An irreverent Wall Street Blog
by Bill Singer

Insurance Forms Completed By Sales Assistant Undo Broker

November 13, 2013

Sales Assistants are the workhorses of most brokerage branches. They are also the folks towards whom far too many brokers wink and give an ever so subtle nudge when it comes to "suggesting" that maybe, just maybe, something that isn't necessarily supposed to be done, could somehow, perhaps, surprisingly, you know, get done. Wink, wink, nudge, nudge, say no more. In today's Broke And Broker Blog, we have the case of a broker who may have asked his sales assistant to go just a little too much above and a little too far beyond.

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, Thomas S. White. III submitted a Letter of Acceptance, Waiver and Consent ("AWC"), which FINRA accepted. In the Matter of Thomas S. White. III, Respondent (AWC 2010025540201, November 5, 2013).

White first became registered in 2004 with Northwestern Mutual Investment Services, LLC , where he remained until his voluntary termination on December 6, 2010. The AWC asserts that White had no prior disciplinary history.

The AWC asserts that in early 2010, White recommended that a customer convert three term life insurance policies into whole life policies; and, accordingly, in April 2010, the customer signed in blank a term life insurance conversion form.  From here, things go awry - like, way, way awry. Rather than try to distill the essence of the AWC's allegations, let me offer it to you verbatim:

White later realized that, because three term life policies were in effect, the customer needed to sign three term conversion forms. Instead of having the customer complete and sign all three forms and without the customer's permission or consent, White instructed his sales assistant to make two copies of the term conversion form that the customer had signed in blank, complete all three forms, and submit the three forms to the Firm's life insurance affiliate for processing. As a result thereof, the life insurance affiliate issued three whole life insurance policies for the customer.

According to online FINRA records as of November 12, 2013, White was "permitted to resign" on November 19, 2010, based upon allegations that:

REPRESENTATIVE RESIGNED WHILE UNDER INTERNAL REVIEW REGARDING A POLICYOWNER'S COMPLAINT ABOUT UNAUTHORIZED ACTIVITY ON A NON-VARIABLE LIFE INSURANCE POLICY. AS WELL AS REPRESENTATIVE'S COMPLIANCE WITH THE AFFILIATED LIFE INSURANCE COMPANY'S POLICIES AND PROCEDURES REGARDING THE SALE AND SERVICING OF LIFE INSURANCE.

FINRA deemed White's conduct to constitute a violation of FINRA Rule 2010 and in accordance with the terms of the AWC, the self-regulatory organization imposed a $5,000 fine and a two-month suspension associating with any FINRA member in any capacity.

Bill Singer's Comment

Practice Pointer 1: If a document is supposed to be completed and signed by a customer, make sure that the customer completes and signs the document.  Don't use a short-cut of "blank forms."

Practice Pointer 2: Notwithstanding the convenience and expediency, don't ask or suggest that your sales assistant fill in forms and/or sign those forms as a customer.

Practice Pointer 3: If you violate Practice Pointers 1, and 2, the forces of nature will find a way to disclose your misconduct to your firm; and in accordance with the scientific principle that bad goes to worse, FINRA will also get involved and it will cost you time off and a fine.

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