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With the number of bankruptcies among certified financial planners on the rise, the Certified Financial Planner Board of Standards announced Thursday that it will start making CFP holders’ bankruptcies available to the public.
Come July 1, the CFP Board said during a conference call on Thursday that CFP professionals’ bankruptcy filings will be noted on their public profile on CFP Board’s website and will also be mentioned in a news release that CFP Board will issue no less than four times each year.
The board subjects CFP professionals and candidates for CFP certification who have filed a single bankruptcy within the previous five years to its disciplinary process, which CFP Board says has resulted in some outcomes that are not available to the public.
Following a public comment period, which ended on Feb. 17, the board's directors adopted a new procedure for addressing those individuals who have filed a single bankruptcy within the previous five years and are not under investigation by the board for any other conduct.
Under CFP Board’s new procedure, it will disclose all such bankruptcy filings to the public.
Michael Shaw, CFP Board’s managing director for professional standards and legal, said on the call that CFP bankruptcies have been rising steadily over the past several years, with one filing in 2008, eight in 2009, 20 in 2010, 49 in 2011, and 37 filings in just the first quarter of 2012.
Shaw said that “no two bankruptcies are alike,” and attributed the rise to the “expanding number of CFPs,” who now number more than 65,000, and the poor state of the economy over the last few years.
Alan Goldfarb, chairman of the CFP Board’s board of directors, added on the call that that filing for bankruptcy “doesn’t have the stigma that it used to.”
CFP Board received 316 comments on its new bankruptcy procedures with 48% in favor, 42% in favor of the current disciplinary approach, and 10% neutral or in favor of neither approach.
The board announced the same day that it was shortening the full-time experience requirement from three years to two if a CFP candidate works under the direct supervision of a CFP professional when providing direct financial planning services to clients.
The board also announced changes to its discplinary procedures, including allowing the sharing of investigative information with government regulators and industry self-regulatory organizations (SROs). "We’re in discussions right now with SROs and state regulators regarding sharing information," Shaw said.