An insurance regulatory official is seeking to close a producer licensing loophole he believes exposes consumers to potentially bad actors.
Todd Kiser, commissioner of the Utah Insurance Department and chairman of the National Association of Insurance Commissioners producer licensing task force, told reporters this week that he plans to propose new regulations requiring specific information about producers to be added to a national database. The goal is to more easily allow state regulators to identify producers who have been barred from the securities industry.
The information would be included in monthly disciplinary reports from the Financial Industry Regulatory Authority, according to a report from the Wall Street Journal.
State regulators would be able to search a national registry of producers by their unique Finra number assigned in the securities industry. State regulators, then, will be able to quickly see whether brokers barred from the securities industry are still licensed to sell insurance products.
Kiser is concerned about the loophole after Finra reports suggested that at least 13% f 395 brokers banned from the securities industry had an insurance license, and had merely moved over to continue their bad behavior in an insurance practice.
While some states, such as California, Connecticut and Alabama, have been proactive about closing this loophole, others have not and do not swap information with other state departments. Intead, these states wait to act after being notified of disciplinary actions on th securities side.
Kiser said next steps will involve surveying state licensing directors to determine the ease of collecting future and existing Finra numbers and uploading the data to a national registry. After an official proposal is drawn up, it will be sent to other committees and public hearings to be considered by all state commissioners.
Kiser said “several of the states were very excited” at the prospect, though others were concerned about potential cost.
