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Industry Spotlight > Broker Dealers

Compliance Chiefs Want To Team Up Against Bad Practices

By Matt Brady

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Manufacturers and distributors need to communicate more to root out unsuitable sales.

Speakers delivered that message here during a panel discussion at the annual meeting of the American Council of Life Insurers, Washington.

Although insurers can hire third parties to ensure that sales of products are suitable, they should be able to show any regulators who appear that the policing is actually being done, said John Doscher, vice president of compliance at Prudential Financial Inc., Newark, N.J.

When the regulators come by asking about policing, “you don’t want them to see that you pushed it off onto the broker-dealers,” Doscher said.

Doscher said insurers should recognize that any potential problem patterns they see at a distributor may be the result of the fact that the distributor offers products from many different carriers.

The distributor may be using products from one carrier to fill a specific niche, Doscher said.

But, “when you find a pattern or trend,” that could indicate sales that are unsuitable, “you have to follow up,” Doscher said.

“If you see something, share it with your broker-dealer,” said Joseph Tuorto, chief compliance officer at Linsco/Private Ledger Corp., Boston. “Going forward, we’re going to have to have a cooperative effort between broker-dealers and insurance companies.”

Increasing automation will help make it easier for insurers and broker-dealers to identify possible problem patterns, but Tuorto notes that regulations, such as rules that deal with asset transfers, can handicap broker-dealers that are looking for compliance problems.

“One of the struggles broker-dealers have is that often an advisor will change firms,” Tuorto sad. “They can take their clients, but the assets can’t be transferred. So, if the client wants to stay with the advisor, the advisor has to tell them to change their contracts…. We need to find a way to let a client continue to work with an advisor if the client wants to do so.”

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