SEC & FINRA Issue Alert on Pension or Settlement Income Streams

The SEC and FINRA issued an investor alert, Pension or Settlement Income Streams – What You Need to Know Before Buying or Selling Them.  The investor alert informs investors about the risks involved when selling their rights to an income stream or investing in someone else’s income stream.  The alert urges investors considering an investment in pension or settlement income streams to proceed with caution.

The alert explains that

Anyone receiving a monthly pension or regular distributions from a settlement following a personal injury lawsuit may be targeted by salespeople offering an immediate lump sum in exchange for the rights to some or all of the payments the person would otherwise receive in future.  Typically, recipients of a pension or structured settlement will sign over the rights to some or all of their monthly payments to a factoring company in return for a lump-sum amount, which will almost always be significantly lower than the present value of that future income stream.

The investor alert contains a checklist of questions to consider before selling away an income stream.