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.”
The primary risk associated with investing in life settlements (or viaticals) concerns the possibility that the insured (who has sold his or her life insurance policy to the investment sponsor) will outlive the money set aside by the sponsor to pay for continued life insurance premiums. In such a scenario, the investors in the life settlements are then obligated to pay future premiums in order to ensure that the policy remains in force until maturity. When some investors refuse to pay, the remaining investors are left to cover higher premium payments, or else allow the policy to lapse. Additionally, investing in a private placement carries considerable risk — including the illiquid nature of the investment — and, therefore, is typically only available to accredited and/or sophisticated investors, as explicitly referenced in the Conestoga PPM.
The Division alleged that Messrs. McDonald, Viater, and Anderson violated applicable Wisconsin securities law, as well as Regulation D, an SEC rule which governs private placement investments and ordered them to “disgorge any all commissions, profits, or any other moneys received by them as compensation for making offers and/or sales of Conestoga life settlement interests to Wisconsin investors….”
The attorneys at Law Office of Christopher J. Gray, P.C. have significant experience in representing investors who have incurred losses in connection with losses in non-conventional investments. Investors may contact our office at (866) 966-9598 or via email at newcases@investorlawyers.net for a no-cost, confidential consultation.