Beginning as early as January 2015, the Financial Industry Regulatory Authority (FINRA) will start providing monthly reports of its disciplinary actions to state insurance regulators in an attempt to patch a loophole that currently allows brokers who have been barred from the securities industry to sell insurance and other financial products.
At the moment, these reports detailing securities fraud, stockbroker fraud and any other disciplinary actions are only sent to state securities regulators. FINRA has stated that it wants “to be certain that all state insurance regulators receiving this information.”
According to one report published by The Wall Street Journal, the coordination and communication between state securities and insurance departments were faulty at times. In some states, for example, an insurance department is not automatically notified when an agent is barred from the securities industry, leaving that agent free sell insurance-related financial products.
Brokers are generally barred for infractions related to or including misappropriating customer funds, among other types of broker fraud, failing to provide FINRA with information, and selling unregistered securities.
Many states do not have laws in place requiring securities and insurance departments to share information. Further complicating matters is that many state insurance websites do not indicate whether an insurance agent also has a securities license; however, some states are moving to close this gap outside of FINRA. California, for example, has taken matters into its own hands, checking FINRA’s monthly disciplinary reports against its own records and taking action when needed.
Unfortunately, some brokers barred from the securities industry as a result of fraud or other misconduct have committed the same kind of misconduct in the insurance industry. If you or someone you know has been the victim of either securities fraud or stockbroker fraud by an insurance agent, contact us today. The lawyers at Dimond, Kaplan & Rothstein, P.A. have extensive experience litigating securities and investment fraud matters. . Schedule an appointment with us at one of our offices in Florida, California, or New York or contact us to schedule a phone consultation.
