Bankruptcy and FINRA registration

Two of the most common questions we get asked concerning bankruptcy and FINRA registration are:

Can I lose my FINRA Registration if I file for bankruptcy?
Will my FINRA application be denied if I have filed bankruptcy in the past?

The answer to both is:

Probably not

Here’s what you need to know.

SHOULD I TELL FINRA ABOUT MY BANKRUPTCY?

Yes, you should tell FINRA about your bankruptcy

Bankruptcy must be reported to FINRA, but will probably not cause you to lose your registration or have your application denied, unless:

You lied on your bankruptcy papers, or
Hid assets

Walker & Walker Law Offices has never had a client accused of, or convicted of, lying on their bankruptcy papers, in over 40 years of filing for bankruptcy in Minnesota.

The FINRA guidelines understand that there are many legitimate reasons to file bankruptcy.

FINRA, like Walker & Walker Law Offices, knows that good people can very quickly face financial hardship that can be resolved with Chapter 7 bankruptcy or Chapter 13 bankruptcy.

WHAT IS FINRA REGISTRATION?

For those that don’t know, FINRA is the Financial Industry Regulatory Authority, and one of the ways they keep the financial industry honest is through registration, credentials, and reporting for financial advisors, brokers, and other finance professionals.

It is not a part of the US government or any state government
It is a private organization that works to make sure the securities and investment industry operates fairly and honestly

To get this registration, an applicant must fill out and file a U4 form.

The U4 application also has a line where the applicant must report liens and judgments.

BANKRUPTCY AND FINRA REGISTRATION

There is a line on the U-4 application where the applicant must list any bankruptcy filed within the last 10 years.

You must list any:

Personal bankruptcy
Bankruptcy of a business where you exercised management control
Involuntary bankruptcy against you

They understand that bankruptcy is a legal and legitimate process, and it can often be wise for someone to file a bankruptcy.

FINRA states that a bankruptcy, by itself does not disqualify anyone from registration

From FINRA’s point of view, the problem isn’t that an applicant filed for bankruptcy, it is whether or not the applicant was honest enough to put the bankruptcy on the application.

If the applicant committed some sort of fraud or deceit in the bankruptcy process, however, then FINRA may deny registration.

Remember:

Failing to pay creditors is not fraud
Fraud is things like running ponzi schemes, or selling people securities of no value

Very few people who file for bankruptcy engage in bankruptcy fraud.

Walker & Walker Law Offices has never had a client convicted of bankruptcy fraud in our more than 40,000 successful bankruptcies in Minnesota over the last 40 years.

Why are those with liens and judgments more risky to investors and employers?

A person with liens and judgments against them is more risky to investors and to employers than someone who has filed bankruptcy.

This is because:

Someone with unpaid liens or judgments against their property is seen as more likely to borrow (or steal) a client’s money to pay their own personal bills

However, a bankruptcy, at least in Minnesota, eliminates most judgment liens, and can modify or eliminate many other types of liens.

Thus, filing bankruptcy can remove a broker’s reasons and incentives to cheat clients.

DUTY TO REPORT

People with FINRA registration must report bankruptcy and liens relatively quickly after they happen.

Bankruptcies and judgments do not only appear on new applications
You must also amend your U-4 if you have one

Walker & Walker Law Offices has filed lots of bankruptcies for people in Minnesota with FINRA registration.

Usually those peoples’ employers feel relieved that the employee filed bankruptcy.

We make sure that these people update their FINRA registration, and then they can focus on building their career rather than living paycheck to paycheck to pay debt.

WHAT TO DO NEXT

If you’ve got money worries and are concerned about your FINRA Registration, then call us at 612.824.4357 now and we’ll give you all the help and advice you need.

Alternatively, fill out our free Bankruptcy Evaluation Form to see if filing for Chapter 7 Bankruptcy or Chapter 13 Bankruptcy in Minnesota is right for you.

We’re looking forward to helping you.