808 KAR 10:410. Life settlement investments

Link to law: http://www.lrc.ky.gov/kar/808/010/410.htm
Published: 2015

      808 KAR 10:410. Life settlement

investments.

 

      RELATES TO: KRS 292.331, 292.340,

292.370, 292.380, 292.390, 292.410(1)(i), 292.430

      STATUTORY AUTHORITY: KRS 292.370(2)(r),

292.410(1)(i), 292.500(1), (3)

      NECESSITY, FUNCTION, AND CONFORMITY: KRS 292.500(3)

authorizes the commissioner of the Department of Financial Institutions to

promulgate administrative regulations necessary to carry out the provisions of

KRS Chapter 292. This administrative regulation establishes the requirements

for registration of life settlement investments and for registration of an

agent selling life settlement investments.

 

      Section 1. Definitions. (1) "Life

settlement contract" is defined by KRS 304.15-020(17).

      (2) "Life settlement investment'' is

defined by KRS 292.310(22).

      (3) "Life settlement policy"

means a life insurance policy that has been acquired by a life settlement

provider under a life settlement contract.

      (4) "Life settlement provider"

is defined by KRS 304.15-020(18).

      (5) "Life settlement purchase

agreement" means a contract or agreement entered into by an investor to

purchase a life settlement investment for the purpose of deriving an economic

benefit.

      (6) "Owner" is defined by KRS

304.15-020(19).

 

      Section 2. Registration of Life

Settlement Investments. (1) In order to register a life settlement investment

pursuant to KRS 292.370, the following activities shall be performed:

      (a) A registration statement containing

the information established in Section 3 of this administrative regulation is

filed with and approved by the commissioner;

      (b) The filing fee of $500 is submitted

to the commissioner;

      (c) Each investor is provided with the

documents established in Section 4 of this administrative regulation; and

      (d) A consent to service of process, if

required under KRS 292.430, is filed with the commissioner.

      (2) Registration under this

administrative regulation shall not be available to an issuer if the issuer; a

predecessor or affiliate of the issuer; a director, officer, or general partner

of the issuer; a beneficial owner of ten (10) percent or more of a class of the

issuer’s equity securities; a promoter of the issuer presently connected with

the issuer in any capacity; an underwriter of the securities to be offered; or

a partner, director, or officer of an underwriter of the securities to be

offered:

      (a) Has filed within the last five (5)

years a registration statement that is the subject of a currently effective

registration stop order entered by a state securities administrator or the

Securities and Exchange Commission;

      (b) Has been convicted within the last ten

(10) years of a:

      1. Felony;

      2. Criminal offense involving fraud or

deceit; or

      3. Criminal offense in connection with

the offer, purchase, or sale of a security;

      (c) Is currently subject to a state or

federal administrative enforcement order entered within the last five (5) years

finding fraud or deceit in connection with the purchase or sale of a security;

or

      (d) Is currently subject to an order,

judgment, or decree of a court of competent jurisdiction entered within the

last five (5) years, temporarily, preliminarily, or permanently restricting or

enjoining the subject of the order from engaging in or continuing to engage in

a conduct or practice involving fraud or deceit in connection with the purchase

or sale of a security.

      (3) Upon termination of the effective

period of a registration statement filed under subsection (1) of this section,

or prior to renewal of a registration statement, the issuer shall file a sales

report indicating the aggregate sales price of securities sold in Kentucky during the effective period of the registration statement.

 

      Section 3. Filing Requirements -

Registration Statement. (1) The registration statement required under Section

2(1)(a) of this administrative regulation shall contain the following information:

      (a) The name, address, and telephone

number of the issuer, and the name of the contact person of the issuer;

      (b) The articles of incorporation of the

issuer, if a corporation or similar organizational documents for other business

organizations;

      (c) The name and address of each director

and officer of the issuer along with the person’s principal occupation for the

past five (5) years;

      (d) A general description of the program

and securities offered by the issuer, excluding details of specific life settlement

policies or life settlement contracts;

      (e) A description of the nature and

amount of commissions, finders’ fees, or other remuneration paid directly or

indirectly for soliciting a sale of a life settlement investment in Kentucky;

      (f) The issuer’s most recent audited

income and expense statement and balance sheet;

      (g) A blank copy of the Life Settlement

Disclosure Document Parts A and B to be furnished under Section 4 of this administrative

regulation to an investor;

      (h) A copy of all offering materials

including any prospectus, pamphlet, form letter, advertisement, or other sales

literature used or intended to be used in connection with the offer or sale of

a life settlement investment; and

      (i) A statement indicating the procedures

that the agents of the issuer will use to determine the suitability of the

investment for an investor and a copy of any documents used to determine

suitability.

      (2) The issuer shall promptly amend its

registration statement if any of the information becomes inaccurate or incomplete

in any material respect.

      (3) The effective period of a

registration statement filed under this administrative regulation shall be established

pursuant to KRS 292.380(6).

      (4) The information and documents

required under KRS 292.370(2)(a) through (q) shall be omitted from a

registration statement filed pursuant to this administrative regulation unless

otherwise required in this administrative regulation.

      (5) The commissioner may deny, suspend,

or revoke a registration pursuant to KRS 292.390.

 

      Section 4. Disclosure Requirements for Sale

of Life Settlement Investments. (1) The following documents shall be provided

to an investor in connection with the sale of a life settlement investment:

      (a) At least forty-eight (48) hours prior

to the time a prospective investor executes a life settlement purchase

agreement, the prospective investor shall receive a completed Life Settlement

Disclosure Document Part A equivalent to Kentucky Form 10:410A.

      (b) On or before the date when the

investor is presented with a specific life settlement investment under an executed

life settlement purchase agreement, the investor shall receive a completed Life

Settlement Disclosure Document Part B equivalent to Kentucky Form 10:410B.

      (2) The completed Life Settlement

Disclosure Document Part A and B given to an investor shall reasonably conform

to the formatting of Kentucky Forms 10:410A and 10:410B with respect to font

size, boldface type, and line spacing.

 

      Section 5. Rescission. (1) Investor's

right of rescission.

      (a) An investor shall have the right to

rescind a life settlement purchase agreement at any time until ten (10) days

after the investor executes a life settlement purchase agreement.

      (b) A rescission by an investor under

paragraph (a) of this subsection shall be sufficient if addressed to the entity

designated in the Life Settlement Disclosure Document Part B to receive the

notice and the notice is either postmarked or received by the entity within ten

(10) days after the investor executes a life settlement purchase agreement.

      (2) Required offer of rescission.

      (a) Within ninety (90) days after the

execution of a life settlement purchase agreement by an investor, the issuer

shall make an offer of rescission to the investor if, during that period, the

issuer has not identified a specific life settlement contract that is suitable

for the investor and has not delivered a completed Life Settlement Disclosure

Document Part B to the investor.

      (b) The issuer shall notify the investor

of the offer of rescission on Kentucky Form 10:410 or its equivalent. The

notice of the offer of rescission shall reasonably conform to the formatting of

Kentucky Forms 10:410 with respect to font size, boldface type, and line spacing.

      (c) An acceptance by an investor of an

offer of rescission shall be valid if the acceptance is either postmarked or

received by the entity designated in the offer within ten (10) days after the

investor receives the offer.

 

      Section 6. Agent Registration. An agent

of an issuer of a life settlement investment shall be registered pursuant to

KRS 292.331 as an agent of the issuer and shall submit a completed Form U-4 as incorporated

by reference in 808 KAR 10:010 to the commissioner. The agent shall also:

      (1) Pass the appropriate examination,

which shall be one (1) of the following Financial Industry Regulatory Authority

("FINRA") examinations: Series 1, 2, 6, 7, 11, 17, 22, 24, 26, 39,

40, 52, 53, 62, or 79; and

      (2) Pass the North American Securities

Administrators Association ("NASAA") Series 63 or Series 66

examination.

 

      Section 7. Waiver of Life Settlement Investment

Requirements. Upon the request of an issuer, the commissioner may by order

waive a requirement of this administrative regulation if the commissioner

determines the waiver to be in the public interest and that the requirement to

be waived is not necessary for protection of investors. The issuer bears the

burden of proof to satisfy the commissioner that the waiver is in the public

interest and that the requirement to be waived is not necessary for protection

of investors.

 

      Section 8. Availability of KRS

292.410(1)(i) for Life Settlement Investments. An issuer may rely on the exemption

provided in KRS 292.410(1)(i) for the offer or sale of a life settlement investment

if the issuer:

      (1) Otherwise meets the conditions and

requirements of KRS 292.410(1)(i); and

      (2) Prior to any sale in Kentucky, in

reliance on this exemption, the issuer files with the commissioner a claim of

exemption containing the information established in Section 3(1) of this

administrative regulation.

 

      Section 9. Incorporation by Reference.

(1) The following material is incorporated by reference:

      (a) Form 10:410A (November 2010 edition),

"Life Settlement Disclosure Document Part A";

      (b) Form 10:410B (November 2010), "Life

Settlement Disclosure Document Part B"; and

      (c) Form 10:410 (November 2010 edition), "Offer

of Rescission - Life Settlement Investment".

      (2) This material may be inspected,

copied, or obtained, subject to applicable copyright law, at the Department of

Financial Institutions, 1025 Capital Center Drive, Suite 200, Frankfort, Kentucky

40601, Monday through Friday, 8 a.m. to 4:30 p.m. (27 Ky.R. 1122; Am. 1843; 2456; eff. 3-19-2001;

37 Ky.R. 2498; 2845; eff. 7-1-11.)
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