The concept of customer service is often elusive from the perspective of customers. You call a so-called customer-service telephone line and you're asked to push endless amounts of numbers, listen to truly annoying music, and seemingly caught in an endless loop of options that never quite lead to a sentient human being -- and all too often, just when you hear the beeps indicating that you're being forwarded to a member of homo sapiens, you're disconnected and forced to go through the whole series of questions and delays. A recent regulatory settlement shows the extent to which one State Farm employee went to deliver rock-bottom automobile insurance prices for his customers. One suspects that his customers were truly appreciative of his over-the-top service. One suspects that his employer was less than enamored. One knows that the industry regulator wasn't at all thrilled.
Case In Point
For the purpose of proposing a settlement of rule violations alleged by the Financial Industry Regulatory Authority ("FINRA"), without admitting or denying the findings, prior to a regulatory hearing, and without an adjudication of any issue, Adam Canote submitted a Letter of Acceptance, Waiver and Consent ("AWC"), which FINRA accepted. In the Matter of Adam Canote, Respondent (AWC 2015047756801, August 31, 2016).
Canote was first registered in 2014 with the FINRA member firm State Farm VP Management Corp. ("State Farm VP"). While associated with the broker-dealer State Farm VP, Canote also sold automobile insurance for the brokerage firm's affiliate State Farm Mutual Auto Insurance Co. ("State Farm Auto").
I Do Declare
According to the AWC, during several months in 2015, Canote submitted documents on behalf of 11 applicants for automobile insurance. During the relevant times, State Farm Auto offered lower rates for applicants who had automobile insurance during the prior 12 months. Included by Canote in the insurance applications were representations that each of the 11 applicants had been previously insured by another insurance company. In support of said prior insurance coverage, Canote submitted a Declaration Page from the purported previous insurer. The AWC alleges that each of the Declaration Pages had been altered by Canote to change the policy's effective date and the policyholder's name, address, and vehicles. Canote did not alter the actual policy's number or coverage.
State Farm Auto was alerted to the alterations when an underwriter noticed inconsistencies among Canote's applications such as:
The Hidden Cost of Insurance
The AWC asserts that on October 31, 2015, State Farm VP terminated Canote.
FINRA deemed Canote's alteration of 11 documents and the subsequent submission of same as constituting a violation of FINRA Rule 2010. In accordance with the terms of the settlement, FINRA imposed upon Canote a $5,000 fine and a three-month suspension.
Bill Singer's Comment
I know . . . I know . . . I'm supposed to take this whole regulatory settlement seriously. For whatever it's worth, I do take it seriously. Canote sent in 11 altered insurance applications and got hit with a $5,000 fine and a three-month suspension. Okay, the sanctions are pretty fair and sort of consistent with what the respondent did.
As I see it, the takeaway from this case is found in FINRA's AWC, which offers guidance for registered reps who will be attempting to alter a Declaration Page in order to defraud their employer insurance company into issuing cheaper policies. The AWC offers some truly useful tips as to how best to circumvent your firm's antifraud policies. If you follow these three suggestions, you may be able to short-circuit detection and obtain low-ball prices on coverage for your customers:
"Double Trouble On Wall Street"(BrokeAndBroker.com Blog, August 4, 2016): Two FINRA regulatory settlements. Two . . . count 'em. Double trouble resulting in one guy getting fined and suspended and the other guy getting barred. The first bit of trouble involves a registered rep and college planning services. The second bit of trouble involves a registered rep and nine fictitious auto insurance policies. All of which reminds us of those woeful lyrics from Otis Rush's "Double Trouble."