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In order to provide viatical settlement investors with federal securities law protection, the Securities and Exchange Commission (SEC) is recommending that Congress define viatical settlements as securities. The following benefits were proposed in the SEC's report: 1) the SEC and the Financial Industry Regulatory Authority (FINRA) would have authority to oversee the viatical settlement market, which could aid in detecting fraud and dishearten abuses; 2) the states and federal government would be able to deal with viatical settlement issues in a more consistent manner; and 3) viatical settlement market intermediaries would fall under the regular framework of both the SEC and FINRA. The task force created the report due to the inconsistent regulation of market participants.

A viatical settlement is the sale of an owner's life insurance policy to a third party for more than the cash surrender value, but less than its net death benefit. The seller of the policy is benefited with a lump sum payment. The buyer of the policy pays the monthly premium and receives the benefit of the policy when the seller or the insured dies. Viatical settlement transactions typically involve an insured who is terminally or chronically ill. A person who is terminally or chronically ill has a life expectancy of less than two years. From an investor's perspective, the return will depend on the seller's life expectancy and date of death. Therefore, viatical settlements cannot be equated with zero coupon bonds because the date of death or maturity is uncertain.

The SEC is also urging Congress to regulate life expectancy underwriters in a more consistent manner, enforce legal standards of conduct upon brokers and providers, and look for the development of a viatical settlement securitization market.

The subject of viatical settlements has not gone unnoticed within Congress, as well. US Senator Herb Kohl released a General Accountability Office report expressing his concern for the inconsistent regulation of viatical settlements. Some of the challenges mentioned are less protection for investors in certain states, the lack information and risk disclosure, and broker dilemmas due to inconsistent laws across the states.

Have you suffered a loss in a viatical settlement? If so, call Robert Pearce at the Law Offices of Robert Wayne Pearce, P.A. for a free consultation.

The most important of investors' rights is the right to be informed! This Investors' Rights blog post is by the Law Offices of Robert Wayne Pearce, P.A., located in Boca Raton, Florida. For over 30 years, Attorney Pearce has tried, arbitrated, and mediated hundreds of disputes involving complex securities, commodities and investment law issues. The lawyers at our law firm are devoted to protecting investors' rights throughout the United States and internationally! Please visit our website,, post a comment, call (800) 732-2889, or email Mr. Pearce at for answers to any of your questions about this blog post and/or any related matter.