Reg Rep & Bankruptcy - Help

Discussion in 'Professional Trading' started by desperateone, Dec 7, 2002.

  1. Here’s my story and please help me if you can. I came out to NYC 3 years ago to trade at a prop firm. I took my Series 7, 63 and 55 and began my trading career. I didn’t have any lofty expectations for the first 2 years but did expect to start making enough to pay my bills in my 3rd year. However, things didn’t go according to plan. Many of my peers who started in the same training class as I did became much bigger traders than I and are making a living. I cannot say the same for me. So the time has come for me to accept the fact that trading may not be for me. I love trading but maybe I’m not meant to be a trader, maybe a clerk or an order taker but not a trader. The big problem now is that I have incurred a mountain of debt (basically taking credit card advances to pay the monthly expenses) and am considering filing for personal bankruptcy.

    My concern is that, as a registered rep, what are the consequences of me filing for bankruptcy. Will I be able to get another job in this industry or will I be barred (I’d like to stay in the industry)? Will a prop firm ever consider hiring me again or avoid me like the plague? Will I be able to keep my personal accounts where I do more investing? Will it show up on my U4? Who do I have to disclose this information to?

    Also, how hard is it to build up your credit after you’ve got a bankruptcy on your record or are you screwed for 10 years? Does getting a Visa debit card help any or getting a secured credit card? I’ve learned my lesson and plan to stay away from unsecured credit cards but I would like to buy a car or a house sometime in the next several years.

    Any information would be greatly appreciated. On a side note for those who are just a little curious, I did not use my real name. I do not expect any sympathy as I’ve brought this upon myself. On the same token, this is a tough time for me and ask you not to flame me or subject me to any ridicule. I’m just trying to explore my options here. Thanks.
  2. skynet


    Eventhough I haven't gone thru it I can tell you of what i have heard (and is by no means advise, just info):

    1.) Bankruptcy used to be something a lot of people used to frown upon, but no so much these days with the economy ---layoffs right and left. So don't feel bad.

    2.) as for your record with the NASD, it will stay with you for at least 10 years. No harm in it unless your looking to get some high paying job that involves broker sales or financial analyst position or Investment portfolio.

    3.) If you love trading, don't worry too much about your failure. It takes a long time for most to become good at it. Eeryone walks at their own pace. I dont know your situation, but maybe the reason why you are not doing good in trading is because you were trained the wrong way or didnt get enough of it. Maybe you learned too many bad habits that have caused you to loose or not go anywhere. Maybe (trying not to sound like a jerk here)what you should do is get a real job, so that you can support your self and re learn trading from the very beginning. Take as long as you can to learn again. The MARKETS WILL ALWAYS BE THERE. You can always go back to it.

    4.) Getting a trader position at a prop firm after declaring bankruptcy should be no problem (since the bankruptcy is due to not being able to pay bills, not your trading). I've heard of situations were successful traders have file bankruptcy in the past just for a fresh start. Maybe your trading has been affected too much on growing credit card debt.

    hope that info helps
  3. nkhoi


    find another way to pay off the debt, filed b/r will close so many doors that you will have much harder time to find your way out.
  4. Here's the long and short of bankuptcy (like the trading analogy?):

    1) Chapter 7 (liquidating your assets to pay creditors) will stay on your credit report for 10 years. Chapter 13, the so-called "wage earner plan", will stay with you for 7 years--but you'll be required to pay back a portion of your debts.

    2) Since you probably already have bad credit---which stays on the report for 7 years--, you should ask yourself, "Do I want bad credit for 7 years after which time I'll still owe the debts, or do I want to have bad credit for 10 years and not owe the debts?"

    3) You have to disclose bankruptcy on a U-4. Some exchanges
    require a period of time to lapse after the bankruptcy is discharged before you can qualify as an affiliated person. I think
    I was told the Chicago Stock Exchange doesn't, but I may be wrong abt this. PHLX used to require 3 years. These are definitive
    considerations if you want to be registered in any capacity.
    I also think any exchange requiring a time lapse is arguably violating federal bankruptcy statutes, but it's unlikely you'll have the resources to challenge that issue---and no firm is going to do it on your behalf.

    I have to wonder though, why you want to remain in the industry
    since trading v. real work seems to be the source of your problems. I know this is a tough pill to swallow. Get away for a few years. The market will always be there (until the big rock hits the Earth and then it won't matter anyway).

    Trust me on this when I say it sounds like you have a gambling problem.
  5. I really appreciate the feedback.

    Whether I declare bk or not, I’m still stuck in a tough situation. So far I’ve figured out that I’m going to move out of NY and back home with my parents (not something I’m looking forward to at 32) to cut out about $2k a month in expenses. Also, I do plan to take at least a year off from trading and get a real job. If there is an opportunity for me to get back into trading then fine and if there isn’t then there isn’t.

    I’m not blaming anyone for my failure. I was given a great opportunity and expected too much of myself. I was more concerned about how I was doing against my peers rather than focusing on my own personal growth as a trader so I was conservative when they were aggressive and aggressive when they were conservative. When I finally realized this (about 6 months ago) and focused on my own trading, I made drastic improvements. My trainers continued to encourage me as they felt I had “it” and it was just a matter of time until I became a successful trader. Although I do see that I’m doing better, the one thing that escapes me is consistency. I can have swings either way but I hardly ever put a string of winning days together. I’m not sure if I’m a gambler or not (maybe a dreamer) because I never had huge commissions or any “blow-out” days. And there is no question that my credit card debt was weighing on my mind as I traded.

    Anyways, reality is that my own time limit is up and I can’t continue to go on thinking that success is just around the corner as the bills keep piling up. It can be 3 months or it can be another 3 years before I hit paydirt. I have considered taking a night job to pay the bills but I think it’s more important to decrease my expenses and my bills seem almost insurmountable at this point. I can’t believe I was so irresponsible with my credit cards.

    When I said I wanted to stay in this industry, I didn’t mean specifically trading but finance in general. I have a degree in finance and am also considering taking my CFA but I thought it would be hard to explain to someone why a CFA has a personal bankruptcy on their record.

    This is a big decision so again, thanks for your help.
  6. Aaron


    Whatever you do, I think you should write a book. You've got an interesting story people can learn from. What advice do you have for a young person who wants to start trading?

    Trading is the hard way to make easy money.
  7. Hey desperateone, try this one:

    I too am a reg rep, and considered BK. And yes, you will be blackballed from most firms. You probably will not be considered seriously for any back-office gig, as u have no experience. Believe me, I came into the business as a broker with a top 8 investment banker/broker house. You have experience running money and making decisions, try not to go 'backwards' if u can. Maybe work with a top broker as a sales asst. or something, and study for the CFA. Your experience in NYC will be appealing to most firms not in NYC- i.e. when u move back to your parents' town, you'll be 'da man'.
    Now, as far as credit, I'm trying this law firm that specializes in fixing bad credit, atty Jack Schrold, 877-929-3324; cost only 29 bucks to start and 50 a month to continue seeing improvements in your credit. Try that first before filing BK. Don't like their service, file bk anyway.
    In our business, BK is like having a felony record. We're not criminals cause we filed BK, but in this regulated industry of ours, you'll be labeled. And it goes on your U4.
    By the way, I'm 33. I feel your pain.
    PM or something if u want more info.
  8. I don’t know about writing a book but I have no problems sharing a few insights that I’ve learned. I’m sure it’s not anything that hasn’t been already said or written but for what it’s worth, here goes (in no particular order):

    - Trading is serious business. If someone is looking for a quick buck then I would advise another route. Nothing against the younger traders or those that just graduated from college but it is of utmost importance to adopt a strong work ethic. Now some traders require no homework and others require 90 hours a week. Most of the successful traders I know work very hard because of the market environment in the past 2 years where one style would work for a couple of months and then all of a sudden it wouldn’t (this cycle continued to repeat itself many times over). The reason why these successful, seasoned traders are where they are is because they are always prepared and willing to adapt. We are at the office at least an hour before the open and at least an hour after the close to see how stocks react to news. Some may view this as overkill but this helped me understand the macro view of the market as I used to get caught up in the moment and only concerned myself with the next hour or so. I was fortunate enough to become friends with a couple of top traders of the firm and was able to absorb an immense amount of knowledge.

    -Personal growth as a trader. Many traders fall into the trap of only concerning themselves with the bottom line. It’s a Catch 22, the only thing that matters in this industry is whether or not you’re making money. I found that the more I thought about the money the more I would push myself if I was down and at the same time would pull in the reigns when I was up. It doesn’t matter how everyone else is progressing, it only matters if you are progressing. I would suggest that new traders focus on trading by asking themselves various questions. For instance, was the trade a good set-up? Was this a high risk (smaller shares) or low risk (bigger shares) trade? One suggestion that really has improved my trading has been to plot my equity on a chart along with volume (commissions). This allows me to measure my progress and shows me how I’m doing overall. It paints a picture of my performance and any pivotal points are right there in my face of which I make a note. For example although I knew I was in a slump, I didn’t realize how much of a slump I was in until I looked at my chart. It revealed that I was doing it on almost twice my average commission. I then analyzed the market and whether or not I’ve made any adjustments. It turns out the market was very choppy and I continued to be aggressive. Over the next few days, I lightened up my trading and consciously only took only the stand-out plays. Again I only use it to monitor my progress as a trader by analyzing my performance (were my streaks caused by market conditions, a new technique, improved discipline, etc.).

    -One day, one week, one month does not make a career. At my firm, there are 3 types of traders: cowboys who lose money, cowboys who make money and the real traders. The cowboys are the ones who almost always have to have positions on and they are always taking a “shot.” They figure that it’s not their money and if it works out, they’ll have a huge day, not concerning themselves with the consequences. They often have huge, inconsistent swings in their accounts. Granted some of these have been able to make good money but they certainly risk a whole bunch. Some people are attracted to this type of trading (read gambling) and it can be exciting but unless you’re seasoned and willing to take big hits then you’re not ready for this. I know a trader who has 2 years of experience that often has $10k swings in his account but that’s his style and he does make money. It took me quite a while to get used to these types of swings but I got the hang of it. Eventually I found that the real traders (those who take big swings and those who don’t) were more concerned about making a little bit everyday and when the opportunity presented itself, to capitalize on it. There are going to be times when the conditions are not conducive to good trading (not making money) and there are times when it is. In other words, these successful traders are willing to wait out the market until they saw their set-up and thus able to build their account one day at a time, one week at a time, one month at a time.

    -There is more to life than trading. As been discussed several times in many threads, everyone has their own definition of happiness. My definition was that if I were a successful trader then I would be a happy person. I was wrong. I moved to New York for this opportunity and left my family, friends and life back out on the west coast. I figured that by engulfing myself in trading that I wouldn’t have to worry about enjoying my life. For the first several months it was fun to explore a new city but eventually that fizzled away. As trading became tougher, the harder I worked at it and at the same time, the more I avoided how lonely this city can be. It was only until the last few months that I decided to relax a little and see what this city is all about. As down as I was mentally, I ventured out and started enjoying myself. Whenever I accomplished a short-term goal, I would go out for a decent (not exorbitant) dinner. Whenever I had a tough couple of days, I would go for a free stroll in Central Park. The point being that to succeed in anything in life, you have to be happy as a person. Work is work and you can’t attach any self-worth to it and you can’t take that feeling home as well. As traders, we basically don’t contribute anything to society. I know some traders who volunteer at a soup kitchen every weekend to feel a sense of benefiting others.

    Sorry for the length but I’ve had some time on my hands as of late. Anyhow I hope it helps others.
  9. Aaron


    Excellent post. You've lost a lot of money but gained a lot of wisdom. It might turn out to be a good trade yet.

    I'm still working on your last two points. You said them well. Trading is like bricklaying. You just do the same thing over and over and try to build your wall a little higher each day. You don't just throw all your bricks in the air and hope they land in the shape of a wall! If you want excitement, go to Las Vegas.

    And I need to keep working on having a life besides trading. It helps give me perspective after a lousy day of trading to work on something other than a bag of chips in front of the television.
  10. I can't comment on the Professional ramifications of filing Bankruptcy but I can clue you in to some personal stuff...

    As a former Finance Manager in the car business (among other things the job entailed getting difficult loans approved) I can state for a fact that a CLEAN bankruptcy filing is held in better regard by most lenders than some of your other options. Consumer credit counseling, chapter 13 and some of the alternatives to chapter 7 discharge are just as bad if not worse than wiping out the debt. They just prolong the misery and do not help your credit score - many of the creditors continue to post late payment history as vindictively as they can (cell phone companies are the worst).

    What do I mean by "clean"? That up until the bankruptcy filing you had near perfect or excellent credit, without late payments or collections. This shows a lender in the future that bad things can happen to a good person - this is what the bankruptcy laws are designed for. If you were a very good bill payer prior to the bankruptcy, it is not the end of the world. With a good story and decent sized downpayment for a car or home you won't have too much trouble but will pay somewhat higher interest rates. This is fair.

    If you already have a whole bunch of 30, 60 and 90+ day lates or collections on your credit report then your credit is already shit - future lenders will know you were just an irresponsible credit user and bill payer and you will have a very hard time getting credit whether you go bankrupt or not (except for secondary market/high risk credit - VERY HIGH RATES).

    If you already have some charged-off accounts you might as well file bankruptcy because it has the exact same effect.

    One of the things that loan officers look for is multiple time frames of bad payments - I.E. you didn't just have a 6 month stretch of late payments due to job loss or divorce, instead you have batches of late payments stretching back through your whole credit history. This shows that a person is just a plain old poor credit user.

    I have had many automobile customers that were nice, professional people that had tough circumstances in their life and it seems that it takes about 3 to 5 years to truly re-establish credit after a bankruptcy. But if you were an excellent bill payer prior to that it is more like 2 to 3 years.

    You can also pick which accounts to keep so if there is any way to consolidate the debt on the cards and keep 1 Visa/MC card (with the highest credit line) off of the bankruptcy (with a ZERO balance) - this way you can still rent cars, buy plane tickets, etc. - make sure you pay it off at the end of every month and DO NOT carry a balance on that card. This will help your re-establishment dramatically.


    #10     Dec 9, 2002