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Reg Rep & Bankruptcy - Help

  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. 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. 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. 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. 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.


  11. darn good counseling make me want to file b/r myself :)

  12. I did not mean to imply to take it lightly or even recommend it - if consolidation or something similar can be used to get the debts under control then B/R should be avoided.

    But if the situation is already such that there is many late payments, collections and/or charge-offs then it doens't matter much and IMO a person is better off getting a clean start without the extra pressure of knowing they are are still deep in hock AND still have shitty credit.

    I mean, a B/R vs. 5 charged off accounts that were past due 90 days +, which is worse? - The net effect on your life is the same. Both people would be in the same high risk credit category - and the longer it goes on the worse it is.

    This is why most credit counseling programs and chapter 13 B/R (debt reorganization as opposed to debt discharge) just make things worse - the creditors continue to report the late payments and past due balances - they just can't send you to Collections anymore. But your credit score continues to get worse and worse.

    The other thing to consider is whether or not a person can live with himself/herself knowing that they failed to live up to their obligations. For some people the guilt can be devastating. I have had people break down crying in my office as I probed them for details so I could come up with a good "story" for the loan buyers in an effort to get their loan approved.

    But I just wonder if that is outweighed by all the sleepless nights and sense of doom that people in financial trouble live with constantly. Having been there myself in the past I know this firsthand. It eats away at any quality of life one may otherwise have. Sometimes you just gotta cut your losses.

    I know of people that have made a point of going back and paying off the account balances that were discharged during the B/R - they did that when their fortunes improved because they felt it was the right thing to do - this also hastened their re-establishment because it displays honor and character.

  13. Many SRO's(Self Regulatory Organozations) anf trading firms will not accept traders for a period of time after a bankruptcy filing. I believe it is seven years at our SRO, the PHLX. Please check with a qualified legal advisor , before filing for bankruptcy , especially if you are in the securities industry. Bankruptcy may not be your only option.

    Gene Weissman
    Lieber & Weissman Sec., LLC
  14. Why?

    What difference does a BK have? What happens to a person who is already a member and then files BK, are they then removed from the SRO or trading firm?

    I don't understand? If someone has a BK or judgements against them, how would this effect thier job?

    I thought people who completed a Bk were actually a better risk, cannot file BK for another 7 years?

    If you do not claim this info on the U-4, how would they find out?
  15. F-Trader ,

    Good questions , however , I can't answer these in a general way in this forum. If you do file for bankruptcy, you probably should let your firm(prop firm) , know about it , since it should be reported to your SRO. Remember, as a prop trader, you are trading the firms capital and your membership in the prop firm is subject to SRO(self regulatory organization) approval.

    Gene Weissman
    Lieber & Weissman Sec., LLC
  16. desperate,

    You have to ask yourself who you are before you can come up with a solution. Do you want to be self employed or work for a big firm? Would you rather make 2k a month being a day trader or 6k a month working in the industry for someone else?

    Also, where you are in life is very relevant. For example if you are single and looking to "settle down" then maybe having no money and living with your folks is no big deal. If you want to do whatever it takes to become a profitable trader, then moving back home and lowering your overhead is a great idea.

    Figure that part out and then you will know what the solution is. Don't make a decision on bk until you have decided the above.

    Your answer will probably be somewhere in the middle. If so, then think about getting a job on a trading desk as an order taker (not trader). These jobs are easy to get but only pay $2,500 a month. That way you stay in front of the market. Then check out the succesful prop traders at your desk (most desks have prop) and see if you can get a stake and start trading your own account there. If you do well, the firm will let you trade their capital (with strict guidelines ie no more than 500 shares etc.). If you violate their guidelines you will be fired on the spot. This way you get the best of both worlds - you can trade and you have a job.
  17. I retired at 40, I have no intentions of filing BK-7 :p

    Could you answer just in general why the SRO's do not want people with BK on their record?

    It is my understanding that you cannot file BK for another 7 years after your first BK has been discharged, I thought this made these people more attractive for CREDIT.

    Do firms check your Credit report for BK's?

    What if you fail to report on U-4, how would anyone know?

    I am amazed that someone who has gone thru BK could actually be turned down from SRO, all the CROOKS on Wall Street: Enron, Worldcon, Global Crossings, etc... get away with murder.

    It sounds like someone could actually lose their career "JUST" because of a BK?

    Many people file BK for medical reasons (large bills), death of spouse, divorce, etc... this rule makes no sense to me.

    Just curious?
  18. I retired at 40, I have no intentions of filing BK-7

    Could you answer just in general why the SRO's do not want people with BK on their record?

    It is my understanding that you cannot file BK for another 7 years after your first BK has been discharged, I thought this made these people more attractive for CREDIT.

    Do firms check your Credit report for BK's?

    What if you fail to report on U-4, how would anyone know?

    SRO's probably do not want traders with financial problems , because of the potential for liability(introducing broker) or fraud by the trader who may be in financial trouble. I assume this is the reason for the SRO's concern. Firms could ask you for a credit or background check in addition to U-4 information. Generallly U-4's ask all questions that relates to a traders financial condition. If you willfully do not report acts of bankruptcy or fraud on a U-4, you could be subject to SRO and/or criminal penalities(Read the U-4 form) .

    Gene Weissman
    Lieber & Weissman Sec., LLC
  19. Thanks :D

    Your input is appreciated.

    Being in BK-7 must SUCK!!! :mad:
  20. I hope you don't mind the edit to save space but this is one of the BEST posts I've read on ET. This post has been a real eye opener and really says it all. You are so right. I too, am at a junction where I started to have good winning streaks only to give back all my gains after a losing day to try to "get it back" and do a series of bone-headed trades.

    Now I'm trying to concentrate on controlling my losses and just stop trading for the day if it's not working. I have to learn to truly accept the fact that sometimes the market just doesn't cooperate. I want to be that "real trader" who focuses on making a little bit each day when the opportunity presents itself - not one of those "cowboys" who tries for the one big trade.

    I'm also working on having a more interesting life outside of trading so it doesn't dominate my life. Though that can be tough with a full time job.

    I think I will really reach the next level when I can truly accept the possibility that this might not work out and not feel devastated by this thought - but be able to move on.

    Hang in there desperateone and keep an open mind regardless of what might happen. I think with your insight you should be able to succeed at trading or anything else you put you mind to do.

    I wish you the best of luck. :)
  21. Interestingly enough, that original post was made in 2002. Funny how soem things never change though.

    I wonder how Desperate one is doing now.
  22. Several years ago (2001) I was laid off from a job at an online brokerage firm and was massively in debt and ended up filing for chapter 7. Prior to doing so, I contacted the NASD and they told me that it would not effect my chapter 7 with them, but that each state has a securities administrator and they may handle things differently. I contacted the state securities department of that state and they said it would have no effect on my licenses, so I filed. While going thru the chapter 7, I passed the series 55 exam and moved to another state. I had to disclose all this on my U4 but that was it. I have subsequently changed firms a few times and added a series 24 license. The State that I am in now always requires me to complete a balance sheet of my personal finances when I re-register after switching firms. Someone in that office explained to me years ago that the chapter 7 improves the financial standing of most people, making them less likely to commit fraud than someone deeply indebted, so they almost always tend to approved registrations (series 63) for people who have declared it on their U4. I have even had part-time jobs working for banks and for credit card collection companies since the chapter 7. Interestingly enough a few bankruptcy attorneys were unaware of what the consequences were for filing, if one was in the securities industry, so after exhaustive reading...I was actually informing them.
  23. to continue the thread I found this link regarding the issue.



    My former firm is suing me on a promissory note I signed relating to advance compensation. I offered a nominal amount to settle the matter, which they rejected. I can't afford to pay them what they want--even if they get an award against me. I'm considering filing for bankruptcy, but I'm concerned about the effect on my license. Could I lose my license if I file for bankruptcy?

    --M.K., New York


    Section 525 of the Federal Bankruptcy law states that a government entity may not deny, revoke, suspend or refuse to renew a license, or discriminate with respect to employment against a person solely because that person is or has been a debtor or a bankrupt under the Bankruptcy Act or has not paid a debt that is dischargeable or was discharged under the act. It also states that no private employer may terminate the employment of or discriminate with respect to employment against such a person.

    The failure to pay an arbitration award rendered against you, however, can result in the NASD commencing summary suspension proceedings to revoke your license. Filing for bankruptcy is one way to forestall this action. Still, fraud typically is not dischargeable in bankruptcy. So, if there was a finding of fraud by the arbitrators, the debt may not be wiped out by a bankruptcy filing. As a result, the NASD may still be able to pull your license.

    In addition, where an individual has filed for bankruptcy, the regulators may take a closer look at your record to decide if other grounds exist for denying, revoking or suspending your license. For example, a prior bankruptcy that wasn't disclosed on your U-4 could subject you to revocation or suspension under the "statutory disqualification" provisions of the Securities Exchange Act of 1934. You could also find your license revoked or suspended under the same provision if there is an arbitration award finding you liable for unsuitable investment recommendations. Still, merely filing for bankruptcy should not affect your license.