Insurance companies have collectively been involved in 22 industry “stumbles,” according to a new report.
Tiburon Strategic Advisors discloses this finding in a new report, “Financial Services Industry Stumbles: An Ongoing Series of Missteps.” The report tracks the evolution of financial services industry stumbles and outlines perceived industry offenders. Among the missteps detailed in the report:
Insurance company stumbles
- American International Group (AIG) drew down its entire credit line and went back for more, pushing the U.S. government’s investment to $123 billion;
- AIG lost $62 billion, the largest quarterly loss in U.S. corporate history, in the fourth quarter of 2008;
- The U.S. government extended an $85 billion loan to AIG in exchange for an 80 percent equity stake; and
- Prudential Financial life insurance agents sold investments without the required Series 7 license and illegally split commission with Prudential Securities brokers.
Full-service brokerage firm stumbles
- Edward Jones & Co. paid a $75 million settlement for failure to disclose more than $300 million in revenue sharing payments from mutual fund families it recommended to customers;
- Five firms paid a combined $36.2 million for failing to honor breakpoint discounts, with Wachovia Corp. paying the most at $9.7 million.
Independent advisor stumbles
- The predecessor of TD Ameritrade, TD Waterhouse, was fined $2 million by the SEC for making cash payments to registered investment advisors.
Retail broker, insurance agent and retail banker stumbles
- Lehman Brothers and SG Cowen Broker Frank Gruttadauria misappropriated $115 million from clients over 15 years from 1987 to 2002;
- Frank Gruttadauria sought to cover up $270 million of losses in 28 client accounts and was subsequently given a seven-year sentence.