by Structured Settlement Watchdog
Rule 9 of the Registry of Settlement Planners Standards of Professional Conduct states "A settlement planner shall not make false or misleading statements
about the planner, the services the planner is offering, the planner’s compensation, or other matters related to settlement planning". Thus a settlement planner who is a member of the Society of Settlement Planners and/or a Registered Settlement Planner should not be using the term Secondary Market Annuity to market an instrument that is not an annuity in public facing advertising.
"Secondary Market Annuity" is a false flag originally used in the tertiary market to appropriate the imprimatur of annuities to market an investment that isn't an annuity to advisors (including certain settlement planners) who then market the instrument to investors, including injury victims.
How big of a problem is this?
In the early days some tertiary market companies even used the names and trademarked logos of insurance companies they competed against to market the imposters. I recently reported discovery online of a California settlement planner's declaration under penalty of perjury to the California Superior Court that misrepresented such investments as "not changing the funding asset" in a comparison to a term more familiar to a judge "structured settlement annuities". That declaration was made in 2012 and it was a lie. It was reasonable and logical to wonder how many other times that California settlement planner made the same statement under penalty of perjury for the same purpose.
Is it ethical for any settlement planner to use the term Secondary Market Annuity when marketing factored structured settlement payments streams in any context in 2021?
The National Association of Insurance Commissioners expressly provides in Statutory Issue Paper No. 160 (adopted April 2019) that factored structured settlement payment streams are neither annuities nor insurance products. Rights do not equal annuity.
The use of the term annuity to describe factored structured settlement payments or assigned structured settlement payment rights has been refuted in a number of courts and even questioned by a late member of Congress (Elijah Cummings).
Western United Life Assurance Company v. Hayden, 64 F.3d 833 (3rd Cir. 1995), then-Judge (later U.S. Supreme Court Justice) Samuel Alito, on behalf of the Third Circuit Court of Appeals, repeatedly pointed to the difference between rights that a payee has to future payments under a settlement agreement and the lack of rights of a payee under an annuity purchased by the obligor to fund such payments.
On November 2, 2015, late Congressman Elijah Cummings (D-Maryland), then ranking member of the House Oversight Committee, sent a letter to Thomas Burgess Hamlin CEO of Somerset Wealth Strategies significant for the including the question of whether “secondary market annuities” are regulated annuities under Maryland State law; what disclosures are made to purchasers of these “annuities;” the profits made by selling or mediating the sale of these “annuities.”
In a March 29, 2017 decision in Greenwald v Caballero-Goehringer, Delaware Superior Court C.A. No. K14C-04-027 JJC. a Delaware Superior Court judge rejected an attempt to portray structured settlement payment rights as an annuity, stating. "The proposed "structured settlement" was described in the Third Petition as a structure to be purchased through a third party to be facilitated by a Houston, Texas law firm. The "annuity" proposed by the Petitioner was in fact a "receivable purchase agreement" which involved purchase of the rights of payment of a structured personal injury settlement from a California injured party having nothing to do with this case. In other words, the annuitant in the proposed plan facilitated by the Texas law firm was the California claimant, not the Minor. Furthermore, despite the Petitioner describing The Hartford as providing the annuity, the seller of the receivable purchase agreement was Genex Capital. No rating was provided for that entity in the petition. The Court denied the Third Petition, without prejudice"
In its June 11, 2021 answer to a Complaint in a pending Arizona case, Genex Capital Corporation made an important distinction between direct assignment of structured settlement payment rights and the acquisition of "subsets" of those rights.
At a time where a number of tertiary market companies have come around on this issue, it is high time that the settlement planners review their marketing materials and stop using the term secondary market annuity or secondary market annuities.