State regulators are planning to up their scrutiny of former stockbrokers who have been barred from the securities business but still hold licenses to sell insurance and securities brokers often sell insurance in addition to other services and products. Until recently, states had little ability to keep track of expelled brokers who were still selling non-security, insurance-based financial products. Their has been little coordination between state insurance regulators and Self-regulatory organizations (SROs). While, these brokers may still sell insurance after losing a license to sell stocks and bonds, regulators have expressed concern that failing to track such brokers will let some bad conduct slip through the cracks.
The National Association of Insurance Commissioners (NAIC), the body that provides regulatory guidance to states and drafts model laws, has agreed to a framework whereby increased checks will be put in place to keep track of reps who have been barred from the securities industry but are still activley selling insurance. A NAIC representative stated the group’s initiative doesn't’t force state insurance regulators to take any actions against barred brokers, but the new procedures are designed to make it easier for them to spot potentially bad actors.
Many state regulators have been trying for years to close gaps in the transfer of information between state securities departments and their insurance counterparts. In some states, insurance regulators aren't’t even told when an insurance agent in their state has been barred from the securities industry. Insurance regulators often rely on the insurance agents to self-report their dismissal, which understandably doesn't’t always happen.
As of Dec. 1, at least 13% of 395 brokers barred in 2013 by the Financial Industry Regulatory Authority (FINRA) had an insurance license. FINRA is the SRO funded and run by the securities industry.
Brokers were barred in 2013 for infractions including identity theft, misappropriating customer funds and failing to provide Finra with requested information. Under the new policies, NAIC staff will review monthly disciplinary reports put out by Finra that detail whenever a securities broker has been barred. The staff will cross-reference names on Finra’s disciplinary list against the NAIC’s database of insurance agents to see if any match up.
If there is a potential match, an NAIC spokeswoman said, the group’s staff will contact an official in the state where the insurance agent is licensed and ask that further research be carried out to verify that the broker and the insurance agent are the same person. State insurance officials will then be able to update a national system that tracks regulatory actions for licensed insurance agents, flagging the Finra action. The new procedures are stated to go into effect on July 1.
The experienced securities fraud attorneys at Colling Gilbert Wright & Carter have successfully represented investors and recovered damages for FINRA Rule violations and cases involving variable annuities as well as other insurance products., if you have suffered losses as a result of omissions or misrepresentations during the purchase of a security or variable annuity, please contact us for a free case evaluation