808 KAR 10:410. Life settlement
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
(6) "Owner" is defined by KRS
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
(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:
2. Criminal offense involving fraud 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;
(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
(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
(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
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
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
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.)