(In Part I of this two-part blog series, I discussed the ins and outs of the CFP Board's proposed new rules regarding advisor bankruptcies. In Part II below, I present the arguments for and against the proposed rules.)
So what, specifically, are the arguments both for and against the bankruptcy rule change? And how can you most effectively voice your opinion?
Arguably, the CFP Board's existing policy regarding bankruptcy (that can result in public admonition, suspension or revocation of the mark) was also a matter of public protection, too. The unfortunate reality is that those under financial duress do represent an elevated risk of conducting other improprieties with clients, from inappropriate recommendations in an effort to earn a little more income to the outright misappropriation of client funds in some extreme situations.
From this perspective, the CFP Board's change arguably represents a step down in public protection, as public disclosure of questionable conduct (assuming the public even seeks to verify their financial planner's CFP certification on a regular basis, which is doubtful) is clearly a lesser standard than simply barring that individual from the marks in the first place.
On the other hand, barring individuals from CFP certification doesn't prevent them from still engaging clients in the financial services industry, and the reality is that neither FINRA nor the SEC bars an individual for bankruptcy, either.
I suspect some people will object to the CFP Board's proposed rules simply on the basis of the public disclosure itself. Is it "fair" that the CFP Board will announce an individual's prior financial difficulties for the world to see, for up to a decade after the event has happened, as the new rule proposes? Should it do so in a world where a bankruptcy can affect everything from your credit to your ability to get a job?
On the other hand, if a hiring firm presumably cared that much about an individual's prior bankruptcy, they could just ask anyway, or run a background or credit check, and find out the same answer. And the reality is that a prior bankruptcy must already be disclosed by FINRA registered representatives on their U-4, and by RIAs on their Form ADV Part II, so the new CFP Board disclosure doesn't necessary put forth information that wouldn't already have been public.
Questions, Questions
