends to take over JVC’s current role in monitoring appraisal practices within our industry. In the same way that JVC monitors trade practices within the industry, JBAR will investigate allegations pertaining to appraisal practice and work to educate and solve those problems when they arise.

Incompetent and fraudulent appraisals cause integrity and ethical concerns, negatively impacting the industry as a whole. JBAR is intended to reduce these problems and help jewelers maintain sound and legally compliant business practices. These goals and the goals of the appraisal organizations are the same. JBAR has the support of a wide population of industry members who are hungry for accessible education. We hope it will also have the support of Mr. Hoefer and his colleagues.

Cecilia L. Gardner, Esq., Executive Director and General Counsel Jewelers Vigilance Committee

Questions on Cut Assessment

I just finished reading “GIA to Assess Cut on Reports.” What I would like to know is: Do jewelers really want this? Or is adding a cut assessment the final “nail in the coffin” in making the diamond a true (and profitless) commodity? If jewelers feel this will help them sell more diamonds at higher profit margins, then so be it, but I need someone to explain to me how this would happen, because it violates every rule I learned in business school.

If GIA is doing something that the majority of jewelers don’t want, I suggest that they write GIA and express their displeasure.

Steven R. Martin G.G., MBA, President, M. Martin and Co. Jewelers, Chicago