There is a revolving door between the securities and insurance industries. Some financial professionals switch industries or become licensed in both in order to offer new financial products to clients. Others, however, however, have a more sinister motive.
The National Association of Insurance Commissioners is working with the Financial Industry Regulatory Authority to quickly identify bad stockbrokers who simply leave the brokerage industry and get relicensed as insurance agents. Until now, there has been no mechanism to quickly share information between insurance regulators spread out over 50 states.
FINRA, the 5o states securities commissioners and the SEC make information about bad stockbrokers available on one website. That isn’t the case within the insurance industry, however, making it easy for bad brokers to become insurance agents.
Complicating the matter is that many products sold by insurance agents are really securities. Unfortunately, the public is left unprotected.
Last week, a stockbroker who left the securities industry several years ago pleaded guilty to fraud charges related to a Ponzi scheme. Sunil Sharma, age 68, faces 20 years in prison when sentenced. Beginning in 2008, Sharma raised over $8 million from investors and lost it in a risky options trading scheme. When the money ran out, he simply used money from new investors to pay old investors, a classic hallmark of a Ponzi scheme.
Not all the money went to pay new investors. Prosecutors claim Sharma used $2.5 million for personal use. That money was spent on a luxury home, Mediterranean cruise, Mercedes and BMW.
For many years, Sharma was a stockbroker. He worked at several big brokerage firms including Merrill Lynch, A.G. Edwards and Raymond James. After his clients lost significant amounts of money, he relinquished his securities license.
What did he do next? He became an insurance salesman.
Why an insurance salesman was selling an options trading strategy isn’t clear. Unfortunately, investors frequently do not what licenses a financial professional needs. For example, most investors have no clue which type of annuities must be sold by an insurance agent versus those that require a securities license.
How Do I Sue My Insurance Agent?
“How do I sue my insurance agent” is a question we hear often. Most insurance agents have insurance and so do the agencies that employ them. Regardless of the type of license held by an insurance agent, if the agent sells through an agency, his or her employer may be liable for the losses. Sometimes the carrier can also be liable but laws vary widely from state to state.
If you lost money from a bad investment, give us a call. Even if the agent is out of business (or in jail), it may be possible to get back your hard earned money.
MahanyLaw – America’s Fraud Recovery Lawyers