New Jersey Life Producer Law Practice Test

Under what circumstances may the Banking and Insurance Commissioner revoke the license of a producer?

1. Failure to submit claims on time

2. Depositing commission in a trust account

3. Not attending industry conferences

4. Receiving negative feedback from clients

The correct answer is: Depositing commission in a trust account

The correct circumstance under which the Banking and Insurance Commissioner may revoke the license of a producer is the improper management of funds, specifically related to depositing commission in a trust account. Producers are required to adhere strictly to regulations regarding financial practices, including the handling of client funds and commissions. When a producer deposits commission intended for their personal use into a trust account—where funds must be held for the benefit of clients or to pay claims—it violates ethical standards and regulations. This mismanagement can lead to loss of trust and integrity in the insurance market, warranting disciplinary action, including license revocation. In contrast, the other options do not directly relate to the fundamental ethical and financial management issues that typically lead to license revocation. For instance, failure to submit claims on time may reflect poor practice or ineffectiveness but does not inherently indicate misconduct serious enough for revocation. Not attending industry conferences and receiving negative client feedback also do not represent violations of law or regulations that would justify such a severe consequence.