Lapse in Insurance License - Question about U4 disclosure. Really need help --Thanks in advance

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Sep 12, 2011 8:56 pm

I am a new user & I would greatly appreciate any
help.  On August 10, I was notified
through email that my producer’s insurance license had lapsed effective August
1 and to contact the State Department of Insurance.  At the office where I work, we have an employee who keeps
up with all employees’ continuing education requirements and we usually
complete all requirements well in advance, so my first thought upon receiving
the email was that the license lapse was a simple misunderstanding.  I immediately called the State Department of
Insurance and was told that all my continuing education requirements had been
met except for an annual $12.00 renewal fee. 
I paid the fee as well as a $50 penalty to reinstate my license effective
immediately. I was asked if I had written any policies during the 10 day lapsed
period and I told them that I did and that I will be glad to provide them with
details of the policies written if needed. 

A few days later, I received a letter from the State
Insurance Department explaining that an investigation had been opened &
that I have been alleged to have violated Law XXXXXXX where (summarized) a
person may not sell or solicit insurance unless the person is licensed for that
line.  The letter also contained an
affidavit for me to explain and confirm the policies written.  After talking again to the Department of Insurance,
it seems that the producer (me) as well as the insurance company will receive a
fairly substantial fine per policy written. 

Being a member of FINRA, I am very concerned whether this is
a reportable event.  After contacting my
compliance director, I am getting mixed responses.  Originally, I was told that if I am fined
& a consent order is issued, then it is a reportable event.  Now, I am being told that I need to update my
U4 since an investigation has been opened against me.  After getting a copy of the U4 disclosure
questions, I am having trouble understanding how this issue corresponds with
any of the disclosure questions.  Does
anyone know if you have a section on your U4 that describes exactly what occurred
(10-day lapse in continuing education requirements) rather than just a simple “yes”
check mark by a particular question?  I understand that the violation is because I wrote policies during the 10 day lapsed period, but I want my U4 to state that the license lapsed because of CE requirements and that I am not just some random guy acting as an insurance agent without the property licensing.  The
U4 questions seem to deal with fraud, false statements or omissions, & very
serious issues, and I am worried that if my U4 states that I have been charged
with a misdemeanor, that it could be interpreted by future employers in an
incorrect way. 

Any advice would be greatly appreciated.  I am extremely worried about this situation
and how it could affect my credibility and status with future job
employers.  I never imagined that a 10
day lapse in a state insurance license for continuing education could
potentially cause a blemish on my FINRA U4. 
Would you recommend calling FINRA directly to see if I could get advice
on whether this is a reportable event, and what I need to do?

Again, thanks in advance. 

Oct 5, 2011 10:06 pm

If a regulator notifies you and states the they are "investigating" you or that you are the "subject of an investigation" then yes, that is reportable.  The fact that your insurance license alone is not a reportable event.  If you're getting inconsistent responses then you need to speak with the chief compliance officer, if you are able to otherwise consult with an attorney who has expertise in U4 disclosure matters.