Form U-4 requires disclosure of bankruptcies and compromises with creditors, among other financial disclosures for all registered persons. Brokers have been wondering if the forgiveness of a PPP loan constitutes a compromise with creditors, which would require disclosure.
This is not as odd a question as it might seem, as FINRA sometimes contrives odd interpretations of its own language. Ask me about FINRA's definition of conversion, which is materially different than the dictionary definition and the legal definition. Or the time I represented a broker when FINRA tried to take the position that his agreement in family court to an alimony payment plan is a compromise with creditors, which he failed to disclose. We prevailed in that instance as well, but FINRA has taken the position that settling a mortgage through a short sale was a compromise with creditors and disclosable, as well as settling a credit card debt for less than owed.
However, this time, they are in agreement with common sense. The PPP loans, when forgiven if used in accordance with the government program, are not compromises with creditors. FINRA agrees, according to Financial Advisor IQ.
We will update when we have word directly from FINRA
