TEXAS INVESTORS SHOULD BEWARE OF LIFE PARTNERS VIATICAL SETTLEMENTS

The Securities and Exchange Commission (SEC) is investigating Life Partners Holdings Inc., a Texas based company, for arranging several billions worth of viatical settlements sales. The SEC's main concern is how Life Partners calculated its mortality estimates, which is what investors use to value a viatical settlement investment. This comes as no surprise since 90% of the insured individuals, many of whom were HIV positive, outlived company estimates.

A viatical settlement is the sale of an owner's life insurance policy to a third party for more than the cash surrender value, but less than its net death benefit. The seller of the policy is benefited with a lump sum payment. The buyer of the policy pays the monthly premium and receives the benefit of the policy when the seller or the insured dies. Viatical settlement transactions typically involve an insured who is terminally or chronically ill. A person who is terminally or chronically ill has a life expectancy of less than two years. From an investor's perspective, the return will depend on the seller's life expectancy and date of death. Therefore, viatical settlements cannot be equated with zero coupon bonds because the date of death or maturity is uncertain.

Shorter mortality estimates would result in an investor anticipating lower costs and a higher return on investment. In the case of Life Partners, almost all of the insured individuals lived beyond the company's estimates, which forced higher costs and lower returns upon investors. This led the SEC to investigate a Nevada physician, who was responsible for calculating mortality rates for Life Partners. After its investigation, the SEC concluded that one Dr. Cassidy used an unrealistic approach that produced short life expectancies.

Companies like Life Partners do better than the clients they purport to serve. Life Partners has sold 6,400 policies worth $2.8 billion to 27,000 clients since 1991. Also, fees to Life Partners have averaged as high as $308,000.00 per policy in some years. In return, investors were told they would earn 10 to 15% on their money, which was not the case since returns were driven down due to longer than expected mortality rates. Clearly, viatical settlements were made to benefit Life Partners' bottom line.

Brokers have a duty to make recommendations that are suitable for its clients. This duty includes informing clients of the risks associated with an investment. If brokers fail to adhere to their duties, their brokerage firms can be held liable to investors for damages even if they did not know of the brokers' conduct.

Have you suffered a loss in a viatical settlement? If so, call Robert Pearce at the Law Offices of Robert Wayne Pearce, P.A. for a free consultation.

The most important of investors' rights is the right to be informed! This Investors' Rights blog post is by the Law Offices of Robert Wayne Pearce, P.A., located in Boca Raton, Florida. For over 30 years, Attorney Pearce has tried, arbitrated, and mediated hundreds of disputes involving complex securities, commodities and investment law issues. The lawyers at our law firm are devoted to protecting investors' rights throughout the United States and internationally! Please visit our website, www.secatty.com, post a comment, call (800) 732-2889, or email Mr. Pearce at pearce@rwpearce.com for answers to any of your questions about this blog post and/or any related matter.

THE SEC CONTINUES ITS EFFORTS TO PROTECT SENIOR INVESTORS NATIONWIDE AGAINST VIATICAL SETTLEMENT SCAMS

The Securities and Exchange Commission (SEC) is continuing to focus on the sale and marketing of retirement products to help combat fraud against senior investors. These efforts stem from the fact that seniors are oftentimes sold unsuitable investments because a broker has failed to disclose or misrepresented the risks associated with a product. One such product is a Viatical settlement, which is among the SEC's top priorities since the industry has experienced stellar growth and will likely surpass $150 billion in value within the next few decades.

A viatical settlement is the sale of an owner's life insurance policy to a third party for more than the cash surrender value, but less than its net death benefit. The seller of the policy is benefited with a lump sum payment. The buyer of the policy pays the monthly premium and receives the benefit of the policy when the seller or the insured dies. Viatical settlement transactions typically involve an insured who is terminally or chronically ill. A person who is terminally or chronically ill has a life expectancy of less than two years. From an investor's perspective, the return will depend on the seller's life expectancy and date of death. Therefore, viatical settlements cannot be equated with zero coupon bonds because the date of death or maturity is uncertain.

Viatical settlements are of emerging interest since they may very well become Wall Street's next big securitized products. Still, the SEC has limited authority over viatical settlements. A task force has been established to examine whether sufficient regulation is in place to protect senior investors against fraudulent activity. Apart from fraud, the SEC has expressed concern that many seniors may not understand the consequences of selling their life insurance policies to investors. These consequences include the loss of tax benefits and the inability to obtain life insurance in the future.

Have you suffered a loss in a viatical settlement? If so, call Robert Pearce at the Law Offices of Robert Wayne Pearce, P.A. for a free consultation.

The most important of investors' rights is the right to be informed! This Investors' Rights blog post is by the Law Offices of Robert Wayne Pearce, P.A., located in Boca Raton, Florida. For over 30 years, Attorney Pearce has tried, arbitrated, and mediated hundreds of disputes involving complex securities, commodities and investment law issues. The lawyers at our law firm are devoted to protecting investors' rights throughout the United States and internationally! Please visit our website, www.secatty.com, post a comment, call (800) 732-2889, or email Mr. Pearce at pearce@rwpearce.com for answers to any of your questions about this blog post and/or any related matter.

THE SEC RECOMMENDS THAT CONGRESS CHARACTERIZE VIATICAL SETTLEMENTS AS SECURITIES IN ORDER TO PROTECT INVESTORS NATIONWIDE

In order to provide viatical settlement investors with federal securities law protection, the Securities and Exchange Commission (SEC) is recommending that Congress define viatical settlements as securities. The following benefits were proposed in the SEC's report: 1) the SEC and the Financial Industry Regulatory Authority (FINRA) would have authority to oversee the viatical settlement market, which could aid in detecting fraud and dishearten abuses; 2) the states and federal government would be able to deal with viatical settlement issues in a more consistent manner; and 3) viatical settlement market intermediaries would fall under the regular framework of both the SEC and FINRA. The task force created the report due to the inconsistent regulation of market participants.

A viatical settlement is the sale of an owner's life insurance policy to a third party for more than the cash surrender value, but less than its net death benefit. The seller of the policy is benefited with a lump sum payment. The buyer of the policy pays the monthly premium and receives the benefit of the policy when the seller or the insured dies. Viatical settlement transactions typically involve an insured who is terminally or chronically ill. A person who is terminally or chronically ill has a life expectancy of less than two years. From an investor's perspective, the return will depend on the seller's life expectancy and date of death. Therefore, viatical settlements cannot be equated with zero coupon bonds because the date of death or maturity is uncertain.

The SEC is also urging Congress to regulate life expectancy underwriters in a more consistent manner, enforce legal standards of conduct upon brokers and providers, and look for the development of a viatical settlement securitization market.

The subject of viatical settlements has not gone unnoticed within Congress, as well. US Senator Herb Kohl released a General Accountability Office report expressing his concern for the inconsistent regulation of viatical settlements. Some of the challenges mentioned are less protection for investors in certain states, the lack information and risk disclosure, and broker dilemmas due to inconsistent laws across the states.

Have you suffered a loss in a viatical settlement? If so, call Robert Pearce at the Law Offices of Robert Wayne Pearce, P.A. for a free consultation.

The most important of investors' rights is the right to be informed! This Investors' Rights blog post is by the Law Offices of Robert Wayne Pearce, P.A., located in Boca Raton, Florida. For over 30 years, Attorney Pearce has tried, arbitrated, and mediated hundreds of disputes involving complex securities, commodities and investment law issues. The lawyers at our law firm are devoted to protecting investors' rights throughout the United States and internationally! Please visit our website, www.secatty.com, post a comment, call (800) 732-2889, or email Mr. Pearce at pearce@rwpearce.com for answers to any of your questions about this blog post and/or any related matter.

FLORIDA INVESTORS BEWARE OF VIATICAL SETTLEMENT INVESTMENT SCAMS

Florida attorney Michael McNerney has reached a settlement with the Securities and Exchange Commission (SEC) for being involved in a viatical settlement scam that defrauded investors out of $1 billion. Mr. McNerney, who was outside counsel to Mutual Benefits Corp., has been restrained by the SEC from future securities activity and ordered to pay $826 million in restitution along with other convicted defendants. He was also sentenced to time in prison for conspiracy to commit securities fraud.

A viatical settlement is the sale of an owner's life insurance policy to a third party for more than the cash surrender value, but less than its net death benefit. The seller of the policy is benefited with a lump sum payment. The buyer of the policy pays the monthly premium and receives the benefit of the policy when the seller or the insured dies. Viatical settlement transactions typically involve an insured who is terminally or chronically ill. A person who is terminally or chronically ill has a life expectancy of less than two years. From an investor's perspective, the return will depend on the seller's life expectancy and date of death. Therefore, viatical settlements cannot be equated with zero coupon bonds because the date of death or maturity is uncertain.

Mutual Benefits Corp. was accused of marketing viatical settlements as safe and secure investments through its sales agents and marketing materials. Other allegations include acquiring policies that could not be purchased or sold, improperly managing escrow funds, and pressuring doctors to approve false life expectancy figures.

Selling away is one available theory of liability in a viatical settlement scam case. Selling away is the inappropriate practice of an investment professional who sells or solicits securities or investments not held or approved by the brokerage firm with which the professional is associated with. Under NASD and FINRA rules, brokerage firms must approve investments offered by their investment professionals and supervise its sales. Viatical settlements are rarely approved as authorized investments at broker-dealers, and broker-dealers can be held liable for its salesmen's activities because it either failed to establish a reasonable supervisory system, or because it failed to implement an existing reasonable supervisory system. Even if the broker dealer did not know of Mr. the investment professional's activities, it can still be liable to investors for damages.

Have you suffered a loss in a viatical settlement? If so, call Robert Pearce at the Law Offices of Robert Wayne Pearce, P.A. for a free consultation.

The most important of investors' rights is the right to be informed! This Investors' Rights blog post is by the Law Offices of Robert Wayne Pearce, P.A., located in Boca Raton, Florida. For over 30 years, Attorney Pearce has tried, arbitrated, and mediated hundreds of disputes involving complex securities, commodities and investment law issues. The lawyers at our law firm are devoted to protecting investors' rights throughout the United States and internationally! Please visit our website, www.secatty.com, post a comment, call (800) 732-2889, or email Mr. Pearce at pearce@rwpearce.com for answers to any of your questions about this blog post and/or any related matter.