by John Darer CLU ChFC MSSC CeFT RSP CLTC
As more settlement planners have ventured into qualified settlement fund administration in the hope of stirring up the money funnel for big
insurance and investment commissions, perhaps it's time for ethical questions to be raised. Can one wear too many hats?
Scenario Administrator of a Qualified Settlement Fund under 26 USC § 1.468B-1 1-468B Administrator is a settlement planner who wears many hats, including one or more of a structured settlement brokerage, a qualified assignment company, an insurance brokerage, an investment advisory firm. lien negotiation firm, qualified assignment company. money management and/or a structured settlement secondary market origination firm.
Even though I'm not the youngest, it seems appropriate to ask "The Four Questions" in this week of all weeks.
Question 1. Can a QSF Adminstrator that has direct or indirect common ownership with a qualified assignment company and insurance brokerage ethically refer business to his/her/its business family member structured settlement brokerage, which will make a commission on the placement of the annuities?
Question 2 Can a QSF Adminstrator that has direct or indirect common ownership with a qualified assignment company and structured settlement brokerage ethically make a qualified assignment to his direct or indirectly controlled qualified assignment company?
Answer: Direct or indirect ownership of both could violate Rev. Proc. 93-34 and invalidate the qualified assignment. See Rev. Proc 93-34 Sec 4.01(5) ["A designated settlement fund or a qualified settlement fund will be treated as "a party to the suit or agreement" within the meaning of section 130(c)(1) of the Code if
each of the following requirements is satisfied...the assignee is neither controlled by, nor controls, directly or indirectly, the designated or qualified settlement fund. For purposes of this section 4.01(5), examples
of control include an assignee that is a corporation the stock of which is owned by the
fund or an assignee that is a trust the trustee of which is the administrator of the fund"]
Question 3 If the QSF Administrator learns that the family of one of the QSF plaintiffs has a relationship with another settlement planner, can a QSF Adminstrator that has direct or indirect common ownership with a qualified assignment company and insurance brokerage ethically insert himself/herself in the frame and demand compensation from the other settlement planner?
Question 4 Is a QSF Adminstrator a fiduciary?
I'm interested to hear what people think. Write to me privately and I will compile the answers.