Compulsory vs discretionary license discipline

Two consecutive statutes list grounds for license discipline in Florida, and the whole distinction is one word. Under s. 626.611 the Department MUST deny, suspend or revoke. Under s. 626.621 it MAY. Exam items rarely ask you to recite either list — they describe conduct and ask which statute governs, so the sorting rule matters far more than memorizing entries.

Questions and answers, explained

All 12 questions above, with the correct answer and why it is correct. Everything here is on compulsory vs discretionary license discipline.

1. An agency principal diverts $150,000 of premium trust funds to cover business losses. Under s. 626.561, F.S., the criminal classification of the misappropriation is:

   • Aa felony of the third degree
   • Ba felony of the second degree
   • Ca felony of the first degreeCorrect
   • Da misdemeanor of the first degree

   Why: The tiers in s. 626.561(3), F.S., are: $300 or less, first-degree misdemeanor; more than $300 but less than $20,000, third-degree felony; $20,000 or more but less than $100,000, second-degree felony; and $100,000 or more, first-degree felony. Because $150,000 is above the top threshold, option C applies; option B is the closest distractor and would be correct only for amounts below $100,000. Misappropriation of fiduciary funds is also a compulsory ground for suspension or revocation under s. 626.611, F.S. (Outline FL-I.G)

   Reference ss. 626.561(3), 626.611, F.S. — Outline FL-I.G

2. An agent is found to have committed churning involving fraudulent conduct. Under s. 626.9521, F.S., the maximum administrative fine for each willful violation is:

   • A$12,500
   • B$100,000
   • C$125,000
   • D$187,500Correct

   Why: For twisting or churning, s. 626.9521(3), F.S., imposes an administrative fine of up to $12,500 per nonwillful violation and up to $187,500 per willful violation (willful violations involve fraudulent conduct), and the violation is punishable as a first-degree misdemeanor. These caps were raised by 2022 legislation; the $100,000 figure is the current cap for other willful unfair trade practice violations, making it the closest distractor.

   Reference FL-II.A; ss. 626.9521(3), 626.9541, F.S.

3. While completing a health application, the applicant mentions she was treated for depression last year. The agent says, 'That's not important — leave it off,' and submits the application without it. During the contestable period the insurer discovers the omission. Which statement BEST describes the likely outcome?

   • AThe insurer may rescind with no exposure, because the applicant signed the application
   • BThe agent's knowledge is imputed to the insurer, which may bar rescission, and the agent faces disciplineCorrect
   • CThe applicant alone is guilty of misrepresentation and the agent bears no responsibility
   • DThe insurer must pay the claim and may not discipline the agent in any way

   Why: Because the agent is the insurer's representative, the agent's knowledge of a material fact is generally imputed to the insurer, which can bar the insurer from rescinding on the ground that the fact was concealed. Choice A ignores agency law: the applicant's signature does not cure the agent's own misconduct, and instructing an applicant to omit material information is willful deception and a dishonest practice for which s. 626.611, F.S., requires the Department to suspend or revoke the license, in addition to the agent's errors-and-omissions exposure.

   Reference Outline IX (Field Underwriting Procedures): agent responsibilities; s. 626.611, F.S.

4. Which commission arrangement is permitted under the Florida Insurance Code?

   • ASplitting a commission with another agent who is licensed and appointed to write the same kind of insuranceCorrect
   • BPaying part of the commission to the unlicensed office manager who assembled the file
   • CPaying a finder's fee to an unlicensed neighbor that is contingent on the sale closing
   • DPaying a commission to an agent whose appointment for that class of business lapsed two years ago

   Why: Section 626.753, F.S., allows an agent to divide or share in commissions only with other agents appointed and licensed to write the same kind or kinds of insurance (or with a customer representative). Unlawfully dividing a commission is also a compulsory disciplinary ground under s. 626.611(1)(k), F.S., and s. 626.112(8), F.S., separately bars sale-contingent payments to unlicensed persons. Option B is the closest distractor: paying an unlicensed employee out of commissions converts clerical support into compensation related to the production of business, which s. 626.0428(1), F.S., does not shelter. Option D fails because appointment, not just licensure, is required. (Outline FL-I.G)

   Reference ss. 626.753, 626.611(1)(k), 626.112(8), 626.0428(1), F.S. — Outline FL-I.G

5. To save time, an agent has an applicant sign a blank health insurance application and then fills in the answers himself from what he remembers of their conversation. Which statement is CORRECT?

   • AThe practice is acceptable as long as the answers turn out to be accurate
   • BThe insurer is bound by the answers because the applicant's signature appears on the form
   • CThe practice is permitted if the agent later reads the completed answers to the applicant
   • DIt is a serious violation: the applicant never attested to the answers, and the agent is subject to disciplineCorrect

   Why: The application is the foundation of the underwriting decision and typically becomes part of the entire contract, so the applicant must review and attest to the actual answers before signing. Choice A fails even on its own terms: signing a blank form destroys that attestation regardless of accuracy, invites material misstatements that can support rescission during the contestable period, and constitutes conduct for which the Department may suspend or revoke the agent's license under ss. 626.611 and 626.621, F.S.

   Reference Outline IX (Field Underwriting Procedures): completing the application; ss. 626.611, 626.621, F.S.

6. So that an application will be approved at standard rates and his commission will be paid, an agent records on the application that the applicant is a nonsmoker, knowing she smokes a pack a day. Which unfair trade practice provision does this most directly violate?

   • AMisrepresentation in insurance applications — a false statement made to obtain a commissionCorrect
   • BTwisting — inducing a policyholder to lapse and replace a policy through misrepresentation
   • CSliding — charging the applicant for coverage that was never knowingly requested at all
   • DChurning — replacing a policy using the values built up in the same insurer’s existing policy

   Why: Section 626.9541(1)(k), F.S., prohibits knowingly making a false or fraudulent written or oral statement or representation on, or relative to, an insurance application, or knowingly making any such statement to obtain a fee, commission, money, or other benefit from an insurer, agent, broker, or individual. Sliding is the closest distractor, but sliding involves adding or misrepresenting coverage at the point of sale rather than falsifying an underwriting answer; the same act is also a compulsory disciplinary ground as a fraudulent or dishonest practice under s. 626.611(1)(i), F.S. (Outline FL-I.I)

   Reference ss. 626.9541(1)(k), 626.611(1)(i), F.S. — Outline FL-I.I

7. An agent prints business cards describing himself as a "Certified Senior Retirement Advisor," a credential he has never earned, and uses them to sell annuities to retirees. This violates the provision on:

   • Aunlawful use of designations and misrepresentation of an agent’s qualificationsCorrect
   • Bsliding — charging for coverage the applicant did not knowingly request
   • Cfree insurance — advertising insurance as free as an inducement to buy something else
   • Dcontrolled business — writing insurance chiefly on the agent’s own interests

   Why: Section 626.9541(1)(ff), F.S., covers the unlawful use of designations and the misrepresentation of an agent's qualifications, and it targets exactly this kind of invented senior-specific credential used to gain the trust of older buyers. Sliding is the closest distractor but concerns the coverage sold, not the seller's claimed credentials; the conduct here also supports discipline as a demonstrated lack of fitness or trustworthiness under s. 626.611, F.S. (Outline FL-I.I)

   Reference ss. 626.9541(1)(ff), 626.611, F.S. — Outline FL-I.I

8. To speed up processing, an agent signs an applicant's name on a policy delivery receipt. Willfully submitting a fraudulent signature on an application or policy-related document is:

   • Aa noncriminal violation subject only to license discipline
   • Ba misdemeanor of the first degree
   • Ca felony of the third degree, with an administrative fine of up to $187,500 per violationCorrect
   • Da felony of the second degree

   Why: Section 626.9541(1)(ee), F.S., makes fraudulent signatures on an application or policy-related document an unfair trade practice, and s. 626.9521(3)(b), F.S., classifies a willful violation as a felony of the third degree with an administrative fine of up to $187,500 for each violation. Option B is the closest distractor: the first-degree misdemeanor classification belongs to twisting and churning under s. 626.9521(3)(a), F.S., not to fraudulent signatures. (Outline FL-I.I)

   Reference ss. 626.9541(1)(ee), 626.9521(3)(b), F.S. — Outline FL-I.I

9. An agent regularly telephones prospects at 9:45 p.m. their local time without any prior invitation or request from them. Under the Florida Insurance Code, this conduct is:

   • Aa compulsory ground for suspension or revocation under s. 626.611, F.S., with no discretion
   • Ba discretionary ground under s. 626.621, F.S., reaching solicitation after 9 p.m. or before 8 a.m.Correct
   • Cnot a violation, because Florida sets no restriction at all on the time of day a prospect may be called
   • Da felony of the third degree, punishable under the general penalty provisions of the code

   Why: Section 626.621(17), F.S., lists initiating in-person or telephone solicitation after 9 p.m. or before 8 a.m. local time of the prospective customer, unless requested by the prospective customer, as a discretionary ground on which the department may suspend, revoke, or refuse a license. The distinction that matters is mandatory versus discretionary: s. 626.611, F.S., grounds compel action, while s. 626.621, F.S., grounds permit it, and this violation falls in the discretionary list. (Outline FL-I.F)

   Reference s. 626.621(17), F.S. — Outline FL-I.F

10. Two agents each violate the same lawful rule of the Department of Financial Services. Agent A's violation is willful; Agent B's is nonwillful and isolated. Under ss. 626.611 and 626.621, F.S.:

    • ABoth violations are compulsory grounds for suspension or revocation
    • BBoth violations are discretionary grounds only
    • CAgent A's willful violation is a compulsory ground, while Agent B's nonwillful violation is only a discretionary groundCorrect
    • DNeither violation supports any disciplinary action

    Why: Willfulness is the dividing line: s. 626.611(1)(m), F.S., makes willful failure to comply with, or willful violation of, a proper order or rule of the department a compulsory ground on which the DFS must deny, suspend, or revoke, while s. 626.621(2), F.S., treats a violation of a lawful order or rule that is not willful as a discretionary ground. Option A is the closest distractor and is the classic error of ignoring the willfulness qualifier in s. 626.611, F.S. (Outline FL-I.F)

    Reference ss. 626.611(1)(m), 626.621(2), F.S. — Outline FL-I.F

11. For which of the following violations is the Department of Financial Services required — not merely permitted — to suspend or revoke an agent's license?

    • AMisappropriating or converting premium funds belonging to an insurer or insuredCorrect
    • BA nonwillful violation of a lawful rule of the department
    • CFailing to notify the department within 30 days after pleading guilty to a felony
    • DBeing found to have engaged in unfair methods of competition or deceptive practices

    Why: Section 626.611, F.S., lists the compulsory grounds, including misappropriation or conversion of fiduciary funds, fraud or dishonest practices, lack of fitness or trustworthiness, and pleading guilty to a felony. Options B, C, and D are discretionary grounds under s. 626.621, F.S. Note the trap in option C: the felony plea itself is a compulsory ground, but the failure to report it within 30 days is only discretionary. (Outline FL-I.F)

    Reference ss. 626.611, 626.621, F.S. — Outline FL-I.F

12. An agent collects $5,000 in premiums from clients and uses the money to pay personal debts instead of remitting it to the insurer. Under s. 626.561, F.S., this misappropriation is punishable as:

    • Aa misdemeanor of the first degree
    • Ba felony of the second degree
    • Ca felony of the third degreeCorrect
    • Da felony of the first degree

    Why: The criminal classification depends on the amount: $300 or less is a first-degree misdemeanor; more than $300 but less than $20,000 is a third-degree felony; $20,000 to less than $100,000 is a second-degree felony; and $100,000 or more is a first-degree felony. Because $5,000 falls in the second tier, this is a third-degree felony — and misappropriation of fiduciary funds is also a compulsory ground for license revocation under s. 626.611, F.S. (Outline FL-I.G)

    Reference ss. 626.561, 626.611, F.S. — Outline FL-I.G

Drill the whole domain

• Florida Statutes and Rules — Common to All Lines (13%)
• Florida Statutes — Life and Annuity (incl. Variable Products) (10%)
• Field Underwriting Procedures (5%)

Other topics

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• Twisting vs churning vs sliding vs rebating
• Annuities on the Florida 2-15
• Medicare and Medicare supplement rules
• Life policy provisions and clauses
• Disability income insurance
• Variable life, VUL and the separate account
• Annuity best interest rules for buyers 65+
• HIV testing and consent in Florida underwriting
• Premium trust funds and fiduciary duty
• Buyer's Guide and Florida free look periods
• Florida guaranty association limits
• License, appointment and continuing education

See all topics · Study Guides · Full practice exam