A Warning Flag From The NASD
A Warning Flag From The NASD For The Life Settlement Industry:
"A variable life settlement may be a valuable option for insureds who otherwise would surrender their policies or allow them to lapse. However, variable life settlements are not for everyone."
NASD Notice to Members 06-38 August 2006. Here it comes insurance folks - suitability review by the NASD. If you are encouraging a policy holder to sell a variable life insurance product in the secondary market, you are subject to NASD regulation.
What is a life settlement? What does the regulation of it by the NASD mean?
As the Notice to Members explains, a life settlement is the sale of a life insurance policy to a third party for less than the net death benefit, but more than the cash surrender value. Life settlements involve policyholders who are not terminally ill and generally have a life expectancy of between two and ten years. The insured sells their policy to a life settlement provider, which either holds it to maturity and collects the net death benefit, or sells the policy or interests in multiple bundled policies to hedge funds or other investors. The insured may contact the life settlement provider, or through a financial advisor, or use a life settlement broker.
A variable life insurance policy is a security and the sale of such a product is a securities transaction subject to the NASD. o, if a life settlement involves the sale of a variable life insurance policy, the sale is subject to NASD regulation. The Notice to Members highlights six areas of concern - suitability, due diligence, best execution, training and supervision, compensation, and subsequent marketing. For the specific recommendations in each area review the NASD Notice to Members 06-38 August 2006">Notice to Members And stay tuned, the NASD warns it will be carefully monitoring this market.
One reading with this new NASD focus on insurance will fall on every NASD with the same effect; or, if this is a focus that attacks independent (sic) broker dealers and their operations more so than MEMBER firms that are the so called "wirehouses." Just because the rich as well as the poor canj't sleep under the bridge mean that the approach is fair.
It sure took NASD forever and a few days to finally choose to police markups like it was supposed to be doing (Christy study). Moreover, the NASD sure took even longer than that to include that maybe, just maybe, the analysts were "Blodgetting" their reports in order to get investment banking business for their underwriters.
I will continue to visit enjoyed the reading thanks
Are promissory notes secured by life settlments (whole life ) subject to the investment Co. act of 1940? Meaning would the notes be
considered a security or does it depend on the size / type of offering involved.
Also can your firm advise me on this subject?
Thanks