On Monday, the CFP Board announced that it has retracted its prior disciplinary actions against seven CFPs, whose only ethical violations were filing for bankruptcy, along with the names of 112 other CFPs who have filed for bankruptcy within the past five years. These retractions and disclosures where made pursuant to new rules adopted by the Board last April, which took effect on July 1.
Under these new rules, the Board “will no longer investigate, and the Disciplinary and Ethics Commission will no longer adjudicate, bankruptcy-only cases … The new rules also provided any CFP® professional who, as a result of having a bankruptcy-only case, received a public discipline from CFP Board, with the option of applying the bankruptcy disclosure procedure retroactively.” For the record, those “public disciplines” included the suspension or revocation of the CFP mark and a public letter of admonition.
The bankruptcy of a Certified Financial Planner is one of the thorniest issues faced by the CFP Board. On the one hand, it’s a public relations nightmare: at a bare minimum, financial planning is supposed to keep people out of bankruptcy court, and financial planners who fail to keep their own financial houses in order are easy targets for today’s “sound-bite” media.
I suspect those earlier, now seemingly harsh “public disciplines” were written at least in part, with an eye toward the damage this kind of media exposure could have done to the credibility of the fledgling planning profession.