Ariz. Gets Serious About Securities

The Arizona Department of Insurance and the Arizona Corporation Commission’s Securities Division are coordinating enforcement efforts to address a growing number of cases involving the sale of fraudulent securities by misinformed or unscrupulous insurance agents. The department states that these cases have been on the rise in the U.S. as investment companies recruit insurance agents to market various types of unregistered securities.

In many of the cases, consumers are encouraged to convert annuities or other insurance products to fund allegedly more profitable investments. Examples of unregistered securities that have been marketed include investments in promissory notes, automatic teller machines, pay phones and viatical settlements. The Securities Division noted that the opportunity to earn large commissions may blind some insurance agents to the problems involved in selling the investments.

In order for an agent to sell a securities product, both the product and the agent must be registered with the Securities Division.

Recently, the Arizona department revoked the insurance license of Jerome A. Zanowski. According to the revocation order, Zanowski sold $175,875 in unregistered securities to at least seven Arizona residents between November 1996 and April 2000. In more than one instance, Zanowski allegedly convinced clients to surrender annuities, for which they paid penalties, in order to fund the investment in an unregistered security product. He was fined $10,000 and ordered to pay more than $23,000 in restitution.

The Arizona department has also revoked the licenses of four other insurance agents in recent months as a result of referrals from the Securities Division. Several additional cases are pending.

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