David Lerner Associates fined $255,000

David Lerner Associates Inc., a Syosset financial company, has agreed to pay a $255,000 state regulatory agency fine after admitting that during a six-year period ending in 2004 it had not given required information to nearly 800 clients who bought replacement insurance and annuity investments.

The company has been in compliance with state law since 2004 and cooperated with investigators, the state Insurance department said.

"This was a lapse in proper documentation, not a failure to provide information. We did provide the information, though not in the format required," said Joseph Pickard, general counsel for David Lerner. "There wasn't a single instance where a client was harmed by the lapse in documentation,” Pickard said. The division involved in the misconduct was a small segment of the overall company, producing about 1 percent of its revenues at that time, Pickard said.

The transactions involved the replacement of 527 variable life insurance policies and 259 variable annuity contracts.

In each of the interactions between 1998 and 2004, David Lerner Associates sales representatives violated state regulations, the insurance regulator said.

"What we saw was a systemic violation" of state regulations, Steven Nachman, the agency’s deputy superintendent for frauds and consumer services, said.

The company "just had customers sign forms in blank and then an employee would fill in the boilerplate," Nachman said. “Because of the magnitude of the violations we went ahead and imposed a fine.”

New York insurance law and department regulations require that any time a life insurance policy or annuity is being replaced, the consumer must first be provided with certain information necessary to make an informed decision, the agency said.

That information includes the reasons for recommending the new policy or contract, and comparisons between details of the current and proposed policy or contract.

This comparison of risks and benefits might help a consumer understand, for example, if getting a higher interest rate on an annuity in the long run would outweigh the short-term cost of the surrender charge he or she may have to pay to close out the old contract, the department said.

Department regulations require that consumers sign a form acknowledging receiving these disclosures.

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