by Structured Settlement Watchdog
Thomas Burgess Hamlin, the CEO of Somerset, has settled the FINRA claim brought by Barry Cooper over the sale of factored structured settlement payments which at the time of sale were marketed to investors as "secondary market annuities".
Barry Cooper's FINRA claim alleged breach of fiduciary duty, negligence, negligent supervision, common law misrepresentation, breach of contract and unauthorized trading. The transaction at issue occurred in 2013, and involved a Factored Structured Settlement "FSS" payment stream through an approved Outside Business Activity "OBA".
Damage Amount Requested
$50,000.00 [ roughly the equivalent of the payments missed since January 2018, due to competing claims]
Broker Comment (by Hamlin-from the mandatory FINRA disclosure Source: FINRA Broker Check)
This claim relates to an approved Outside Business Activity involving a factored structured settlement sold to claimant. The underlying payment stream at issue has been suspended by the annuity company due to a competing claim and litigation concerning the transfer of the payment stream, which had been previously approved by the Circuit Court of Baltimore County in 2013. Because the litigation concerning the payment stream is still pending in the state of Maryland, and such litigation was unlikely to resolve in the near term, the claim was settled as a compromise. (emphasis added)
A companion case against Brian Horn, who was registered with Somerset Securities 2013 to 2015 and now with Waddell and Reed in Portland Oregon, remains pending according to a FINRA Broker Check search on 11/3/2019, which states: "Claim alleges RR (Horn) recommended the claimant use the majority of his retirement savings to purchase a Secondary Market Annuity that was unsuitable for the claimant, that the product was misrepresented as being a safe investment, and that the solicitation was made to the claimant's wife who had no authority over the claimant's account. Product purchased in 2014.
The Cooper case is one of the seminal cases in the intellectually dishonest, crumbling marketing fraud that is "secondary market annuities". In the Cooper case these instruments were marketed as annuities and sold to a retiree with substantially all of his retirement assets from a Navy pension plan. Barry Cooper was not an accredited investor. Factored structured settlement payment streams are not annuities according to the National Association of Insurance Commissioners (NAIC). In Statutory Issue Paper 160, the NAIC explicitly said so and said that insurers, which purchase such assets may not include them as annuities or insurance products in their accounting. They must be accounted for separately.
The Risks of Factored structured settlement payments as investments
- Statutory protection likely not available in the event of insolvency
- Bears transactional risk to investor that is not present with legitimate annuities. If you bought a factored structured settlement payment stream there is a good chance that the transactional risk was not disclosed.
- Some salespeople have even used insurance company logos without insurers' authorization to market factored structured settlement payment streams as annuities, even though they knew what they were selling was not a legitimate annuity.
I will have more to tell you shortly.