NOV 27 2001 THE TREASURER OF THE STATE OF FLORIDA DEPARTMENT OF INSURANCE insure TOM GALLAGHER Docketed by: ’ IN THE MATTER OF: DEBRA ANN BORTH : CASE NO.: 43005-01-AG / ADMINISTRATIVE COMPLAINT TO: DEBRA ANN BORTH 1031 Sawgrass Drive Tarpon Springs, Florida 34689 DEBRA ANN BORTH Amsouth Investment Services 3132 Tampa Road Oldsmar, Florida 34677-2295 You, DEBRA ANN BORTH, are hereby notified that, pursuant to Chapter 626, Florida Statutes, the Insurance Commissioner of the State of Florida has caused to be made an investigation of your activities while licensed as an insurance agent in this state, as a result of which it is alleged: GENERAL ALLEGATIONS 1. Pursuant to Chapter 626, Florida Statutes, at all times pertinent to the dates and occurrences referred to herein, you, DEBRA ANN BORTH, were licensed in this state as a life and variable annuity insurance agent and are currently so licensed, License No. A026293. 2. Pursuant to Chapter 626, Florida Statues, the Florida Department Insurance has jurisdiction over your insurance licenses and appointments. te ately COUNT I 3. The above general allegations are realleged and incorporated herein fully by reference. 4. On or about July 10, 2000, you, DEBRA ANN BORTH, as a licensed insurance agent, met with Elsie D. Birch, an eighty-three year old widow at Amsouth Bank in Palm Harbor, Florida. Mrs. Birch was then a customer of Amsouth Bank with certificates of deposits invested which were shortly scheduled to mature. 5. You, DEBRA ANN BORTH, being aware that her certificates of deposit were approaching maturity, then and there informed the said Elsie D. Birch that you could provide to her a superior investment which had no risk and which was better than a certificate of deposit. 6. You, DEBRA ANN BORTH, then and there proceeded to fill out two variable annuity applications for the said Elsie D. Birch, one in the amount of twenty seven thousand five hundred dollars ($27, 500.00) and the other in the amount of forty eight thousand five hundred sixty seven dollars and twenty one cents ($48, 567.21), each directed to American Skandia. 7. Based upon your representations that such annuities were safe and superior to certificates of deposit, the said Elsie D. Birch signed said applications and authorized checks to be drawn from her certificate of deposits proceeds payable to American Skandia in the sums above set forth. 8. You, DEBRA ANN BORTH, failed to in anyway disclose to the said Elsie D. Birch any of the annuity contractual provisions, including early withdrawal penalties, the right to cancel, annuity values or the free look period provisions. 9. . Shortly thereafter the said Elsie D. Birch received by mail a prospectus and upon review of same she determined she did not wish to invest her funds in any variable life annuities. Ss ee ad She promptly telephoned you to inform of this decision followed by a personal meeting with you at the bank. 10. At such meeting Elsie D. Birch again informed you that based upon information in the prospectus she was not interested in keeping the variable life annuities which you had sold to her. You, DEBRA ANN BORTH, refused to rescind the applications. IT IS THEREFORE CHARGED, that you, DEBRA ANN BORTH, have violated and are accountable under the following provisions of the Florida Insurance Code and Rules of the Department of Insurance which constitutes grounds for the suspension or revocation of your licenses and eligibility as an insurance agent: (a) Willful misrepresentation of any insurance policy or annuity contract or willful deception with regard to any such policy or contract, done either in person or by any form of dissemination of information or advertising. [Section 626.61 1(5), Florida Statutes}; (b) | Demonstrated lack of fitness or trustworthiness to engage in the business of insurance. [Section 626.611(7), Florida Statutes]; (c) Fraudulent or dishonest practices in the conduct of business under the license or appointment. [Section 626.611(9), Florida Statutes]; (d) Knowingly making a false or fraudulent written or oral statement or representation on, or relative to, an application or negotiation for an insurance policy for the purpose of obtaining a fee, commission, money, or other benefit from any insurer, agent, broker, or individual. [Section 626.9541(1)(k), Florida Statutes]. WHEREFORE, you, DEBRA ANN BORTH, are hereby notified the Treasurer and Insurance Commissioner intends to enter an order suspending or revoking your license(s) and eligibility for licensure as an insurance agent or to impose such lesser penalties as maybe oer woo provided under the provisions of Chapter 626, Florida Statutes, and under the other reference sections of the Florida Statutes as set out in this administrative complaint. You are further notified that any order entered in this case revoking or suspending any license or eligibility for licensure held by you shall also apply to all other licenses and eligibility held by you under the Florida Insurance Code. NOTICE OF RIGHTS Pursuant to Sections 120.569 and 120.57, Florida Statutes and Rule Chapter 28-106 Florida Administrative Code (F.A.C.), you have the right to request a proceeding to contest this action by the Department. You may elect a proceeding by completing the attached Election of Rights form or filing a Petition. Your Petition or Election of a proceeding must be in writing and must be filed with the General Counsel acting as the Agency Clerk, Department of Insurance. If served by U.S. Mail the Petition or Election should be addressed to the Florida Department of Insurance at 612 Larson Building, Tallahassee, Florida 32399-0333. If Express Mail or hand delivery is utilized, the Petition or Election should be delivered to 612 Larson Building, 200 East Gaines Street, Tallahassee, Florida 32399-0333. The Petition or Election must be received by, and filed in the Department within twenty-one (21) days of the date of your receipt of this notice. YOUR FAILURE TO RESPOND TO THIS ADMINISTRATIVE COMPLAINT WITHIN TWENTY-ONE (21) DAYS WILL CONSTITUTE A WAIVER OF YOUR RIGHT TO REQUEST A PROCEEDING ON THE MATTERS ALLEGED HEREIN AND AN ORDER OF REVOCATION WILL BE ENTERED AGAINST YOU. If a proceeding is requested and there is no dispute of fact the provisions of section 120.57(2), Florida Statutes would apply. In this regard you may submit oral or written evidence in opposition to the action taken by this agency or a written statement challenging the grounds upon which the agency has relied. While a hearing is normally not required in the absence of a me epee TR er oe dispute of fact, if you feel that a hearing is necessary one will be conducted in Tallahassee, Florida or by telephonic conference call upon your request. If you dispute material facts which are the basis for this agency’s action you may request a proceeding pursuant to sections 120.569 and 120.57(1), Florida Statutes. If you request this type of proceeding, the request must comply with all of the requirements of Rule Chapter 28- 106, F.A.C. and contain: (a) A statement identifying with particularity the allegations of the Department which you dispute and the nature of the dispute; (b) — Anexplanation of what relief you are seeking and believe you are entitled to; (c) Any other information which you contend is material. These proceedings are held before the State administrative law judge of the Division of Administrative Hearings. Unless the majority of witnesses are located elsewhere the Department will request that the hearing be conducted in Tallahassee. If you request a hearing, you have the right to be represented by counsel, or other qualified representative, to take testimony, to call and cross-examine witnesses, and to have subpoena and subpoena duces tecum issued on your behalf. You are hereby notified that mediation under Section 120.573, Florida Statutes, is not available. . . Failure to follow the procedure outlined with regard to your response to this notice may result in the request being denied. All prior correspondence in this matter shall be considered freeform agency action, and no such correspondence shall operate as a valid request for an administrative proceeding. Any request for administrative proceeding received prior to the date id i ein a SOROS ome CR ree” of this notice shall be deemed abandoned unless timely renewed in compliance with the guidelines as set out above. WBYIVETICATE OF SERVICE I HEREBY CERTIFY that a true and correct copy of the foregoing ADMINISTRATIVE COMPLAINT and ELECTIONS OF RIGHTS have been furnished to: DEBRA ANN BORTH, 1031 Sawgrass Drive, Tarpon Springs, Florida 34689 and DEBRA ANN BORTH, Amsouth Investment Services, 3132 Tampa Road, Oldsmar, Florida 34677-2295 by certified mail this27th ZEEE. DEAN ANDREWS, ESQUIRE Florida Bar No. 0001959 Division of Legal Services 612 Larson Building Tallahassee, Florida 32399-0333 (850) 413-4242 day of _ NOVEMBER , 2001. noe cree DEBRA A. BORTH Florida Department of Insurances NOMIHISTR is Division of Legal Services December 14, 3001 HEARIN ie wre) Mr. Dean Andrews, Esquire 612 Larson Building Tallahassee, Florida 32399-0333 Dear: Mr. Andrews Please be advised that I have received your November 27, 2001 correspondence regarding the Administrative Complaint (Case No. 43005-01-AG). Documented below, please find my statement disputing the alleged allegations. 1. On July 10, 2000 Ms. Elsie Birch met with Jason White and myself, Investment Services Representatives, (“ISR”) for AIS. The purpose of the meeting was to discuss the possibility of receiving a better return on an IRA CD currently held at AmSouth Bank. Based on information provided by Ms. Birch, a Confidential Client Profile, (“CCP”) was completed by me. In general, the information documented in the CCP is designed to assist an ISR and determine a client’s risk tolerance and overall investor profile. While I completed the four page CCP, Ms. Birch provided the information to me through a series of profiling questions designed to determine suitability. Ms. Birch indicated that her overall investment objective was tax savings and growth for the future and that she was willing to accept fluctuations in the value of the principal in order to achieve her financial goals. Ms. Birch indicated that she currently held, in her investment portfolio, individual stocks, mutual funds, and CD’s that were valued over $400,000. I routinely ask a client to review all documentation prior to signing. The Purchase Authorization Form (“PAF”) signed by Ms. Birch, clearly indicates directly above the client’s signature, in bold, large, capitalized font, “IMPORTANT CLIENT DISCLOSURES — PLEASE READ.” While Ms. Birch did not have prior experience with annuities, she did own mutual funds with Prudential. Mutual funds, like variable annuities, are variable products and may fluctuate in value. Ms. Birch signed a CCP which indicated: a) “Tax Savings” and “Growth for the Future,” b) “Current income is not my primary concern. My primary interest is growth;” and c) she “somewhat agrees” that she would “be willing to accept Sperone Ferrier rere ~2- December 14, 2001 fluctuations in the value of [her] principal in order to achieve [her] financial goals.” In addition, Ms. Birch initialed a pie chart indicating that her risk tolerance was “moderate.” The pie chart represents 50% - 60% of an individual’s investment portfolio allocated to growth, 30% - 40% allocated to income and 20% - 30% allocated to fixed. The $75,000 investment made by Ms. Birch represented approximately 17% to 18% of her investment portfolio. Ms. Birch signed both a CCP and PAF indicating that her time horizon on this investment was 5 to 9 years. I never knew about any serious health problems. Moreover, the annuity provides for a death benefit prior to age 90 that provides the beneficiary with the greater of the total purchase less withdrawals or the current account value plus the interim value of any fixed account. If the owner dies after the age of 90, the beneficiary receives the account value, with a Market Value Adjustment applied to the fixed account. In addition, should Ms. Birch require access to the funds in the variable annuity due to medical reasons, she can make penalty free medical withdrawals if she becomes terminally ill or is confined to a medical care facility for over 90 days. The CCP indicates that Ms. Birch had approximately $230,000 with AmSouth, $100,000 with Prudential in mutual funds, and $100,000 plus in various stocks. In addition, Ms. Birch had approximately $160,000 of equity in her home. Her net worth, from this information, would be approximately $590,000. While Ms. Birch may have allowed her certificates of deposit to “roll over,” she _ also owned other investments, such as mutual funds and stocks, which unlike CDs, do not “roll over.” I adamantly deny the statement that I “assured Ms. Birch that the annuities were as safe as certificates of deposit.” One of the features that the American Skandia annuity offers is the Skandia Safety Net: Balanced Investment Program. This allows the investor to participate in the market but also allocate a portion of the purchase payments to the fixed rate option for a duration that is sufficient to guarantee the value of the purchase payments, including those allocated to the variable options. I discussed this particular feature of the product with Ms. Birch. As is often the case, a widower may seek out professional guidance with respect to their finances or estate — much like Ms. Birch did with an estate attorney. I reviewed Ms. Birch’s finances and made a recommendation for an investment that would enable Ms. Birch to: a) receive greater growth*; b) invade principal and income in the event of terminal illness or medical facility care for longer than 90 days; c) leave the original principal to her designated beneficiaries (which generally avoids the fees charged by an attorney for probating an individual’s will) with the potential for market growth; and d) invest in a product that after seven (7) years guarantees the original investor a return of principal plus market growth. - -3- December 14, 2001 *While the intent of the investment was to provide greater growth, no investment representative, at the time a recommendation is made, can know whether or not the market will decline or increase in value. 6. I was unaware that Ms. Birch was dissatisfied until my office received a written letter from Ms. Birch’s attorney. I also never received either a written or verbal request to cancel the annuity. While I did meet with Ms. Birch to reallocate the sub-accounts of the variable annuity (which is extremely common among investors), Ms. Birch did not express her desire to cancel the contract. 7. Additionally Ms. Birch did not incur any tax liability for this purchase. The monies being held in the AmSouth Bank IRA CD were rolled over to the annuity as qualified money. Again, the money that was invested in the bank IRA CD still remains in a qualified retirement plan and therefore did not create a tax liability for Ms. Birch. In summation, I adamantly deny any willful misrepresentation, fraudulent or dishonest practices involving any transactions with Ms. Birch. I also deny making any false or fraudulent written or oral statements or false representations to Ms. Birch. Being an experienced investor owning stocks and other investments, Ms. Birch was receptive to my recommendation of the variable annuity product. The product was fully explained with ever aspect being fully disclosed by myself as well as by Jason White. Thank you for your consideration in this matter. Sincerely, Cit AMELIL Debra A. Borth CC: Aaron C. Ball, Esq., AmSouth Investment Services, Inc. 1031 SAWGRASS DRIVE+ TARPON SPRINGS, FLORIDA « 34689 PHONE: 727-937-7443 Tey crecre

Docket for Case No: 02-000139PL