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A collective of missteps insurers have made

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Insurance companies have collectively been involved in 22 industry “stumbles,” according to a new report.

Tiburon Strategic Advisors discloses this finding in a new report, “Financial Services Industry Stumbles: An Ongoing Series of Missteps.” The report tracks the evolution of financial services industry stumbles and outlines perceived industry offenders. Among the missteps detailed in the report:

Insurance company stumbles

  • American International Group (AIG) drew down its entire credit line and went back for more, pushing the U.S. government’s investment to $123 billion;
  • AIG lost $62 billion, the largest quarterly loss in U.S. corporate history, in the fourth quarter of 2008;
  • The U.S. government extended an $85 billion loan to AIG in exchange for an 80 percent equity stake; and
  • Prudential Financial life insurance agents sold investments without the required Series 7 license and illegally split commission with Prudential Securities brokers.

Full-service brokerage firm stumbles

  • Edward Jones & Co. paid a $75 million settlement for failure to disclose more than $300 million in revenue sharing payments from mutual fund families it recommended to customers;
  • Five firms paid a combined $36.2 million for failing to honor breakpoint discounts, with Wachovia Corp. paying the most at $9.7 million.

Independent advisor stumbles

  • The predecessor of TD Ameritrade, TD Waterhouse, was fined $2 million by the SEC for making cash payments to registered investment advisors.

Retail broker, insurance agent and retail banker stumbles

  • Lehman Brothers and SG Cowen Broker Frank Gruttadauria misappropriated $115 million from clients over 15 years from 1987 to 2002;
  • Frank Gruttadauria sought to cover up $270 million of losses in 28 client accounts and was subsequently given a seven-year sentence.


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