Entering into a Loan Agreement with A Annuity Client in Texas

[txagentcccc]

In Texas is it prohibited or frown upon to enter into a Loan Agreement with a long standing client over 8 years relationship.

I.E. Agent ask for a loan gets a loan agreement to pay client back in 3 years with some interest is that a ethics or a cause for a license to get revoked suspended if the agent has not defaulted or has already paid off loan.

Didn't find any clarity online from the Texas Department of Insurance

 

[adjusterjack]

Are you the agent?
Have you borrowed money from your client?
Have you be paying as agreed?
No problems between you and your client?

Then why would TDI have to even know about the loan?

 

[txagentcccc]

Yes clients family accused me of selling client too many annuities and complained to TDI on it and yes bonehead move but there was a loan agreement for a second business i wanted to start up

 

[BADTROUT]

I'm not sure I understand the "too many" annuities. I mean if you are putting EIA's on someone that won't outlive the contract I'd say there was something to complain about, but other than that I'm not sure where the complaint would have a basis, and certainly not something that strikes me at least, as anything having to do with a loan.

That said, it feels like there is more to the story...

What is your side business?
How much was the loan (ballpark)?
How much was the cumulative total of the annuities you have placed for the insured?

 

[adjusterjack]

Yes clients family accused me of selling client too many annuities and complained to TDI on it and yes bonehead move but there was a loan agreement for a second business i wanted to start up

The following section of the Texas Insurance Code provides the grounds for disciplinary action against an agent:

Texas Insurance Code - INS - INS TX INS § 4005.101 | FindLaw

Whether any of them will apply is beyond me.

Exactly what was the complaint? Borrowing the money or selling to many annuities, or both?

And in what stage of TDI's proceedings are you in? Have you gotten any correspondence from TDI? What did it say?

 

[VolAgent]

If you have received a copy of the complaint from the TDI, its time to go to the experts. Notify your E&O, see if they will provide defense, otherwise secure your own attorney.

Without knowing more, its hard to say if you "sold too many annuities", nor whether the loan was unethical or otherwise violated a law or regulation. On the surface, the loan definitely seems ill advised and opens you up for unwanted attention. If it goes to a suit, I'm sure their attorney will use it against you. Its hard to say what the TDI will do.

So again, if you have received the complaint from the TDI and they are investigating, notify your E&O and make sure you have representation. The other side will have an attorney, don't go into battle unarmed.

 

[walthamny]

It sounds like there is more to this story.

 

[adjusterjack]

Of course there is.

 

[WinoBlues]

Suitability?
Age?
Mental capacity?
Over what period of time?
Where did the money come from? Penalties?
Where any family members involved in the meetings?
Type of annuities?

Make sure your file is in order. And as Volagent suggested start checking out your E&o and possibly legal counsel

 

[Allen Trent]

could be a violation of the Financial elder abuse laws enacted in the last few years.

bad idea all the way around in terms of the loan, especially if you or they have failed to report interest payments to IRS, etc

E&O will likely not defend on the issues related to the loan (ie: Promissory Note)

if you hold any securities licenses/registrations, you have definitely violated those laws related to loans from customers. contact your compliance officer of your Broker Dealer if you have one.

Deal with this upfront & aggressively, otherwise it will get ugly as it should. the elder abuse laws were created because of items such as this & Ponzi schemes many times are started by a simple loan/promissory note from 1 client that escalates to involving many to postpone dealing with the real issue