The Jewish Observer,

Los Angeles


            27 Elul-4 Tishrei, 5777-5778                             Sept. 18-24, 2017 -- THE JEWISH OBSERVER, LOS ANGELES  --  600th Web Ed.


SACRAMENTO – Gov. Jerry Brown has signed Assembly Bill 1398 (Kalra), which protects annuity owners from losing investment value if insurers delay processing annuity surrenders.
The bill, sponsored by the Department of Insurance and authored by Assemblymember Ash Kalra (D-San Jose), addresses a problem identified by department market conduct examiners who noticed delays with some insurers between the date an annuity surrender request was received from a consumer and the date the insurance company processed the request. The delay, in many cases, led to a reduction in the value of fixed-indexed annuities, the value of which are tied in part to a stock market index (e.g. Nasdaq, NYSE, S&P 500). In one case a consumer lost $22,000 because the insurer delayed processing the annuity surrender and a drop in the stock market index reduced the value of the annuity.
AB 1398 solves the problem by requiring insurers to value the surrender of a fixed annuity on the date the surrender request is received and then process the surrender as expeditiously as possible, but no later than 45 days from the date the surrender request is received. The bottom line is the value of the annuity is made on the date the consumer submits the surrender request. AB 1398 makes this industry best practice law.
"This bill protects consumers from potentially costly delays when surrendering an annuity," said Insurance Commissioner Dave Jones. "Without these protections, seniors and others who rely on annuity investments to prepare for retirement might lose a significant amount of their investment upon surrender. I thank the Governor for signing this reform measure and Assemblymember Kalra for championing it in the Legislature."
Under current law, insurers are not required to use the date a surrender request is received for valuing the surrender of non-variable annuities. Annuity funds left to sit following the receipt of the contract owner's request to surrender, and subsequently cashed out at a later date of the insurer's choosing, may be greatly reduced by hundreds, if not thousands, of dollars. This loss of value may be in addition to the potentially significant surrender charges and penalties applied.
"As annuities gain in popularity and the amount of cash surrenders are likely to increase, it is critical we have strong consumer protections against unnecessary, unfair, and unexpected financial losses," said Assemblymember Ash Kalra. "I am pleased Governor Brown signed AB 1398 into law so that consumers, especially our growing senior population and others who rely upon these investments to prepare for retirement, can rest assured that annuities will be better protected going forward."


Kenneth L. Gross [#52081], 74, of Beverly Hills, was disbarred July 26, 2017, and ordered to notify his clients of the discipline and perform other obligations under rule 9.20 of the California Rules of Court. Gross’ default was entered after he failed to participate in a State Bar Court proceedings. He was found to have engaged in moral turpitude, misappropriating more than $268,000 from a client, who was entitled to receive the money as profit from the sale of her condominium. Other related charges were also found to be true involving failing to maintain client funds in his client trust account, breaching his fiduciary responsibilities, inappropriately entering into a business transaction with his client, failing to provide an accounting of client funds and failing to promptly pay the client any portion of the funds in his possession to which the client was entitled. He had a prior record of discipline, also relating to the issue of a conflict of interest with a client.


David Allen Hiersekorn [#237471], 48, of Placentia, was disbarred July 26, 2017, and ordered to notify his clients of the discipline and perform other obligations under rule 9.20 of the California Rules of Court and to make restitution. He was found to have misappropriated more than $210,000 from a living trust he was hired to oversee. Hiersekorn failed to participate in the State Bar’s prosecution of the matter and his default was entered.


SACRAMENTO -- Gov. Jerry Brown signed into law Senate Bill 764, by Sen. John Moorlach, R-Costa Mesa. The bill expands options available to real estate brokers to protect their clients’ money through an insurance policy.

Real-estate brokers set up “client trust accounts” to separate funds belonging to the broker from funds belonging to clients. To safeguard the process, brokers hold the clients’ money in trust to pay for real estate-related transaction costs.

Under current law, unlicensed employees of real estate brokers may withdraw funds from the broker’s trust-fund account. The employees can do so only if the broker has a fidelity bond as coverage equal to the maximum amount of the trust funds to which an employee has access. Most brokers already have an insurance policy to cover these funds for their business. The result is redundant coverage: insurance and a fidelity bond.

Senate Bill 764 gives real estate brokers an option of either a fidelity bond or insurance coverage, while ensuring the coverage of the potential of an employee’s intentional wrongful acts.


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