by Structured Settlement Watchdog
One settlement purchaser provides potential investors with what it labels a "confidential information memorandum" in which it represents that " the ownership of some structured settlements represents a direct investment in an annuity contract", which it goes on to say provides an opportinity to shield assets from creditors.
The document which was supplied to me by one of our sources, an investor,
1. States incorrectly that "a structured settlement is an agreement between parties which generally results in a insurance entity committing to make tax-free payments to an individual over an agreed upon perioid of time, or for the life of the individual". This is just not correct. Parties agree on a schedule of periodic payments. The taxation of the payments to the original payee depends on the type of damages that the structured settlement payments represent.
2. Refers to annuity payments as repayments as opposed to contractual obligations
3. Refers to its services as "arranging structured settlements" when it it facilitating the purchase of structured settlement payment rights as those terms are defined by the Internal Revenue Code.
ATTENTION NOLGHA AND STATE INSURANCE COMMISSIONERS!
4. As part of its effort to solicit what it labels a direct investment in an annuity contract, states that "each state has a specific limited guarantee or fund for repayment in the event that an insurance company is not able to meet their obligations.
5. Continues to mischaracterize structured settlement payment rights as annuities in the inducement to investors when it states " Annuties, depending on theamounts owed, are partially or fully guaranteeed by state insurance funds,designed to protect annunity holders fromloss.This may provide an additional level of security to the purchaser.
6. Continues to suggest strategies for diversification while mischaracterizing structured settlement payment rights as annuities in the inducement of investors by sttaing " Because most state guaranty funds have dollar limits on the amount that they can be obligated to pay in resoect to annuties and lie isnurance policies issiued by insolvent insurance companies,you should be cognizant of the size of tehunderlyingannuity that supports the structured settlement relative to those limits"
Most states make it illegal for licensed insurance producers to the existence of such unfunded statutory protections in connection with the sale of annuities or life insurance. Yet settlement purchasers are generally not licensed insurance producers. Essentially the sales and solicitation practices of the settlement purchasing industry segment are unregulated and a number of such companies routinely exploit the regulatory loophole while soliciting people to buy deals which they label as "secondary market annuities" "in force annuities" or other labels such as "SMAs", "recycled structured settlements". They routinely use the existence of state guarantee funds in their sale process.
What is the point of regulating only half of the industry?
This author will comply with any state insurance regulator that wishes a copy of the solicitation by the cash now pusher referencing