“What was he thinking?” We heard this frequently after a prominent politician resigned due to a sex scandal. We won’t retell the tawdry tale. But we will say his conduct highlights two qualities inappropriate in a public servant: arrogance (“I’m above the law”) and stupidity (“No one will notice”)

These flaws, unfortunately, are universal. People of all professional, educational, or social backgrounds believe (wrongly) that rules don’t apply to them and that rule breaking has no cost.

We see this a lot at the National Ethics Association. Financial professionals who want to earn our optional Certified Background Check credential must complete a detailed application and pass a rigorous seven-year background check. If they’ve had a disqualifying violation, we either find out about it from their application or from our background check. In either case, when truth comes to light, we must decline their application or revoke their membership.

Here’s a case in point (true story). A financial advisor, let’s call him Bob, wanted to join our Association. But he checked “no” to this question on our membership application: “Within the last seven (7) years, have you had a state or federally regulated license revoked, restricted, or terminated for cause?”

Our background check, however, revealed that he, in fact, did have a restricted business license. Reason: When he applied for his license, he failed to disclose that several decades before; he had been convicted of a misdemeanor. The state promptly fined him $2,500, revoked his unrestricted license, and replaced it with a restricted one.

Even though his misdemeanor happened 20 years ago and was eventually dismissed and expunged from his record, and even though he had never had a consumer-related insurance complaint, we could not admit Bob because of his current license status.

Here’s another true case: When a Certified Background Check member’s credential came up for renewal, we ordered a complete check, as we do with all renewing members. This uncovered two problems.

  • First, in the prior year, Tom had failed to respond to a regulatory agency inquiry.
  • Second, he had falsely stated to the regulator that he completed his continuing education credits. The state fined him for these two violations, and we revoked his membership.

What can advisors learn from these two cases? That having a cavalier attitude toward rules is as serious a matter as outright criminality. If you are one of the many who believe that rules don’t apply to you and that you’ll never get caught if you break them, consider this article a wake-up call.

Don’t jeopardize your career, your finances, or your clean errors-and-omissions insurance status by ignoring the rules. Instead . . .

  • Follow all of the rules prescribed by regulators, especially administrative ones. You’ll pay a price if you don’t.
  • Never assume rules they don’t matter. They matter a lot, and they apply to YOU!
  • Don’t violate the rules and think you’ll never get caught. You will.

By paying attention to the rules, you won’t get sanctioned or sued . . . and your family and friends won’t ask, as they did about the disgraced politician, “What was he thinking?”

Prevent liabilities by arming yourself with knowledge.

Regarding large bureaucracies, Mother Theresa once said, “So many signatures for such a small heart.” The same could be said for the U.S. banks embroiled in the foreclosure scandal. Haven’t they learned anything from the economy’s meltdown?

Obviously, they haven’t learned that using so-called “robo-signers” to process foreclosure documents isn’t only wrong, but illegal. Do bank leaders actually believe mortgage clerks can sign 10,000 foreclosure files a month (or one per minute) and still give each file a proper review? Even if the clerks were doing their due diligence, one wonders whether they knew what to look for.

A foreclosure supervisor with Goldman Sachs admitted in a court deposition that she didn’t know the meaning of terms such as “promissory note,” “lien,” or “defendant.”

We can only conclude that banks are either woefully ignorant in this area or consciously criminal. But just because they’re doing this in banking doesn’t mean professionals in other financial sectors should do the same. In insurance, investments, and financial-advisory worlds, client and advisor signatures on sales forms and disclosure documents remain crucially important. Cutting corners or playing signature games can have serious consequences for all concerned.

Why are signatures so important? According to West’s Encyclopedia of American Law, “a signature is a mark or sign made by an individual on an instrument or document to signify knowledge, approval, acceptance, or obligation.” Its purpose: “to authenticate a writing, or provide notice of its source, and to bind the individual signing the writing by the provisions contained in the document.” Literally, every aspect of a businessperson’s success hinges on the validity of the signatures they ask their clients to make—and the ones they make themselves.

Sound straightforward, right? Yes, but the Devil is in the pen strokes. Despite the fact that most financial professionals get lots of training in this area, we still hear stories of them signing forms for clients and committing other serious paperwork mistakes. Those who do this run the risk of having their sales rejected, of clients filing complaints, of having their professional licenses pulled, and of getting entangled in errors-and-omissions insurance claims.

Don’t let it happen to you. Here are four key signature guidelines to keep you and your business safe:

  1. Never sign a document as a witness unless you actually saw the client sign the document.
  2. Never sign a form on behalf of another person, even if the person asks you to.
  3. Never ask or require a client to sign a blank or incomplete sales document or other form for you to fill in later.
  4. Never omit dates from forms and then later insert a pre- or post-date.

Remember, the road to perdition—and to nasty client lawsuits—is paved with bad signatures. Whatever you do, stay off that road! Your errors-and-omissions insurance loss history will thank you for it.

Visit our E&O Headqurters for more tips and insights on how to protect yourself.

It’s no secret that recent market cycles have created a financial blood bath. Millions of consumers lost trillions in net worth. People who work in real estate or investment banking have seen their livelihoods sink. And millions more Americans have lost their jobs and with them, their ability to stay afloat financially.

Well, you know what happens when financial catastrophe and water mix. You get a lot of blood in the water. And blood, along with survivors thrashing on the surface, attracts those who would benefit from misfortune—sharks.

In today’s environment, revenue-hungry attorneys or clients who are determined to recoup their losses can tear into and gut your business, chew up your net worth, and spit out your professional future.

So what to do? In times like these, your best defense is to triple-check your moral compass. If you continue to do business with a strong commitment to ethics and integrity, you will greatly minimize the odds of a “shark attack.”

However, doing business ethically is just the first step. The second is to purchase a high-quality errors-and-omissions (E&O) insurance policy that is properly designed for your type of business. Being insured won’t necessarily prevent an attack. But it will minimize the aftermath of one, allowing you to swim to shore and get on with your business and life.

However, even if you’re ethically grounded and protected with a good errors-and-omissions insurance policy, you’re still human. That means you may someday make a mistake that sheds client blood, potentially triggering a feeding frenzy. The best defense here is to E&O proof your business practices. Here are just a couple errors-and-omissions loss prevention strategies to consider:

  • E&O Prevention Strategy #1: Make sure your solicitation materials play it totally straight. You never want to misrepresent who you are, what you do, or what you sell.
  • E&O Prevention Strategy #2: Do a rigorous fact-finder and document the client needs you uncovered. Then link your recommendations to the client’s documented needs.
  • E&O Prevention Strategy #3: Educate your clients about what they bought. Make sure they understand what it does and doesn’t do, as well as all its moving parts, fees and expenses, and any underlying risks and guarantees.
  • E&O Prevention Strategy #4: Always stay in your area of expertise. Swimming in water that’s over your head is a recipe for flailing. And you know what flailing attracts.
  • E&O Prevention Strategy #5: Put everything in writing. Make sure your client file documents every key decision. Also make sure to document when clients decline important coverage, such as long-term care insurance. This will protect you from a beneficiary attack.


These five techniques are clearly the surface of a very deep ocean. But here’s the key point: Train yourself to think defensively at all times, while remaining upbeat about the great work you do.

Finally, to prevent errors-and-omissions insurance claims, don’t get out of the water. Instead, swim in the right direction (ethics), with the right protective gear (errors-and-omissions insurance), and with the right strokes (best practices).

For great pricing on E&O insurance click here.