Investor Lawyers Blog
On May 15, 2015, the Wisconsin Department of Financial Institutions, Division of Securities (the “Division”) entered an Order against Respondent insurance agents Jace McDonald, Peter Viater, and Derek Anderson, in connection with private placement sales of life settlements to Wisconsin investors. Additionally, the Division named Conestoga Life Settlements, Conestoga International, Conestoga Trust, and Conestoga Member Services as related entities (collectively, “Conestoga”) in the enforcement action.
Messrs. McDonald, Viater, and Anderson all allegedly maintained independent contractor agreements with Conestoga pursuant to which they agreed to “market the products and services of Conestoga” and, further, to refer all suitable clients for Conestoga’s products and services. The Division alleged that Conestoga agents, including McDonald, made certain misstatements and misrepresentations to investors by implying that the life settlements being sold through a private placement offering were safe and would mature like a CD, that the return of principal was guaranteed, and that Conestoga was “contractually obligated” to pay on the private placement investment being offered.
Life settlements (or viaticals) are generally regarded as illiquid and risky investments. In fact, Conestoga’s own offering documents, including a private placement memorandum (PPM), reportedly stated that a life settlement is a “HIGHLY SPECULATIVE INVESTMENT. IT IS DESIGNED FOR SOPHISTICATED INVESTORS WHO ARE ABLE TO BEAR THE ECONOMIC RISK OF THE LOSS OF THEIR INVESTMENT IN THE LIFE SETTLEMENT INTEREST AND IS NOT INTENDED AS A COMPLETE INVESTMENT PROGRAM.”