More On Legal & Compliancefrom The Advisor's Professional Library
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- Agency and Principal Transactions In passing Section 206(3) of the Investment Advisers Act, Congress recognized that principal and agency transactions can be harmful to clients. Such transactions create the opportunity for RIAs to engage in self-dealing.
The North American Securities Administrators Association (NASAA) announced Wednesday that state securities regulators had reached a settlement with Bankers Life and Casualty Company of Illinois, after a task force found that the firm was acting as an unlicensed broker-dealer and investment advisor.
As part of the settlement, Bankers Life, along with its subsidiary BLC Financial Services (BLCFS), agreed that it will not engage in the hiring, training or supervision of any registered representatives or investment advisor representatives through March 31, 2015.
Under the terms of the settlement, Bankers Life will pay $9.9 million to be disbursed among the states where its dual agents were located between 2005 and 2011.
In a statement, Jack E. Herstein, NASAA president and assistant director of the Nebraska Department of Banking & Finance, Bureau of Securities, said, “During this ‘quiet period,’ Bankers Life has agreed not to engage in a violative activity and must refrain from all brokerage activity. The firm also has agreed to hire an independent consultant to verify compliance.” In addition, Bankers Life has also agreed to withdraw the registration of its brokerage subsidiary with the SEC, and will terminate its membership with FINRA.
A multi-state investigation found that Bankers Life, without being registered to do so, engaged in brokerage and investment advisor activity via affiliations with licensed brokers or other firms and directing the operations, hiring, training, production selection and sales techniques of those firms.
In 2005 Bankers Life made an agreement with UVEST Financial Inc. that provided for Bankers Life insurance agents who became licensed as registered representatives and/or investment advisor representatives of UVEST to provide brokerage and investment advisory services out of the insurance firm’s branch offices. A similar arrangement was made with ProEquities, Inc., a broker-dealer in Birmingham, Ala., in 2010.
Regulators found that Bankers Life received about $21 million from the two brokerage firms for variable annuity and securities transactions and investment advice between 2005 and 2011.
In addition to its $9.9 million fine to the states, Bankers Life has agreed to pay $375,000 for the cost of the investigation, $260,000 in past licensing and registration fees, and $106,000 to cover the cost of state audits to ensure compliance with the consent order.
UVEST and ProEquities agreed to similar settlements, with the former agreeing to pay $750,000 and the latter $435,000 for their role in the relationship with Bankers Life.