SEC Eyes Secondary Market 

The head of the U.S. Securities and Exchange Commission has set up an internal task force to look into the life settlement business.

SEC Chairman Mary Schapiro formed a multidisciplinary team in August “to examine emerging issues in the life settlements market,” says SEC spokesman John Nester.

Among issues to be studied are sales practices, privacy rights, disclosure issues and the role of securitization in the industry, Nester says.

“In addition, the task force will engage in outreach efforts with fellow securities and insurance regulators to coordinate regulatory efforts and analyze whether gaps in oversight [of the life settlement industry] exist,” Nester says.

In a speech last year, while Schapiro was chief executive of the Financial Industry Regulatory Authority, Washington, she identified the rise of life settlements as one of a number of “troubling trends” stemming from the economic crisis—along with the increase in use of reverse mortgages and accounts of investors prematurely tapping their retirement savings.

“We are concerned that some investors may be risking their most valuable assets in an effort to raise cash—including those in or near retirement, who may not have time to recover their losses,” Schapiro said at the time.

In April, after Schapiro took over as head of the SEC, she promised Sen. Herbert Kohl, D.-Wisc., chairman of the Senate Special Committee on Aging, that she would look into the life settlement industry.

Kohl has released a statement welcoming the formation of the SEC life settlements task force.

“There’s still so much we need to know about this burgeoning industry, and I’m grateful to the SEC for stepping up,” Kohl says. “My hope is that the new task force will determine that greater regulation by the agency is necessary for life settlement providers and brokers.”

Earlier this week, Rep. Paul Kanjorski, D-Pa., chairman of the capital markets subcommittee of the House Financial Services Committee, said the subcommittee would hold a hearing on the life settlement securitization process Sept. 24.

• • 9/18/2009 7:31:17 AM
  • Gene Eldridge
  • SEC oversight of Life Settlements
  • So, lets see; the SEC is known to be overworked to the extent it completely missed the Madoff ponzi scheme and several others like it, it oversees a failing industry which loses peoples life savings on speculation, (where is the secure in securities?) it wants to oversee the annuity industry about which is has no knowledge or legal precedent as its authority. Hmmmm ? Let's give this power-grabber Mary Shapiro the auto industry and Homeland Security while we're at it. While she was head of NASD the re-branding to FINANCIAL INDUSTRY REGULATORY AUTHORITY takes place, and it's reported as being "in the interest of the consumer." Not as big a power-grab as the administration but give her time.
• • 9/18/2009 8:22:58 AM
  • stuarti
  • Life Settlements
  • Let's not forget the crux of the issue here. Policy owners find themselves in situations in which they no longer want or no longer need their life insuranc policies. Rather than merely letting them lapse for no value or surrendering the policy back to the insurance company for its cash surrender value they now have another option. This option, typically for insureds who are over age 65, is for them to sell the policy to instiutional investors for an amount greater then the cash surrender value but less than the death benefit. This transaction is known as a life settlement. The insured is NOT terminally ill. In the past the economic value was retained by the life insurance company. In the policy the owner has the right to name a new owner and to transfer the policy for value. In 1911 the U.S.Supreme Court recognized this policy owner right. So let's work towards protecting the policy owner's rights to recognize the economic value of their policy when they no longer want or need their life insurance, and when lapsation or surrender are seriously being considered. At the same time let's see if the regulators can actually put in place reasonable and consistent regulation and not be unduly influenced by the politicking and lobbying efforts of the life insurance industry. Life settlements are not for everyone but they may provide an important liquidity option not available otherwise.
• • 9/18/2009 8:55:36 AM
  • R Snrub
  • SEC In The Settlement Business
  • I would say getting the SEC more involved in the insurance industry would be a mistake. They have enough on their plate and a lot on their face already. Securitiezing settlements would bring much needed capital to the market, but it would also bring Wall Street and Investment Bankers. Who makes all the money and screws up the industry then? The Billionair Boys Club! I think they should focus on mortgages. They've done a bang-up job on that so far.
• • 9/21/2009 11:23:08 AM
  • Walter Moore
  • Life Settlement Securitization
  • What? Definite term - Life Settlement Securitization, no set definition of scope of specific potential current regulatory violations? Please direct me to the "nut shell" explanation for the problem. Thanks.

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