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Your Financial Advisor Files for Bankruptcy. Should You Be Worried?

You trust your financial advisor to be knowledgeable and trustworthy, but financial setbacks can affect anyone. What if your financial advisor files for bankruptcy protection? Would you still trust their advice?

Most investors understandably assume that financial advisors are immune to economic problems that plague the lives of everyday people. However, that’s not the case. They can be in extreme debt. They make mistakes. In this post, we’ll break down what you should do if the person giving you financial advice files for bankruptcy.

CFP Board Discloses CFP Planner Bankruptcies 

The Certified Financial Planner Board of Standards, Inc. (CFP Board) is a non-profit organization that sets and upholds standards for financial planning.

In July 2021, the CFP Board revealed the identities of twenty-four CFP® professionals who had declared bankruptcy while the CFP Board’s prior bankruptcy disclosure process was in effect. These individuals, however, failed to disclose their bankruptcy status to the CFP Board.

A more recent example of broker-related bankruptcy occurred in February 2025, when Stoever, Glass & Co. Inc. closed its doors after filing its recent bankruptcy petition in a Manhattan federal court.

The discovery of these CFP planner bankruptcies came to light during the CFP Board’s comprehensive background checks on all CFP® professionals, which aimed to identify any potential misconduct, such as financial advisors filing for bankruptcy, that had not been previously reported to the CFP Board.

Bankruptcy Disclosure Process

A typewriter that typed out the word ‘bankruptcy,’ such as to indicate CFP planner bankruptcies

The CFP Board’s previous Bankruptcy Disclosure Procedures were operational from July 2012 through June 30, 2020, and they pertained to CFP® professionals who had filed for bankruptcy once. According to the agency, these procedures were established in response to a surge in bankruptcy filings among Americans, including CFP® professionals, during the “Great Recession. ”

Additionally, the CFP Board issued news releases to identify CFP® professionals who had publicly undergone bankruptcy proceedings. You can review CFP planner bankruptcies, disciplinary information, and certification statuses with the CFP Board at CFP.net/verify.

Protecting Your Financial Future

Of course, not everyone, especially certain financial advisors who file for bankruptcy, agree with the CFP Board’s disclosure standards. Some claim that personal bankruptcy is not pertinent to their financial practice. On the other hand, financial troubles could tempt an unscrupulous individual to trade more than usual, even churning your account, costing you commissions for trades that might not be in your best interest.

Easy Way to Check Your Broker – FINRA BrokerCheck 

Most CFP professionals fall under the jurisdiction of the Financial Industry Regulatory Authority (FINRA) and/or the U.S. Securities and Exchange Commission (SEC). Because of that, investors can perform a free search for their broker or advisor with FINRA’s BrokerCheck.

The FINRA BrokerCheck tool is a free online tool that allows investors to research and verify the background and credentials of financial brokers, brokerage firms, and investment advisors registered with FINRA. You can also use this tool to see when a financial advisor files for bankruptcy.

FINRA BrokerCheck provides investors with detailed information about a broker’s or advisor’s professional history, qualifications, and regulatory actions of brokers and brokerage firms. Investors can use the tool to verify whether a broker or brokerage firm is registered with FINRA.

It’s also a great way to review their employment history, licensing status, and any regulatory complaints or actions filed against them. That includes CFP planner bankruptcies, if they exist. Bankruptcy judgments within the past ten years are reportable and will be reflected on an advisor’s BrokerCheck profile.

Disclosure Events on BrokerCheck Profile

Learning when a financial broker files for bankruptcy is essential. However, it’s not the only thing brokers must report. The following is a list of disclosure events you may find on your broker’s profile:

  • Customer Complaints are complaints filed by clients alleging misconduct, such as unauthorized trading, misrepresentation, or unsuitable investment recommendations.
  • Regulatory Disciplinary Actions: Actions taken by regulatory authorities, such as FINRA or the SEC, against the broker for violating securities laws or regulations. These actions could include fines, suspensions, or even barring from the industry.
  • Arbitration Awards: Decisions made by arbitration panels in disputes between the broker, clients, or other parties. These awards may involve monetary damages or other remedies.
  • Criminal Charges or Convictions: Any criminal charges or convictions related to financial crimes or other offenses.
  • Employment Separation After Allegations: Instances where the broker was terminated or resigned from a firm while under investigation for alleged misconduct.
  • Financial Judgments or Liens: Legal judgments or liens against the broker related to debts or financial obligations.
  • Bankruptcies: When a financial advisor files for bankruptcy, it’s a disclosure event. Seeing a broker or advisor repeatedly go through the bankruptcy disclosure process may indicate financial difficulties.
  • Regulatory Examinations: Records of regulatory examinations conducted by authorities such as FINRA or the SEC, which may reveal findings of non-compliance or deficiencies.
  • Educational Background: Information about the broker’s academic qualifications and certifications, including any disciplinary or regulatory actions related to educational credentials.
  • Civil Litigation: Involvement in civil lawsuits related to securities fraud, breach of fiduciary duty, or other legal disputes.

Frequently Asked Questions (FAQs)

Can Financial Advisors Get in Trouble?

Yes. Financial advisors and brokers can face disciplinary action or legal consequences for not following industry regulations, participating in unethical conduct, not disclosing earlier bankruptcy judgments, or not acting in their clients’ best interests. If someone in an advisory role violates any regulations, they can face fines, suspensions, permanent bans, or criminal charges.

Do Financial Advisors Have to Disclose Bankruptcies?

Yes. FINRA-registered financial advisors and those working under the CFP Board must disclose bankruptcies. Seeing a bankruptcy filing in an advisor or broker’s history doesn’t always mean you should avoid partnering with this professional. Instead, this information is available to promote transparency within the financial industry.

What Is Investor Abuse?

This type of abuse happens when a financial professional engages in deceptive, unethical, or illegal activities that cause harm to their clients.

Examples of investor abuse can include:

  • Misrepresenting financial risks
  • Unauthorized trading
  • Conflicts of interest
  • Providing dangerous investment recommendations

Protecting Your Rights: Speak With National Securities Attorneys

Your broker’s history is your business. Sometimes, financial advisors file for bankruptcy. It happens. However, it doesn’t necessarily indicate a broker’s character or trustworthiness. However, other events may tell you more about bad character or broker misconduct, which can lead to investor abuse. Consumers have the right to get as much information as possible to make an informed decision, including finding out about CFP planners’ bankruptcies.

For a free consultation with our national securities fraud attorneys, please call the firm at 1-888-637-5510. 

The White Law Group, LLC, a national securities fraud, securities arbitration, investor protection, and securities regulation/compliance law firm with offices in Chicago, Illinois, and Seattle, Washington, is providing the foregoing information, which is all publicly available.

For more information on The White Law Group, please visit our website at https://whitesecuritieslaw.com.

 

Tags: , , , , , , , , , , Last modified: May 21, 2025

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