Iowa Insurance Division Prohibits Sale of Securities by Iowa Agent, Acts to Revoke License

March 9, 2004

Roy Evanovich, of Washington, Iowa, is the subject of actions being taken by the Iowa Insurance Division in reaction to his reported sales activities, representing transactions totaling at least $700,000. Late last month, Assistant Insurance Commissioner Rosanne Mead issued a Cease and Desist order directing him to halt sales of securities.

Evanovich is a licensed Iowa insurance producer, but is not a registered securities agent. Nevertheless, he has reportedly acted as a securities agent and offered to sell and sold investment products which are unregistered.

Evanovich, doing business as FSI Senior Services, sold investments in IFS Financial (an alleged business entity), JAB Rehabilitation & Living Centers, Inc and Medical Rehabilitation Research, Inc. of Iowa City. All three entities reportedly appear to be shell companies for Evanovich to raise funds for his personal use.

The order commands that Evanovich immediately and forever stop such activities. The IID contends that these transactions violate Iowa law. Persons violating such an order may be deemed to be in contempt by a district court judge. If found in contempt, the violator will be subject to a civil penalty in an amount not less than $3,000, nor greater than $10,000 per violation. He has the right to request a hearing on this order.

The Iowa Insurance Division alleges that Evanovich solicited and influenced clients to invest in various funds and then prepared and presented documents designed to lead investors to believe that such deposits had been made, while the deposits were actually determined by the IID to have been made to FSI, which
he controlled.

The accounts of at least four investors have been considered in this action by the IID. Three investors from Polk County invested from $10,000 to over $450,000 with Evanovich. Some of those
monies were invested in accounts other than those that his clients believed them to be. Another unauthorized fund transfer occurred when more than $133,000 of a Polk County resident’s money was wired by Evanovich to a Lee County investor as a partial redemption of that investor’s accounts with Evanovich.

These alleged activities also represent a violation of Iowa law regulating insurance agents.

In a separate action, a Notice of Hearing alleging violation of insurance regulations has been issued. The hearing is set
for March 29, 2004, at which time the IID will ask for revocation of his license to sell insurance.

According to Mead, this alleged behavior would represent a violation of the trust placed in Evanovich by the investors. “He’ll have a hearing on his insurance license, and be offered the opportunity for a hearing regarding the sale of securities, at which time a final decision will be made as to these matters. He certainly could lose his license, and must immediately cease these activities.”

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