A State Investigator, the Financial-Adviser ‘Heir’ and an Elderly Client: How Lines Get Blurred in Insurance Regulation
April 9, 2019 by Gretchen Morgenson
state investigator concluded a financial adviser acted unethically and violated Maryland insurance laws when he received a windfall from an elderly client’s estate. An arbitration panel then blasted the adviser’s firm for what it called seriously deficient supervision. The firm also wasn’t qualified to operate in the state at the time.
What happened next? The investigator was fired. The adviser and firm faced no regulatory action.
Financial advisers who sell insurance products are policed primarily by state insurance regulators, but some are also overseen by federal regulators. This case highlights how questionable financial conduct can occur under that regulatory regime.
State insurance regulators are vastly outnumbered by the people and companies they must oversee. There was just one antifraud enforcement official for every 10,000 licensed insurance producers in 2017, compared with one for every 8,325 producers a decade ago, according to the National Association of Insurance Commissioners. And state regulatory budgets as a percentage of their revenues have fallen in that time to an average of 5.9% from 8.3%.
Click HERE to read the full story via The Wall Street Journal.