On April 23, 2019, a division of insurance hearing officer issued a decision revoking the nonresident producer license of Alex Drawve, formerly of Springfield, Illinois, for his failure to disclose a criminal conviction on his 2015 nonresident producer license application to Massachusetts and his failing to report the revocation of his nonresident producer license by the state of California to the commissioner of insurance as required by Massachusetts law.
The division of insurance hearing officer, Kristina A. Gasson, entered an order against Mr. Drawve revoking his insurance licenses in Massachusetts and ordering him to dispose of any interests in Massachusetts as a proprietor, partner, stockholder, officer, or employee of any licensed insurance producer. Additionally, hearing officer Gasson fined Mr. Drawve $1,500.
FINRA criminal record inquiry leads to resignation and California license revocation
Alex Drawve entered the securities industry in September 2015 when he became associated with FINRA member Horace Mann Investors, Inc. (“HM Investors”). On November 20, 2015, Horace Mann filed an initial Form U4 on his behalf. Mr. Drawve held Series 6, and Series 63 licenses for his sales work with Horace Mann.
At the time, Mr. Drawve became associated with HM Investors; a nonFINRA member affiliate of Horace Mann already employed him, and that firm had not confirmed whether he had a criminal history.
A criminal record check would have shown that Mr. Drawve had pleaded guilty on March 31, 2014, in the McLean County Illinois Circuit Court to a class 4 felony involving the Manufacture/Delivery—Cannabis—10-30 Grams. The court sentenced him to twenty-four months on probation, thirty hours of community service, and $2509 in court costs.
When Horace Mann filed the initial FINRA November 2015 registration Form U4 on Mr. Drawve’s behalf, Mr. Drawve did not disclose that he had pled guilty to a felony in that initial Form U4, or in the other three Form U4 amendments with FINRA he filed between December 1, 2015, and February 8, 2016.
Although Mr. Drawve’s crime was not investment related, he was still subject to a statutory disqualification for selling securities due to his March 2014 felony conviction.
After FINRA initiated an inquiry regarding Mr. Drawve’s criminal history, Mr. Drawve disclosed on his Form U4 for the first time that he had been charged and convicted of a felony in an amendment filed on February 29, 2016.
Mr. Drawve voluntarily resigned from Horace Mann on April 13, 2016, after the firm advised it would not continue his registration. On April 15, 2016, the firm filed a Form U5 terminating Drawve’s registrations.
On July 18, 2016, FINRA accepted Mr. Drawve’s “Letter of Acceptance, Waiver, and Consent,” in which Mr. Drawve admitted that he had “willfully failed to timely disclose that he was charged with and convicted of a non-investment-related felony in violation of Article V, Section 2(c) of FINRA’s By-Laws and FINRA Rules 1122 and 2010.”
As part of the settlement, FINRA assessed a deferred fine of $5,000 and suspended from association with any FINRA member in any capacity for six months. Under the settlement terms, the deferral of the $5,000 fine terminated upon Mr. Drawve’s reassociation with a FINRA member firm, or request for relief from any statutory disqualification resulting from the settlement or any other proceeding.”
Mr. Drawve had held from 2015, a nonresident producer license with the California Division of Insurance as an accident and health agent and life-only agent with variable contracts authority. On March 10, 2017, this division of insurance issued an “Order of Summary Revocation” based on the FINRA disciplinary action showing that Mr. Drawve “is lacking in integrity and constitutes grounds for the Insurance Commissioner to suspend or revoke the license and licensing rights.”
Massachusetts moves to revoke Mr. Drawve’s license for failure to disclose and failure to report
The Massachusetts Division of Insurance began its proceedings against Mr. Drawve on September 20, 2017, by its usual procedure of issuing an Order to Show Cause.
The division sought license revocation based upon Mr. Drawve’s failure to disclose his felony charge on his original license application and his failure to report the California administrative action against his insurance license within the time prescribed in G. L. c. 175, §162V. The division also sought fines, as well as license revocation, based upon Mr. Drawve’s violations of G.L. c. 175, §162R (a)(1), (a)(2) and (a)(9).
Mr. Drawve did not respond to the Order to Show Cause or in writing to the division’s subsequent motion for summary decision. Neither he nor any person purporting to represent him appeared at the hearing on December 1, 2017.[pullquote]The number and the seriousness of the grounds the Division cites for taking disciplinary action against Drawve fully warrant its request to revoke his Massachusetts producer license. Hearing Officer Gasson[/pullquote]
Revocation ordered but maximum fine limited to misrepresentation to division violation
On the default, the hearing officer accepted the documentary evidence relating to the FINRA settlement and the California license revocation. It was undisputed that Mr. Drawve had not reported the California administrative action against him as required by Massachusetts law.
On the charge of a false statement on his application to the Massachusetts Division of Insurance, the hearing officer found that Mr. Drawve had submitted the Uniform Application for Individual Producer License (“Uniform Application”) to the Massachusetts division and other state insurance regulators on June 15, 2015.
Background Question 1b on the Uniform Application asked whether Mr. Drawe had ever been convicted of a felony, had a judgment withheld or deferred, or was currently charged with committing a felony. Mr. Drawve answered “no.”
Although the McLean County Circuit Court had withheld judgment on Mr. Drawve’s guilty plea, placed him probation and ultimately dismissed the charge, Mr. Drawve had a duty to disclose the felony charge in response to the Uniform Application’s question.
The hearing officer found on the Question 1b response that Mr. Drawve made:
…the record fully supports the Division’s claim the Drawve provided incorrect and materially untrue information on his application for an insurance producer license. He is therefore subject to discipline under [G.L. c.175, § 162R] subsection (a)(1).”
The hearing officer assesses different fines for each violation.
On the wilful misstatement on the Uniform Application, the hearing officer found that where Mr. Drawve submitted this producer application to the Massachusetts Division, he had committed an unfair and deceptive act in the business of insurance under G.L. c. 176D. Section 7 of this statute provides for up to a $1 thousand fine for each violation, and the hearing officer assessed the maximum fine of $1 thousand.
On the failure to report the California revocation to the commissioner within thirty days as required under G.L. c. 175, § 162R(a)(2), the hearing officer did not agree with the division. She was not persuaded that the failure to report an action occurring in another state fell with the conditions for an enhanced fine under G.L. c. 176D. Instead, the hearing officer set a fine for the failure to report the California revocation under G.L. c. 175, § 194.
This statute, G.L. c. 175, § 194, applies where the insurance laws have no specific penalty, as is the case with § 162R(a)(2).
The hearing officer imposed the maximum fine under § 194, of $500 against Mr. Drawve for his failure to report the California revocation to the commissioner of insurance.
Also, the hearing officer found on the division’s other request for discipline against Mr. Drawve:
The number and the seriousness of the grounds the Division cites for taking disciplinary action against Drawve fully warrant its request to revoke his Massachusetts producer license. On this record, I find that, in addition to revocation of his license, Drawve should be prohibited from transacting any insurance business or acquiring, in any capacity whatsoever in Massachusetts, any insurance business in Massachusetts and shall dispose of any interests he may have in any insurance business in Massachusetts.”
Final orders entered
The final orders entered against Mr. Drawve by the hearing officer were:
ORDERED: That any insurance producer license issued to Alex Drawve by the Division is hereby revoked; and it is
FURTHER ORDERED: That, within ten (10) days of this decision, Alex Drawve shall return to the Division any license in his possession, custody or control; and it is
FURTHER ORDERED: That Alex Drawve is, from the date of this order, prohibited from directly or indirectly transacting any insurance business or acquiring, in any capacity whatsoever, any insurance business in Massachusetts; and it is
FURTHER ORDERED: That Alex Drawve shall comply with the provisions of M.G.L. c. 175, §166B and dispose of any and all interests in Massachusetts as proprietor, partner, stockholder, officer or employee of any licensed insurance producer; and it is
FURTHER ORDERED: That Alex Drawve shall pay a fine of One Thousand Five Hundred Dollars ($1,500) to the Division within 30 days of the date of this decision and order.
FURTHER ORDERED: that Alex Drawve shall pay a fine of One Thousand Five Hundred Dollars ($1,500) to the Division within 30 days of the date of this decision and order.