BANNED BROKERS STILL POSSES LICENSE TO SELL INSURANCE
The Securities and Exchange Commission earlier this week barred three salesmen who worked at firms with the homiest of monikers: Balanced Financial Inc., Live Abundant and Old Security Financial Group. The SEC accused all three of selling a Ponzi scheme.
Less than homey is the fate of investments purchased by customers, specifically the Woodbridge Ponzi scheme investments, from the consultants who worked at the three firms named above: Gregory W. Anderson, Aaron R. Andrew and Robert S. "Lute" Davis respectively.
The Loop Hole in The SEC Ban
What's significantly twisted is that each of the three sales reps, in spite of the fact that they've been banned by the SEC, they hold licenses in their particular states to offer insurance products to customers.
Mr. Anderson and Mr. Andrew work in Colorado and Utah, separately, while Mr Davis is situated in Texas. They each made between $776,000 and $2 million in commissions from selling the Woodbridge Ponzi scheme, as indicated by the SEC.
This section in the past has concentrated on the confounding idea of the different administrative systems under which financial advisers work. Among the most vexing issues confronting the financial advice industry is that of brokers who are limited or banned from selling securities, yet keep on holding a permit to sell insurance.
“There’s a hole in the regulatory infrastructure that you can drive a Mack Truck through, and the insurance industry seems to be paralyzed with respect to doing anything about it,” said Andrew Stoltmann, a Lawyer and previous leader of the Public Investors Arbitration Bar Association.
“There is nothing more material for a client to know than whether the person they are dealing with has been barred from the securities industry.”
The Invasion of The Woodbridge Scheme
The Woodbridge Ponzi fraud lasted from July 2012 until December 2017, when the Woodbridge Group of Companies, which professed to invest in and create upscale real estate, petitioned for Chapter 11 bankruptcy protection.
Robert Shapiro, the previous CEO of Woodbridge Group of Companies, confessed over the mid-year to running a $1.3 billion scam that made an excess of 7,000 investors lose money, as indicated by Investigators.
Woodbridge operated a system of many insurance agents and brokers, some with checkered professions in the securities industry, to sell the notes, which as far as anyone know were sponsored by mortgages.
The SEC sued Mr. Anderson, Mr. Andrew and Mr. Davis in December 2018, a year after Woodbridge crumbled.
Mr. Anderson declined to remark, while Mr. Andrew and Mr. Davis didn't return calls to remark.
A person who is banned from working in the securities industry is required to uncover this on his application for an insurance license. Such people likewise lose the capacity to sell variable annuities, which are characterized as securities and not insurance products.
