by John Darer CLU ChFC MSSC CeFT RSP CLTC
What is a Broker?
A person who serves as a trusted agent or intermediary in commercial negotiations or transactions. Brokers are usually licensed professionals in fields where
specialized knowledge is required, such as finance, insurance, and real estate. Their rate of compensation (called brokerage or commission) is determined according to custom of the particular trade or by law, and is computed commonly either as a fixed percentage of the value of the transaction or on a sliding scale (higher the value, lower the percentage).
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What is a Structured Settlement Broker?
A structured settlement broker is someone that holds at least an active life insurance license in one or more states and carrier appointments, who provides professional advice and places structured settlement annuities and other qualified funding assets. Structured settlement brokers may hold other professional licenses and provide advice and placement of financial vehicles pursuant to professional licenses.
How is a Structured Settlement Broker Compensated?
A structured settlement broker is paid by commission, either as a licensed and appointed agent of a life insurance company and/or as a licensed broker or producer. In a letter posted on the website of the New York Department of Financial Services, the Office of General Counsel opined that it would be unlawful for a licensed broker to pay a licensed agent who was not appointed by the annuity issuer.
Who Regulates Structured Settlement Brokers?
As a licensed insurance agent, licensed broker or producer, a structured settlement broker who places structured settlement annuities as part of the consideration for the release of legal claims, is regulated by the laws of the states in which he/she/it is licensed. The states control the sales and solicitation process and have the power to fine, suspend or revoke licenses. The annuity issuer can pull appointments as well.
What is a structured settlement annuity?
A structured settlement annuity is an insurance contract whose primary use is as a qualified funding asset to fund obligations to pay future periodic payment obligations under a settlement agreement and pursuant to a qualified assignment agreement. Qualified assignment agreements are governed by the rules set forth in IRC Section 130. Structured settlement annuities can only be placed by individuals and entities (1) holding an active life insurance license and (2) appointed/authorized by the annuity issuer for structured settlement annuities.
Can a structured settlement annuity be sold?
No, a structured settlement annuity cannot be sold.