Even certified financial planners are falling prey to bankruptcy.

The Certified Financial Planning Board of Standards, which oversees the nation's 64,000 certified financial planners, held 103 disciplinary hearings in 2010, with 20 involving bankruptcies. In 2011, it held 134 disciplinary hearings with 48 cases bankruptcy related.

In its report Certified Financial Planning Board Disciplinary Trends 2008-2010, an estimated 30 bankruptcy cases came before the CFP Board in a three-year period, with bankruptcy topping other disciplinary categories including fraud, criminal conduct, forgery and misleading advertising.

While CFP member bankruptcy cases may be collateral damage from a prolonged anemic economy, bankruptcy filings have nonetheless steadily climbed the past few years, CFP officials said.

"There's no question there has been a trend in increasing bankruptcy filings over the years," says Michael P. Shaw, managing director for professional standards & legal at the CFP Board. "In 2009, we had about eight or nine bankruptcy cases; that number doubled to 20 in 2010 and last year we had 48 cases involving bankruptcy.''

In response, the CFP Board on Wednesday proposed a rule that would eliminate disciplinary proceedings over bankruptcy and replace them with disclosure requirements.

Presently when CFP professionals seek bankruptcy protection, they can face a host of punitive sanctions. The CFP Board now asks first-time CFP applicants and existing CFP licensees, who must renew their certification every two years, whether they've filed for bankruptcy. A bankruptcy within the past five years may prohibit or delay a CFP applicant from being certified. With existing licensees, the Board reviews their conduct to determine if discipline is warranted, including whether certification should be delayed. The Board can revoke the certification of a planner who goes bankrupt a second time within five years.

Under its proposed new rule, the CFP Board would not investigate stand-alone bankruptcies nor would the CFP Disciplinary and Ethics Commission rule on whether the advisory business failure was due to an ethical lapse. Instead, the CFP Board would record the bankruptcy in the mark holder's public profile.

Financial planners who were previously punished for filing one bankruptcy would have the option of having the action retracted and replaced with a notice in their profile.

"We're talking about single bankruptcy cases,'' Shaw said. "What we're proposing to do with those single cases is instead of run them through our discipline process, which we have done in past."

The CFP Board would instead verify the bankruptcy filing and note it in the individual's public profile, which is available through search functions on the CFP Board's Web site, or by contacting the CFP Board about an individual's certification status.

"There's more fairness in the way that these cases will be treated," Shaw said. "They will all be posted on our Web site, and it will be up to members of the public to inquire further, either by conducting their own research into the bankruptcy, or ask questions of the CFP professional that they're considering working with."

The CFP Board says disclosure of the bankruptcy in an individual's public profile would run ten years from the date the CFP Board is notified of the bankruptcy.

The CFP Board is soliciting comments from CFP professionals through Feb. 17 on whether it should change how it reviews CFP bankruptcy filings. Proposed amendments will be presented to the CFP Board of Directors for review and approval in March.

-Jim McConville