Initiated By
New York State Department of Financial Services
Allegations
Respondent Jennifer L. Bacarella is licensed as an agent pursuant to Section 2103(a) of the New York Insurance Law ("Insurance Law"), and as a life broker pursuant to Section 2104(b)(1)(A) of the Insurance Law, and is sublicensee of Respondent Sigma Financial Corporation ("Sigma") which is licensed as an agent pursuant to Section 2103(a) of the Insurance Law. The New York Department of Financial Services (the "Department") alleged that Respondents provided materially incorrect information within the meaning of Section 2110(a)(2) of the Insurance Law on Sigma's original application to act as a life broker pursuant to Section 2104(b)(1)(A) of the Insurance Law, submitted to the Department on or about July 8, 2019, in that Respondents failed to disclose that during the approximate period of October 5, 2001 to November 15, 2019: (a) Sigma and Jerome Rydell ("Rydell"), the owner and President of Sigma, were named in at least 55 NASD and FINRA arbitration proceedings involving allegations of breach of fiduciary duty, fraud, or misrepresentation; (b) Sigma and Rydell were defendants in two civil litigations involving allegations of breach of fiduciary duty, fraud, or misrepresentation; (c) Sigma was fined a total of 14 times by NASD/FINRA, four state insurance regulators, and one state securities regulator; and (d) Sigma violated an order of the superintendent within the meaning of Section 2110(a)(1) of the Insurance Law in that Sigma violated the conditions of its August 27, 2009 stipulation with the Department by not taking the necessary steps to prevent the recurrence of violations of Section 2110(a)(2) of the Insurance Law.
Resolution
Stipulation and Consent
Sanctions
Monetary Penalty other than Fines
Amount
$2,500.00
Broker Comment
Sigma submitted a paper application for a New York Life Broker's License ("Initial Application") to the Department's Licensing Bureau. Sigma's mistake in the Initial Application was an honest and good faith error made by one of its experienced and well-supervised employees based on her reasonable and justifiable misunderstanding of the necessary background disclosures required for renewing licenses. Most states process insurance license renewals online through the National Insurance Producer Registry ("NIPR"). However, New York uses a paper application. An employee in Sigma's licensing department completed and submitted Sigma's Initial Application. Question #2 in the NIPR Uniform Application asks whether the firm has been involved in an administrative proceeding "which has not been previously reported to this insurance department." Because all required disclosures had already been previously reported through the NIPR online database or through CRD, the employee typically answers this question "No" (meaning there are no additional or new disclosures to be made). Similar background questions are asked of the firm in New York's Initial Application, but New York's paper application does not include the same qualifying language as that of the NIPR application ("which has not been previously reported"). The employee inadvertently failed to appreciate this nuance, and as a result, she mistakenly answered "No" to Questions 9(b) and 9(e) in the Department's Initial Application. Upon a more careful re-reading of the Initial Application, Sigma now realizes that it should have answered "Yes" to Questions 9(b) and 9(e) despite the firm's prior accurate NIPR and CRD disclosures. The employee, therefore, made an honest and good faith mistake based upon the employee's greater familiarity with and more frequent use of NIPR's online Uniform Application renewal process. There was no intent to deceive or mislead; Sigma has properly made all required disclosures through NIPR and CRD, and those disclosures are freely available to all states and the public. Nonetheless, Sigma regrets the inadvertent error made, has admonished the employee, provided enhanced training, and taken supervisory steps to ensure that such a mistake is not repeated in the future.