April 5 (Reuters) - The names of all certified financial planners who file for bankrupty will be publicly available under rule changes announced on Thursday by the group that oversees CFPs.
Previously, the Certified Financial Planner Board of Standards, a nonprofit based in Washington, would only release the names of CFPs who had been publicly sanctioned for having a bankruptcy filing.
CFPs could avoid this public sanction by convincing the board that the bankruptcy was not their fault, for example, because it resulted from medical costs. A few of the 49 CFPs investigated last year were able to keep their sanctions private, the board said.
The change, which takes effect in July and covers bankruptcy filings of the past five years, comes as an increasing number of the U.S.’s nearly 66,000 CFPs are filing for bankruptcy. The 49 investigations last year were a jump from 20 in 2010 and eight in 2009.
Bankruptcy filings have risen due to both a lagging economy and an increase in the number of CFPs. There is also less of a stigma in filing for bankruptcy, said Alan Goldfarb, chair of the organization’s board of directors.
Aside from putting the names of CFPs who have filed for bankruptcy in one of its periodic press releases, the board will make note of the bankruptcy filing on the CFP’s profile page on the board’s website. It will stay up for 10 years from when the board found out about the bankruptcy filing.
Before these changes, bankruptcies would be listed only on the profiles of publicly sanctioned CFPs.
Clients have the right to inquire about a CFP’s bankruptcy, even if those financial troubles weren’t the CFP’s fault, said Michael Shaw, a managing director of professional standards with the CFP Board. He added, however, that he’s never seen a client harmed by a CFP’s bankruptcy.
Those with more than one bankruptcy filing, or a different kind of disciplinary problem, will still be investigated by the CFP board, and could potentially permanently lose their designation.
The disclosure changes were just one of several policy changes the board announced. Other changes included:
* Candidates for the CFP mark can now obtain the designation even if they have filed for bankruptcy. Before they had to wait for five years after their bankruptcy filing.
They’re not entirely in the clear, however: the bankruptcy will be noted on their online CFP profile for 10 years once they become certified. And it’s still the case that if someone has more than one bankruptcy, they won’t be able to become a CFP.
* The board will now share investigative information with government regulators, like the Securities and Exchange Commission, and industry self-regulatory organizations, like Financial Industry Regulatory Authority. That takes effect in June.
* The board shortened the length of relevant experience a candidate for the CFP designation needs to two years from three, as long as that time was spent providing direct financial planning services to clients and working under the direct supervision of a CFP. That takes effect in September.
Aside from the relevant work experience, it’s still going to take a bachelor’s degree, 15 hours of course work in a CFP-approved education program, an 11-hour exam and a background check to become a CFP.