NAIC to Expedite Info on Agents Who Lose Advisor License
June 16, 2015 by Arthur Postal
The National Association of Insurance Commissioners plans in July to start forwarding information on insurance agents who have been reprimanded for financial wrongdoing.
The NAIC is setting up a system to get the reports from the Financial Industry Regulatory Authority (FINRA) and pass them to states, then commissioners will look at privacy issues and other concerns, said Steve Gouch, a spokesman for Utah commissioner Todd Kaiser.
Kaiser is the head of an NAIC task force set up last winter to ensure greater communication between financial regulators about wrongdoing by people selling financial products. The effort followed media reports that a percentage of insurance agents who had lost their financial license on the federal level still had their insurance license at the state level.
The process has been expedited, which is a concern for the National Association of Insurance and Financial Advisors (NAIFA).
Gary Sanders, NAIFA counsel, said his association supports improved information sharing between securities and insurance regulators, adding that, “It is important that regulators work together to protect consumers and ensure the integrity of the advisory profession.”
However, Sanders said that certain conditions should be in place before insurance regulators use an expedited process to revoke the license of an agent who has been barred from the securities industry. Sanders said an expedited revocation should be limited to situations where the securities license was revoked for matters involving fraud, dishonesty or conversion of a client’s funds following a hearing where the licensee was given the opportunity to be heard and present evidence.
Sanders said “any such action would be reciprocal in nature, meaning that if either the insurance or securities license was revoked under the conditions specified above, then the other license would be subject to expedited revocation.”
Such a protocol won’t be in place when the system launches, Gouch said. He said under the agreement with FINRA, an NAIC official will receive the information from FINRA officials about individuals banned from the securities business by FINRA and pass it on to state regulators. Gouch said the system will be informal until the NAIC crafts a more formal procedure.
The NAIC is hiring someone to ensure that FINRA data is transmitted to state insurance regulators until an automated system can be established, Gouch said.
The Wall Street Journal recently reported how little monitoring was being done in many states of the activities of brokers who had been banned from the securities business. The WSJ said that its review of industry records indicated that, as of Dec. 1, at least 13 percent of the 395 brokers barred in 2013 by FINRA still had their insurance licenses.
