I disagree that Enforcement proved that Wiley converted funds. Wiley routinely deposited premiums into the WIA account to facilitate his insurance business. As an independent contractor, the premiums belonged to WIA and WIA owed a debt to Farmers Insurance Group for the customer premiums Wiley collected. Wiley did not deceive Farmers Insurance Group.

He informed Farmers Insurance Group when he collected premiums, and the customers' insurance policies were not in jeopardy of lapsing.

Furthermore, Wiley testified that he had been doing business in the same manner from the inception of his agency agreement with Farmers Insurance Group. I find Wiley's testimony was credible as there was no evidence presented to contradict it.

I do not believe the testimony or the exhibits prove that Wiley was required to use the Farmers Insurance Group co-bank account. The ACA Manual only recommends that agents deposit premiums daily and refers to this as a "good business practice." Enforcement provided no documentation that Wiley was required to pay premiums into the co-bank account, and there is no signed acknowledgment by Wiley that the Farmers Insurance Group policy on paying premiums within a business day of receipt was anything more than a guideline applicable to him as an independent contractor.

I do not give weight to Wiley's written statement, which was taken by Edmonds, because I believe he was coerced to sign it under duress.

Furthermore, I find it significant that Farmers Insurance Group did not conclude that Wiley embezzled funds. Evidence of this is that Farmers Insurance Group placed a value on and purchased Wiley's book of business. The Agent Appointment Agreement specifically states that "[i]n the event termination is because of embezzlement, there is no Contract Value." If Farmers Insurance Group had concluded that Wiley embezzled, it would not have paid Wiley for his book of business. Finally, the Form U5 filed by Farmers Financial Solutions, LLC gives "Other" as the reason for Wiley's termination and states that the "Firm has elected not to maintain registration."

Because Wiley did not convert the premiums, I do not find that he misled FINRA when he provided his on-the-record testimony.

For these reasons, I would dismiss both causes of action.

On appeal, Wiley argues that FINRA exceeded its authority to take action against him because this matter involved an insurance business dispute that fell outside of FINRA's jurisdiction. In support of his claim, Wiley cites to FINRA's Code of Arbitration and associated case decisions that reference the insurance business activities exclusion under the Arbitration Code. According to Wiley, the terms of his service agreement with Farmers was a contractual dispute that should have been interpreted under the laws of the State of Texas rather than pursuant to FINRA's arbitration rules.

We affirm the Hearing Panel's finding that Wiley converted customer insurance premium payments in violation of FINRA Rule 2010. The record sufficiently reflects that, during the relevant period, Wiley accepted money from 54 Farmers customers for the payment of their insurance premiums, and instead of forwarding the payments to Farmers to be applied to their policies, he intentionally deposited the payments into his WIA & Associates account for personal and business use. We agree with the Hearing Panel's finding that Wiley was neither entitled, nor authorized, to hold or use the customers' payments at his discretion. At best, his possession of the customers' payments was transitory, and he was obligated to relinquish any payments he received to Farmers by promptly depositing them into the co-banking account. Wiley failed to do so.

The Hearing Panel did not find credible Wiley's assertion that his practice of depositing customer funds into his WIA & Associates bank account was routine and customary - something he had done for many years. According to Wiley, it was at his discretion to make deposits into the Farmers co-banking account and that his collection of the payments created a debt he then owed to Farmers. We find no evidence in the record to support this claim and have no reason to challenge the Hearing Panel's credibility determination. See Kirlin Sec., Inc., Exchange Act Release No. 61135, 2009 SEC LEXIS 4168, at *53 (Dec. 10, 2009) (noting that the credibility determination of an initial fact finder is entitled to considerable weight and deference because it is based on hearing the witnesses' testimony and observing their demeanor and that such a determination can only be overcome where the record reflects substantial evidence for doing so). To the contrary, Wiley testified himself that Farmers expected to receive the payments once they were reported in the ACA system, and it was his obligation to remit the payments to Farmers because it was the company providing the insurance coverage.

We also reject Wiley's argument that, as an independent contractor, he was not required to adhere to the payment instructions set forth in his Agent Appointment Agreement or Farmers' published rules and manuals, all of which required the "prompt" depositing of payments that were due to Farmers. The Farmers rules and manuals, which applied to all of its independent agents, indicated that Wiley did not possess exclusive rights to the premium payments. The ACA Manual prohibited outright the commingling of customer funds. It also instructed agents: "No matter what kind of schedule is set up in your office, any agent submitting an ACA must deposit all checks and cash reported under his or her ACA within one business day . . . ." Based on this evidence, Wiley should have known that his use of the premium payments for his own purposes was wrong, notwithstanding his independent contractor status.

The record reflects that Wiley used the customer payments that were intended to pay for Farmers insurance premiums for business and personal reasons. His actions were intentional and unauthorized. Mullins, 2012 SEC LEXIS 464, at *40-41 (finding that respondent did not act with permission when he intentionally converted funds belonging to another); Smith, 2014 FINRA Discip. LEXIS 2, at *13-14 (finding that respondent's exercise of ownership over customer funds for business purposes was intentional and unauthorized). Accordingly, we find that Wiley converted customer insurance premium payments in violation of FINRA Rule 2010.

Controlling precedent abundantly supports our rejection of Wiley's claim that FINRA lacked jurisdiction. While insurance regulation does not fall within FINRA's jurisdiction, Wiley's conduct was unethical and violated FINRA's requirement to observe high standards of commercial honor and just and equitable principles of trade in the conduct of his business. Wiley was appropriately disciplined for his unethical business conduct in accordance with FINRA rules.

Wiley contends that FINRA's jurisdiction is limited to the securities industry and that it improperly "ventured into the distinctly separate and different realms of insurance and Texas independent contractor and contract law." He argues that only the states can regulate the insurance industry and resolve disputes that involve independent contractors or contract law. But state laws governing insurance business practices and independent contractors are irrelevant in this case because FINRA brought this disciplinary action against Wiley for violating FINRA rules. As an associated person of a FINRA member firm, Wiley was subject to FINRA's prohibition on converting customer premium payments for his own use.

Wiley unsuccessfully attempts to distinguish the long line of Commission cases holding that FINRA's disciplinary authority is broad enough to encompass business-related conduct that does not involve securities if that conduct is inconsistent with just and equitable principles of trade. He claims that none of those cases involved an independent contract insurance agent who never participated in the securities industry. And he claims that, unlike respondents in prior cases, he never fraudulently misappropriated insurance premiums, falsified documents, or allowed policies to lapse. But Wiley's status as an independent contractor does not shield him from complying with FINRA rules. FINRA Rule 2010 "protects investors and the securities industry from dishonest practices that are unfair to investors or hinder the functioning of a free and open market, even though those practices may not be illegal or violate a specific rule or regulation."

According to Wiley, this disciplinary action rests on what is essentially a misunderstanding. Wiley asserts that he "missed a payment owed to Farmers, an internal investigation was initiated, the accounts were balanced out, and all the debt owed to Farmers was remitted and the issues between Farmers and Wiley were resolved;" that he never allowed any client policies to lapse and never failed to remit payment to Farmers; and that if he had committed any legal infractions or breached the Agent Appointment Agreement, Farmers could have taken his book of business without being required to purchase the business as Farmers ultimately did. But these assertions are beside the point. Wiley intentionally used his customers' insurance payments for personal and business expenses, knowing this conduct was "questionable." He admitted he was willing to risk his customers' premiums to keep his business operating. That he eventually paid Farmers Insurance and no policies lapsed does not change the fact that he intentionally, and without authorization, took customer premiums to which he was not entitled to pay his own expenses. We agree with FINRA that this conduct is inconsistent with just and equitable principles of trade.

For the same reason, we reject the reasoning of the dissenting hearing panelist, who concluded that Wiley did not convert the premiums because "the premiums belonged to WIA and WIA owed a debt to Farmers for the premiums Wiley collected." But the dissent offers no support for this other than Wiley's testimony, which we find is outweighed by other evidence such as the Agent Appointment Agreement, the ACA Manual, the Agency Operations Guide, and the senior auditor's testimony. The dissent gave no weight to Wiley's written statement, finding that Wiley signed the statement under duress. But the dissent offered no support for this conclusion, which is inconsistent with the Hearing Panel's finding that the senior auditor testified credibly.