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Life Settlement Investment

Statute: ยง 551.102(28), and 551.102(17)(a) and (b), Wis. Stats.

What is a Life Settlement Investment/Viatical Settlement Investment?

A “life settlement investment” is where the death benefit of a life insurance policy on an individual is marketed and sold as an investment security to a purchaser. Similar arrangements involving the sale of the death benefit of a life insurance policy on a person with a terminal illness (referred to as “viatical settlements”) had been marketed nationally in all states (including Wisconsin) beginning in the 1990s. The Division published interpretations in 1997 taking the position that the resales of the death benefits to purchasers as investments constituted a “security” subject to the securities registration, licensing and anti-fraud provisions of the Wisconsin Securities Law. In subsequent years, the Division instituted numerous enforcement actions against companies and their sales agents who offered and sold viatical settlement investments to purchasers in Wisconsin. Incident to the repeal and recreation of the predecessor Wisconsin Securities Law in 2007 Wisconsin Act 196 (effective January 1, 2009), “viatical settlement investment” was expressly added to the definition of “security” in sec. 551.102(28), Wis. Stats.

A change in terminology was made with the recent enactment of 2009 Wisconsin Act 344 (effective November 1. 2010) which was legislation developed by the Wisconsin Office of the Commissioner of Insurance that primarily dealt with the insurance law regulatory aspects of life settlements. That Act 344 also contained revisions to the Securities Law references to “viatical settlements” (in 551.102(28), and 551.102(17)(a) and (b), Wis. Stats.) to instead now read “life settlements.”

It is unlawful for a person to effect transactions in securities, including life settlement investments, unless the person is registered or exempt from registration. See sec. 551.401 and 551.402, Wis. Stats.; DFI-Sec 1.02(5).

History: 551.102(28), Wis. Stats., created in 2007 Wisconsin Act 196 (effective January 1, 2009). Amended by 2009 Wisconsin Act 344 (effective November 1. 2010).

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