Webinar:TDI Enforcement OverviewOctober 21, 2014

Sponsored By:

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2014 TDI ENFORCEMENT OVERVIEW: PENALTIES, SANCTIONS, & OTHER THINGS THAT GO BUMP IN THE NIGHT!Kergin Bedell, Burton & Hyde, PLLC

1. TDI’s Enforcement Section2. Recent Trends in Enforcement Actions3. Commissioner Orders4. Wrap Up and Discussion

Summary

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1. Key Enforcement Personnel2. The Many Ways Cases Reach Enforcement3. TDI’s Enforcement Powers

TDI’s Enforcement Section

Key Enforcement Personnel

Comm. Of InsuranceJulia Rathgeber

Comm. Of InsuranceJulia Rathgeber

Deputy Comm. (Compliance Division)

Mark Einfalt

Deputy Comm. (Compliance Division)

Mark Einfalt

Assoc. Comm. (Enforcement Section)

Sandra Nicolas

Assoc. Comm. (Enforcement Section)

Sandra Nicolas

Enforcement Section Staff Enforcement Section Staff 

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TDI’s Enforcement Powers

General Sanctioning Authority Cancellation or Revocation (TIC § 82.051) Suspension (TIC § 82.052(1)) Cease and Desist (TIC § 82.052(2)) Administrative Penalty (TIC §§ 82.052(3) and 84.021)

Restitution (TIC §§ 82.052(4) and 82.053)

TDI’s Enforcement Powers

Penalty Factors Seriousness of Violation

• Nature, Circumstances, Extent, & Gravity• Actual/Potential Hazard to Public Welfare

Economic Harm Disciplinary History Deterrence Value Corrective Action Intent Other Matters That Justice May Require

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TDI’s Enforcement Powers

Informal Resolutions Closed with No Further Action Warning Letters Consent Orders

The Many Ways Cases Reach Enforcement Consumer Complaints Industry Complaints Compliance Audits TDI Staff Reviews Data Calls

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1. Enforcement Actions (2008 – 2013)2. Enforcement Actions (2014 So Far)3. Sanctions & Penalty Amounts4. Sanctioned Entities5. Orders From the Last 12 Months6. Penalties For the Last 12 Months

Recent Trends

Recent Top Costume Choices

2013 ‐ 2000 2009 ‐ Vampires

2011 – Snooki & The Situation

2008 – The Joker 2006 – Pres. Obama 2003 – Jack Sparrow 2000 – Austin Powers

* Spirit Halloween’s Top Pop Culture Costumes 1983 – 2013 

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TDI Enforcement Case Volume(2008 – 2013)

0

20

40

60

80

100

120

2008 2009 2010 2011 2012 2013

Cases Received Cases Closed

Title Commissioner Orders(2008 – 2013)

0

5

10

15

20

25

30

35

40

45

50

55

60

65

70

75

80

2008 2009 2010 2011 2012 2013

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Title Commissioner Orders(2008 – 2014 YTD)

0

10

20

30

40

50

60

70

80

90

2008 2009 2010 2011 2012 2013 2014

Sanctions (2012, 2013, 2014)2012

2013

2014Admin. Penalty

Revocation

Probation

Cease & Desist

SurrenderLicenseRestitution

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Penalties (2012, 2013, 2014)

2012 2013 2014

High $50,000 $80,000 $40,000

Low $1,000 $1,000 $1,000

Average $9,433 $13,983 $8,823

Median $5,000 $4,000 $3,300

Title Commissioner Orders(Sep. 2013 – Aug. 2014)

Admin. PenaltySurrender LicenseRevocation

High $80,000

Low $1,000

Average $15,047

Median $4,400

SANCTIONS PENALTIES

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Title Commissioner Orders(Sep. 2013 – Aug. 2014)

Orders

Multiple Violations

Filing Deadlines ‐Audit ReportsFiling Deadlines ‐Guaranty FeesRebating

Failure to RemitPremuim

Past Top Costume Choices

1983 ‐ 1999 1988 ‐ Elvira

1996 – Scream 1993 – Barney 1990 –Ninja Turtles  1985 – Hulk Hogan 1983 – Princess Leia

* Spirit Halloween’s Top Pop Culture Costumes 1983 – 2013 

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Filing Deadlines – Audit ReportsRebatingFailure to Remit PremiumMultiple Violations – Compliance AuditsOther Common Violations

Commissioner Orders

Filing Deadlines - Audit Reports

Tex. Ins. Code Ann. § 2651.151(a) Each title insurance agent and direct operation shall have 

an annual audit made of trust fund accounts…  (b)  Not later than the 90th day after the date of the end of the 

agentʹs or direct operationʹs fiscal year, the agent or direct operation shall send … to the department one copy of the audit report… 

Tex. Ins. Code Ann. § 2651.152(a) Each title insurance company shall have an annual audit 

made of trust fund accounts for each county in which it operates in its own name… 

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Filing Deadlines -Audit Reports

3. Tex. Ins. Code §§ 2651.151‐157 requires title  agencies, including , to file with the department an annual trust fund account audit report prepared by a certified public accountant. The report is due before the 91st day after the end of the agent’s fiscal year.

4. According to department records,fiscal year ended December 31, 2013.

5. annual trust fund account audit report was due March 31, 2014.

6. The department received                               annual trustfund account audit report May 7, 2014, five weeks after the March 31,  2014 deadline.

REPRESENTATIVE ORDER LANGUAGE

Filing Deadlines

REPORTING DEADLINE COMPLIANCE TIP

Calendar all reporting requirements

Annual Audit Report 90 days from end of fiscal year

Guaranty Fees2 months after the calendar quarter ends

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2014 Top Costume #5

Oscar’s Pizza Delivery Guy

* GuestofaGuest.com, The Best 2014 Pop Culture Halloween Costumes 

Ellen Degeneres surprised everyone at the Oscar’s by ordering pizza for the crowd. The only person more surprised than the actors in attendance was the pizza delivery guy who walked through the audience handing out slices to the stars. 

Rebating

Tex. Ins. Code Ann. § 2502.051A commission, rebate, discount, portion of a title insurance premium, or other thing of value may not be directly or indirectly paid, allowed, or permitted by a person engaged in the business of title insurance or received or accepted by a person for engaging in the business of title insurance or for soliciting or referring title insurance business. 

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Rebating

3. entered into a written contract.  The written contract provided for                              to performcertain services and furnish certain goods and facilitiesin support of  title insurance and escrow business.                       paid $500 for each file in which 

performed services.sought consultation before entering the agreement, and concluded that their agreement complied with Texas Law.

4. One of the owners of                           was also the owner and president of a mortgage broker registered under the laws of Texas and Kansas. That owner had an agreement with                        to send title insurance and escrow business to                       .

REPRESENTATIVE ORDER LANGUAGE

Rebating

5. After entering into his agreement with                               ,                      received a substantial increase in title insurance and escrow business involving the mortgage broker. The increase in business was attributable to                business relationship with                          .

REPRESENTATIVE ORDER LANGUAGE

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Rebating

RECENT REBATING VIOLATIONS COMPLIANCE TIP

Review Title Bulletin No. 158 (Comm. Bulletin B‐0054‐96)

Have all co‐marketing agreements reviewed by legal counsel

Referral fees

Discounted closing costs if particular title agency is used

2014 Top Costume #4

PHARRELL’S HAT

* Huffington Post, 2014 Halloween Costume Ideas 

Either grab a Canadian Mounty hat and go as the pop artist, or make a giant body‐sized hat. 

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Failure to Remit Premium

Rate Rule R‐2

…Each company shall remit the portion of the premium due to the title insurance company no later than the 15th day of the second month following the month in which the premium was collected… 

Failure to Remit Premium

3. Title agencies, including                              are required to remit underwriter premiums no later than the 15th day of the second month following the month in which premiums are collected.

4.  was required to timely remit underwriter premiums, which were collected for 219 files during April through December, 2013.

5. failed to timely remit underwriter premiumsfor the 219 files before at least February 21, 2014, when the department conducted a compliance audit.

6. A compliance audit in 2011 revealed that premium remittances for 35 files were also delinquent.

REPRESENTATIVE ORDER LANGUAGE

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Failure to Remit Premium

2014 TOP COSTUME # 3 COMPLIANCE TIP

Create redundancies when assigning responsibilities to ensure obligations are met when employees are out sick or on vacation

Multiple Violations –Compliance Audit Procedural Rule P‐61

Title policies shall be provided and furnished to the insured within ninety (90) days after receipt by the title company of proof of compliance with the companyʹs Schedule C requirements. 

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Multiple Violations –Compliance Audit

2. In March 2013, TDI audited            business. During the audit, 172 files were identified that had been closed more than 90 days for which                    had failed to issue title insurance policies.                    has since issued all outstanding policies for the file.

REPRESENTATIVE ORDER LANGUAGE

Multiple Violations –Compliance Audit

3. During the audit,                     demonstrated that it had failed to timely remit $53,331.48 of title insurance premium to its underwriter.                     has since paid this underwriter and is current on all its remittances to underwriters.

REPRESENTATIVE ORDER LANGUAGE

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Multiple Violations –Compliance Audit

COMPLIANCE AUDIT VIOLATIONS COMPLIANCE TIP

Discuss with the auditor any corrective action you have taken

Improper fee splits Failure to issue policies

Failure to remit premium

Unsupported disbursements

2014 Top Costume # 2

GROOT MALEFICENT

The Wrap, Maleficent, Groot Top List of Hottest Movie‐Inspired Halloween Costumes   

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Other Common Violations Closing and Claims Handling

TIC §§ 2501.003(4), 2501.006, 2703.052 & Procedural Rule P‐1.f and s

Continued Non‐compliance with OrderTIC § 82.054

Continuing EducationTIC § 2652.058 & Procedural Rule P‐28 

MisappropriationTIC §§ 2651.301(4) & 2652.201(a)(4)

Unauthorized Premium SplitsTIC § 2502.051 & Procedural Rule P‐22

Unlicensed ActivityTIC §§ 2501.005, 2652.002, 101.102

1. TDI’s Enforcement Section2. Recent Trends in Enforcement Actions3. TDI’s Enforcement Powers4. TDI Orders From the Last 12 Months

Wrap Up and Discussion

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Key Take Away –Penalty Factors

Seriousness of Violation• Nature, Circumstances, Extent, & Gravity• Actual/Potential Hazard to Public Welfare

Economic Harm Disciplinary History Deterrence Value Corrective Action Intent Other Matters That Justice May Require

Key Take Away-Comm. Orders (9/13 - 8/14)

Admin. PenaltySurrender LicenseRevocation

High $80,000

Low $1,000

Average $15,047

Median $4,400

SANCTIONS PENALTIES

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Key Take Away –Compliance Tips

Calendar all reporting requirements

Review Title Bulletin No. 158 (Comm. Bulletin B‐0054‐96)

Have all co‐marketing agreements reviewed by legal counsel

Create redundancies when assigning responsibilities to ensure obligations are met when employees are absent

Discuss with the auditor any corrective action you have taken

Key Take Away –2014 Top Costume # 1

ICE BUCKET CHALLENGE

Huffington Post, 2014 Halloween Costume Ideas 

Because no one is tired of this yet!!!

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311 West 5th Street, Suite 100Austin, Texas 78701

Thank you for your time.  If you have any questions about these presentation materials or would like to follow up with the author, please contact:

Kergin B. Bedellkergin@burtonhyde.comt 512‐800‐5594f 512‐354‐7401