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October 10, 2016

Maryland Congressman Questioned Whether "Secondary Market Annuities" Are Annuities Under Maryland Law

by Structured Settlement Watchdog

Structured settlement derivatives with the slapped on label "Secondary Market Annuities" are not annuities

It is clear to the co-author of the seminal textbook Structured Settlements and Periodic Payment Judgments when he addressed the National Association of Settlement Purchasers in 2013. Yet companies such as Somerset Wealth Strategies, LLC continued to use the label 'Secondary Market Annuities" for quite some time and among others, insinuated statutory protections to investors that have come into question within the past year with the ELNY liquidation.

Congressional Committee Gave Somerset 14 days to Respond.

Congressman Elijah Cummings sent a comprehensive request about "Secondary Market Annuities' to Thomas Burgess Hamlin, the Chief Executive Officer of Somerset Wealth Strategies, LLC of Portland, OR. Sent in the wake of the Washington Post award winning expose on the alleged Access Funding exploitation  of black lead paint victims, Cummings' letter was no fishing expedition. It is clear that structured settlement derivatives are on the radar of legislators. The letter was sent to Hamlin  November 2, 2015 with a requested response by November 16, 2015. Sometime following the receipt of said letter, it is my understanding that Somerset Wealth Strategies, LLC has left the space. This begs the obvious question, "Did Somerset's investors buy some Access Funding deals marketed as "Secondary Market Annuities"?

Your company advertises that it sells "secondary market annuities," including structured settlement payment streams, to third-part1' investors. Your website claims: "The payment of these annuities are safe and dependable." Your website also states that purchasing secondary market annuities assists in "easing your tax burden." Finally, a 2013 "buyers guide," until recently found on your website, states that purchasing secondary market annuities will "allow money to double or triple over time, guaranteed."

  1. The term "annuity" is defined by the Maryland Code, Insurance,§ 1-101. Do the "secondary market annuities" offered for sale by your company conform to the definition of "annuity" under the Maryland Code, and is your company's sale of the "secondary market annuities" regulated by the Maryland Insurance Administration?
  2. Does any state or jurisdiction consider "secondary market annuities" to be annuities regulated under insurance laws?
  3. Is a "secondary market annuity" subject to regulation under any state or federal securities laws? If the "secondary market annuities" offered for sale by your company are not regulated as annuities or securities, what specific state and federal laws regulate the sale of a "secondary market annuity" that is a structured settlement payment stream?
  4. What guarantees from what sources attach to the "secondary market annuities" that are structured settlement payment streams offered for sale by your company?
  5. How are the "secondary market annuities" sold by your firm taxed after they are purchased by investors?
  6. What specific risks does your company disclose to individuals or corporations that purchase structured settlement payment streams through your firm? Which of these disclosures is required by state or federal law?
  7. How does your company find the "secondary market annuity" payment streams listed for sale on its website? Has your firm ever paid any incentive of any kind (whether monetary or in-kind) to any entity that has identified to Somerset any structured settlement payment stream offered for sale by Somerset?
  8. What are the specific commissions and fees your company charges to purchasers of "secondary market annuities"? How much revenue did your company make in 2014 from commissions, fees, and spread from its sale of" secondary market annuities"?
  9. Are individuals who seek to purchase "secondary market annuities" required to hire your company to provide any type of financial advice before they can purchase a "secondary market annuity" offered for sale by your company?
  10. Does your company pay any finders-fee related to the identification of individuals who seek to purchase "secondary market annuities"?
  11. What research does your company do to ensure third-parties have the legal right to purchase the payment streams offered for sale by your company? Has the proposed sale to a third party of any of the "secondary market annuity" offered for sale by your company ever been rejected by any court in the United States?
  12. Please provide a list of all "third party servicing companies" that have serviced any part of any "secondary market annuities" sold by your company.
  13. Please provide copies of all documentation your company will provide or has provided to the entity that purchases or purchased the life-contingent Genworth-issued payment stream with the start date of June 17, 2020 offered for sale on your website as of October 22,2015
  14. Please provide copies of all contractual documents the purchaser of the life-contingent Genworth-issued payment stream offered for sale on your website will be required to sign at the time of purchase. Please also indicate the total revenue that your company will make from the sale of this payment stream, broken out by commission, fees, and spread. (
  15. Please provide a list of all "secondary market annuity" payment streams originally owned by Maryland residents that have been offered for sale by your company in each of the last three years, separated by type of payment stream (i.e. factored structured settlement, life settlement, lottery winnings, etc.). For each such payment stream, please identify the face value of the stream, the price at which your company purchased the payment stream, the price at which your company sold the payment stream to a third party, and the profit your company made from the sale of the payment stream.

What to State Laws Say About what is An Annuity/

Maryland Code, Insurance,§ 1-101(d)  Annuity.-  

(1) "Annuity" means an agreement to make periodic payments for which the making or continuance of all or some of a series of the payments, or the amount of a payment, depends on the continuance of a human life. 

(2) "Annuity" includes: 

(i) an additional benefit that operates to safeguard the contract from lapse or to provide a special surrender value, special benefit, or annuity in the event of the total and permanent disability of the holder; and 

(ii) benefits that provide payment or reimbursement for long-term home health care or long-term care in a nursing home or other related institution. 

(3) "Annuity" does not include life insurance. 

California  Consumers Guide to Life Insurance and Annuities published in 2011 refers to annuities in the context of the byproduct of a lump sum paid to a life insurance company {note: When investing in structured settlement derivatives there is no lump sum paid to a life insurance company. That ship has sailed. California also states that 'The person who sells you a life insurance policy or annuity should be a licensed life insurance agent",

In Florida, where many cash now vultures operate and have historically forum shopped annuitants  into, Florida Statutes 627.4554(3)(b) states that  “Annuity” means an insurance product under state law which is individually solicited, whether classified as an individual or group annuity.

Download 2015-11-2.EEC to Somerset Wealth re "secondary market annuities"

Certain Primary Market Settlement Planners Use Questionable Annuity Term to Solicit Investors Including Plaintiffs and Lawyers

A. I have this in writing in an email that underscores how a New York settlement planner , who solicited a plaintiff (and may have solicited others)with structured settlement derivatives labeled "secondary market annuities"

"If you want immediate, guaranteed income, there is not better financial product, without risk that the secondary market annuities that we’ve illustrated""  Read What One Settlement Planner Has Said In Advising Recycled Structured Settlements to Plaintiffs and Attorneys,  August 11, 2016. The settlement planner marketed the derivative using the same names of the insurers and opined on the adequacy of statutory protections that the planner acknowledged he/she was unauthorized to discuss.

B. In November 2012,  I reported that Van Nuys, California attorney Eugene Ahtirhski observed that 'Recently we have been seeing an increase in funds marked for a primary market annuity being used to purchase a secondary market annuity in an effort to obtain a better rate of return for the payee"  What he then explains is telling:

"It is basically recycling of financial tools, if you think about. in the end the payee does not know the difference all they know is the settlement they received is being paid out over time'.

While I believe that structured settlement payments rights are an asset class that may have an applicable place in the financial plan or settlement plan for certain qualified individuals, Mr. Ahtirski's statement triggers concerns that some investors may not really know what they are getting into.

Recycled Structured Settlements | "In the End the Payee Does Not Know The Difference" Says CA Attorney   November 5, 2012

 

Posted at 05:51 PM in Recycled Structured Settlements |

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