The SEC reaches for life settlements

In 1996, the DC Circuit halted the SEC's attempts at reaching "viatical settlements" (i.e., fractionalized, third party interests in life insurance proceeds) through the Life Partners decision.  While some Circuits saw stalwart SEC staffers occasionally attempt to bring such agreements within the securities laws, it was primarily State actions that regulated the field for years to come.

Last decade, over a dozen States adopted versions of the Uniform Securities Act defining securities to include viatical settlements.

Last week, the SEC released a staff report concluding that life settlements (i.e., a sale of a policy/pool of policies to a third party for a lump sum of cash) are securities.  Among other things, the Report calls for Congress to amend the definitional sections of the federal securities laws to include such vehicles.  See http://www.sec.gov/news/press/2010/2010-129.htm.  Although the SEC Chair's touting of the agency's desire to "get out in front of" this ancient issue is a bit ironic, the aggressive stance by the Commission would nonetheless appear to be a positive and overdue protection for investors.   

---JSC, 7/26/10