Life Insurer Limited Service B-Ds Look Good In Study Of NASD Actions
While limited service broker-dealers affiliated with life insurers make up more than 50% of the membership of the National Association of Securities Dealers, they account for only 7.5% of NASD disciplinary actions, says a study by the American Council of Life Insurers.
The study by Carl Wilkerson, ACLIs chief counsel for securities and litigation, also shows that during the past year, disciplinary actions against limited service broker-dealers tended to involve relatively small amounts of money.
This contrasts, Wilkerson says, with disciplinary actions taken against full service broker-dealers, which can often involve hundreds of thousands, or even millions, of dollars.
Wilkerson says he has conducted the study annually since 1996 in order to spot trends in NASD actions against limited service broker- dealers and alert ACLI member companies of things they need to be aware of as part of their compliance procedures.
He emphasizes that limited service broker-dealers are not 100% free from deficiencies and life insurers need to carefully evaluate trends.
However, Wilkerson says it is an interesting report card relative to the complaints some raise about the industry. “It is different from the hyperbole you hear from different interest groups.”
For example, he says, issues involving suitability are not very common.
While there have been a handful of publicized actions involving suitability, he says, they, in fact, represent less than 4% of the disciplinary actions against limited service broker-dealers.
Instead, Wilkerson says, the most common element in NASD disciplinary actions involves what could be labeled conversion of funds.
These, he says, are usually one-time instances in which a limited service broker-dealer misappropriates a premium check that was supposed to go to the company.
Given that these are single-premium payments, Wilkerson says, the violations usually do not involve large amounts of money.
It is always helpful in the regulatory context, he says, to have a factual foundation of what is happening and to learn lessons from the past.
The insurance industry, he says, has to keep a careful eye on its compliance procedures, try to identify trends and be prepared in advance.
In other news, life insurance agents are praising the anti-spam legislation, known as the CAN-SPAM Act, S. 877, which was approved by Congress last week and is expected to be signed shortly by President Bush.