Ethics, Fiduciary Duties, and Prohibited Practices
Ethics and fiduciary duties are tested through concrete conflicts: jail referrals, collateral handling, and the temptation to cut corners for a fee. The exam expects you to identify the prohibited practice and the correct alternative.
Fiduciary core
Collateral is not the agent's money. Hold it in trust, keep it separate from operating funds, receipt it, account for it, and return it only when the bond is exonerated and the indemnity obligations are resolved. Keep accurate records for the insurer and the Commissioner. Protect confidential defendant information and avoid conflicts between the insurer, the indemnitor, and the agent's own interest.
Prohibited practices
Do not solicit business inside a jail or pay jailers, court personnel, or unlicensed persons for referrals. Do not rebate premiums, split fees with unlicensed persons, misrepresent the bond's terms, give legal advice, threaten a defendant, or use force to recover collateral. Do not commingle funds, falsify records, or continue using a terminated power of attorney.
Worked example
An agent agrees to pay a jail officer $100 for each inmate referral. That is a referral payment to a public employee and a prohibited practice, even if the officer calls it marketing. The agent faces discipline and possible criminal exposure; the proper marketing is lawful advertising and direct inquiry from defendants or families.
Traps
Calling a kickback advertising. Borrowing collateral temporarily. Giving legal advice about the criminal case. Using a POA after the insurer terminates the appointment. Sharing fees with an unlicensed consultant.