RT Journal Article SR Electronic T1 Are Life Settlements a Security? JF The Journal of Structured Finance FD Institutional Investor Journals SP 55 OP 60 DO 10.3905/jsf.12.4.55 VO 12 IS 4 A1 Brian T. Casey A1 Thomas D. Sherman YR 2007 UL https://pm-research.com/content/12/4/55.abstract AB Given the extraordinary growth of the U.S. life settlement industry over the last decade, it is not surprising to find increased attention and scrutiny by academicians, the media and legal enforcement authorities–including, among others, state and federal securities regulatory and self-regulatory organizations. The securities laws regulators argue that investments in all forms of life settlement transactions involve the sale of securities, and that the full spectrum of securities laws applies. For the most part, they may be right. In discussing the pertinent securities-related issues surrounding life settlements, there are three fundamental questions to be addressed: 1) Does the sale of the life insurance policy to a passive investor that relies on others to conduct due diligence, price the policy, carry out the transaction, and perform follow-up services involve the sale of a “security” under the Securities Act of 1933, as amended (the “1933 Act”)? 2) Do the “registration” requirements under the 1933 Act apply? 3) Do sales activities in connection with the sale of the life insurance policy trigger any broker-dealer registration requirements under the Securities Exchange Act of 1934, as amended (the “1934 Act”)? This article concludes that the sale of the entire interest in an in-force life insurance policy to a passive investor may very well involve the sale of a security. The sale can be structured so that it is exempt from the registration requirements of state and federal laws. However, the state and federal anti-fraud provisions will apply to the transaction; and any person effecting the sale, particularly if compensated on the basis of the size of a successful sale, might be required to register with the SEC (and the applicable state) as a broker-dealer and be licensed as a security salesperson by the NASD.TOPICS: Exchanges/markets/clearinghouses, credit risk management, information providers/credit ratings