Close Close
Sign In
Newsletters
Popular Financial Topics Discover relevant content from across the suite of ALM legal publications From the Industry More content from ThinkAdvisor and select sponsors Investment Advisor Issue Gallery Read digital editions of Investment Advisor Magazine Tax Facts Get clear, current, and reliable answers to pressing tax questions
Luminaries Awards
Podcast Center Video Center Webcasts Resource Center Events
About ThinkAdvisor Contact Us Advertise With Us Asset & Logo Licensing Sitemap Terms of Service Privacy Policy Copyright © 2024 ALM Global, LLC. All Rights Reserved.
ThinkAdvisor

Regulation and Compliance > State Regulation

What were they thinking?

By Steven McCarty

X
Your article was successfully shared with the contacts you provided.

“What was he thinking?” I heard this frequently after Eliot Spitzer resigned. I won’t retell the former New York governor’s tawdry downfall. But I will say his conduct highlights two qualities inappropriate in a public servant: arrogance (“I’m above the law”) and stupidity (“No one will notice”).

These flaws, unfortunately, are universal. People of all professional, educational, or social standing believe (wrongly) that rules don’t apply to them and that rule breaking has no cost.

We see this frequently at the National Ethics Bureau. Financial professionals who want to join our organization must complete a detailed application and pass a rigorous seven-year background check. If they’ve had a disqualifying violation, we either find out about it from their application or from our background check. In either case, when truth comes to light, we must decline their application or revoke their membership.

Here’s a case in point (true story). An advisor, let’s call him Bob, wanted to join NEB. But he checked “No” to this question on NEB’s membership application: “Within the last seven years, have you had a state or federally regulated license revoked, restricted, or terminated for cause?”

Our background check, however, revealed that in fact he did have a restricted insurance license. Reason: When he applied for his license, he failed to disclose that he had been convicted of a misdemeanor several decades before. The state promptly fined him $2,500, revoked his unrestricted license, and replaced it with a restricted one.

Even though his misdemeanor happened 20 years ago and was eventually dismissed and expunged from his record, and even though he had never had a consumer-related insurance complaint, we could not admit Bob into NEB because of his current license status.

Another true case: When Tom’s NEB membership came up for renewal, we ordered a complete background check, as we do with all renewing members. This uncovered two problems. First, in the prior year, Tom had failed to respond to an insurance department inquiry. Second, he had falsely stated to the regulator that he completed his continuing education credits. The state fined him for these two violations, and we revoked his NEB membership.

What can we learn from these two cases? That a cavalier attitude toward rules is as serious a matter as outright criminality. If you are one of the many who believe that rules don’t apply and that you’ll never get caught if you break them, consider this column a wake-up call. So what’s the bottom line? Don’t jeopardize your career by ignoring the rules. Instead:

  • Follow all of the rules prescribed by regulators, especially administrative ones. They apply to you.
  • Never assume a rule doesn’t matter. It does.
  • Don’t think you’ll never get caught. You will.

By paying attention to the rules, you won’t get sanctioned — and your family and friends won’t ask, as they did about Spitzer, “What was he thinking?”

NOT FOR REPRINT

© 2024 ALM Global, LLC, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.