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When Your Financial Advisor Files for Bankruptcy

When Your Financial Advisor Files for Bankruptcy, featured by top securities fraud attorneys, the White Law Group

Should you be worried when your Financial Advisor files for Bankruptcy? 

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 his or her advice? 

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 prior Bankruptcy Disclosure Procedure of CFP Board was in effect. These individuals, however, failed to disclose their bankruptcy status to CFP Board. The discovery of these bankruptcy filings came to light during CFP Board’s comprehensive background checks on all CFP® professionals, aimed at identifying any potential misconduct that had not been previously reported to CFP Board.  

Bankruptcy Disclosure Procedures 

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. These procedures were established in response to a surge in bankruptcy filings among Americans, including CFP® professionals, during the “Great Recession” according to the agency.

Additionally, CFP Board issued news releases to publicly identify CFP® professionals who had undergone bankruptcy proceedings. to review an individual’s bankruptcy and disciplinary information and certification status with CFP Board at CFP.net/verify 

Protecting your Financial Future

Of course, not all financial advisors agree with the 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 normal, 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). This enables investors to perform a free search for their broker or advisor withFINRA’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.        

FINRA BrokerCheck provides investors with detailed information about the 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 actions or complaints filed against them.  Bankruptcy judgments within the past ten years are reportable events and will be reflected on the advisor’s Brokercheck profile. 

Disclosure Events on BrokerCheck Profile

The following is a list of disclosure events you may find on your broker’s profile:

  • Customer Complaints: 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 violations of securities laws or regulations. This could include fines, suspensions, or even barring from the industry.
  • Arbitration Awards: Decisions made by arbitration panels in disputes between the broker and 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: Declarations of bankruptcy by the broker, which 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 educational qualifications and certifications, including any disciplinary actions related to educational credentials.
  • Civil Litigation: Involvement in civil lawsuits related to securities fraud, breach of fiduciary duty, or other legal disputes.

National Securities Attorneys 

Your broker’s history is your business. A bankruptcy can happen to anyone for any reason; it isn’t necessarily indicative of a broker’s character or trustworthiness. But 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. 

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

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

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




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