IIABA Calls on State Securities Regulators to Identify Fraud Perpetrators

August 28, 2002

A news release on investment fraud scams issued by a state securities regulator group grossly misidentifies the perpetrators as independent insurance agents, said Independent Insurance Agents & Brokers of America (IIABA) CEO Robert A. Rusbuldt.
Rusbuldt is responding to a “Top 10” list of scams released today by the North American Securities Administrators Association (NASAA) that cites the illegal sale of securities by unlicensed individuals as the number-one concern. The story highlights scams in which insurance agents, investment advisers and accountants are selling high-yield, short-term investment products that are in fact fraudulent.

Following is a statement by Rusbuldt responding to the NASAA release: “While we strongly support the state securities regulators’ efforts to prosecute perpetrators of investment fraud, it is doubly important that the real purveyors of these crimes are accurately identified. Consumers cannot fully understand the threat to their financial security if they do not have an accurate identification of the perpetrators.

“Independent insurance agents, who are predominantly providers of property-casualty policies, such as homeowners, auto and commercial liability products, are not engaged in investment fraud. It is a very small number of life insurance agents or brokers who are selling these products.

“The term ‘independent insurance agent’ has distinct meaning and purpose for consumers, insurance industry officials, industry regulators and political leaders. It refers to insurance professionals who primarily offer their customers property-casualty insurance coverages, have contracts with multiple companies and own their book of business.

“The broad misuse of the term ‘independent insurance agent’ lumps honest and reputable independent insurance agents with the purveyors of these reprehensible schemes. It is a disservice to mislead millions of people and injure the credibility of thousands of trustworthy small businesspersons by incorrectly identifying perpetrators of these acts.

“The 300,000 independent insurance agents and their employees represented by the Independent Insurance Agents & Brokers of America are-by and large-small business owners providing property-casualty or mainstream life, health and retirement coverages.

“Less than 1 percent of independent property and casualty agents hold National Association of Securities Dealers series 6 and series 7 securities licenses-the proper licensing to sell promissory notes. Further, less than 1 percent of IIABA member agency revenues are generated from the sales of securities products, according to the 2000 Agency Universe Study, the most respected and comprehensive demographic profile of the domestic independent insurance agency distribution system.

“What’s more, IIABA has researched the backgrounds of individuals singled out in previous news stories and none of them are IIABA members and only two held a property-casualty license among their many life licenses.

“Again, we wholeheartedly support NASAA’s drive to shine a spotlight on perpetrators of investment fraud, but call on state securities regulators to more accurately identify the scam artists so there is no confusion among the investing public.”

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