The Office of General Counsel issued the following opinion on March 5, 2003, representing the position of the New York State Insurance Department.

Re: Inquiry Regarding Fees


Did the conduct described in the Facts portion of this letter constitute a violation of the New York Insurance Law?


New York Insurance Law § 2119 requires that an agent, broker, or consultant obtain from their client a signed memorandum detailing the compensation arrangement agreed to by the parties. Without a review of the agreement signed by the inquirer’s client, a definitive determination cannot be made.


The inquirer is a principal of a financial planning firm. The inquirer is a registered investment advisor and is registered with the National Association of Securities Dealers (NASD) as well as being licensed by the Department as both an insurance broker and agent. The inquirer described the following situation:

In 1995 the inquirer was approached by a client who was interested in investment alternatives for funds in his closely held corporation’s account. After consultation with the client, the inquirer suggested that the client purchase a no-load 1 life insurance product which featured a fixed account with a 4% return as well as a death benefit. The inquirer’s agreement with the client was that the inquirer would be compensated solely in the inquirer’s capacity as a financial planner and would charge him at a prescribed hourly rate for the time spent assisting him with his planning. To this end, the client executed the inquirer’s firm’s NASD approved form acknowledging the fee arrangement. The client paid the inquirer directly for the inquirer’s services and wrote a separate check payable to the insurer for the insurance product.

The inquirer has recently been approached by the client, who, without specifying any specific grounds, threatened to file a complaint unless the inquirer returned to him $3000 of previously paid fees.


N.Y. Ins. Law § 2119 (McKinney 2000) governs the compensation of insurance agents, brokers, and consultants and requires the execution by the client of a written memorandum specifying or clearly defining the amount or extent of such compensation. That statute provides, in relevant part, as follows:

(a) (1) No person licensed as an insurance agent, broker or consultant may receive any fee, commission or thing of value for examining, appraising, reviewing or evaluating any insurance policy, bond, annuity or pension or profit-sharing contract, plan or program or for making recommendations or giving advice with regard to any of the above, unless such compensation is based upon a written memorandum signed by the party to be charged and specifying or clearly defining the amount or extent of such compensation.

(2) A copy of every such memorandum or contract shall be retained by the licensee for not less than three years after such services have been fully performed.

(b)(1) No person licensed as an insurance agent, broker or a consultant may receive any compensation, direct or indirect, as a result of the sale of insurance or annuities to, or the use of securities or trusts in connection with pensions for, any person to whom any such licensee has performed any related consulting service for which he has received a fee or contracted to receive a fee within the preceding twelve months unless such compensation is provided for in the memorandum or contract required pursuant to subsection (a) hereof.

N.Y. Ins. Law § 2119 (a) & (b)(1)(McKinney 2000).

Thus, under this statute, a licensed agent or broker may receive a fee for consulting services regarding an insurance product provided an appropriate written memorandum is obtained from the party to be charged. The Department expresses no opinion on the adequacy of the agreement obtained from the inquirer’s client since it was not submitted for the Department’s review.

Finally, it should be noted that the statute requires that a copy of the required memorandum shall be retained by the licensee for a period of three years.

For further information one may contact Supervising Attorney Michael Campanelli at the New York City Office.

1 The policy was purchased directly from the company by the client, and there was no commission or sales fee payable to the inquirer. The inquirer is not an agent of the company that sold the client the life insurance product.