Maine’s Office of Securities Announces Major Settlement With Bankers Life and Casualty Company

Multi-State Task Force Led By Maine Finds Illinois-based Insurance Company Acted as Unlicensed Broker-Dealer and Investment Adviser

United States Securities and Exchange Commission

United States Securities and Exchange Commission (Photo credit: Wikipedia)

GARDINER — Maine’s Securities Administrator Judith M. Shaw announced today that a $9.9

million settlement has been reached between Bankers Life and Casualty Company and state securities regulators, concluding an investigation of unlicensed/unregistered brokerage activity by the insurance company.  Maine’s Office of Securities spearheaded the joint investigation into the unlicensed securities activity of Bankers Life with colleagues from New Hampshire, Vermont and Missouri, and with significant assistance from the board of the North American Securities Administrators’ Association (NASAA).

The settlement calls for Bankers Life to pay $9.9 million to be disbursed among the states where its dual agents were located between 2005 and 2011.  Bankers Life also agreed to pay $375,000 to reimburse the task force states for investigation expenses, $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.  Maine is expected to receive approximately $770,000 in penalties, fees and expense reimbursement in connection with the settlement.

“When the possible unlicensed activity was discovered through a branch audit by Maine’s Office of Securities, the task force that was assembled conducted a thorough and aggressive investigation of Banker’s Life’s practices nationally,” Securities Administrator Shaw commented.  “This settlement will protect Maine investors from the dangers of unlicensed securities activity and increase confidence in the securities industry.”

Investigators found that Bankers Life engaged in unlicensed activity in Maine and other states by affiliating with licensed securities brokers UVEST Financial Inc. and ProEquities, Inc., and by directing the operations, training, and sales techniques used by those firms—including having agents use a “sales script” to market certain products, and by steering investors to Bankers Life annuity products.  The investigation also found that Bankers Life received approximately $21 million from its two affiliated brokerage firms for variable annuity and securities transactions and investment advice from 2005-2011.

In addition to the settlement penalties and costs, the Chicago-based insurance company agreed that it, along with its Illinois-registered brokerage subsidiary, BLC Financial Services, Inc. (BLCFS), will not engage in the hiring, training, or supervision of any registered representatives or investment advisor representatives through March 31, 2015.

During what is known in the securities industry as a ‘quiet period,’ Bankers Life has agreed to not engage in any activity that violates the securities laws and must refrain from all brokerage activity.  The firm also has agreed to hire an independent consultant to verify compliance, to withdraw the registration of BLCFS with the Securities and Exchange Commission and the State of Illinois, and to terminate its membership with FINRA.

Similar settlements were reached with UVEST and ProEquities. UVEST agreed to pay $750,000 and ProEquities agreed to a payment of $435,000 for their role in the relationship with Bankers Life.

Shaw praised the significant contributions of Office of Securities’ investigators Willis Smedberg and Christian Caruso, as well as members of the multi-state task force for their role in the nearly two year investigation.

“This settlement resulted from an examination prompted by a single complaint from an 82-year old investor regarding the sale of an annuity product,” Administrator Shaw commented.  “All investors, whether businesses or individuals, should never hesitate to contact the Office with questions, concerns or complaints.”

The Office of Securities oversees the securities industry in Maine.  It is part of Maine’s Department of Professional and Financial Regulation.  Consumers can learn more about the Office and its resources online at www.maine.gov/pfr/securities

 

NASAA is the oldest international organization devoted to investor protection. Its membership consists of the securities administrators in the 50 states, the District of Columbia, Puerto Rico, the U.S. Virgin Islands, Canada, and Mexico.

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