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The Securities and Exchange Commission (SEC) is continuing to focus on the sale and marketing of retirement products to help combat fraud against senior investors. These efforts stem from the fact that seniors are oftentimes sold unsuitable investments because a broker has failed to disclose or misrepresented the risks associated with a product. One such product is a Viatical settlement, which is among the SEC's top priorities since the industry has experienced stellar growth and will likely surpass $150 billion in value within the next few decades.

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.

Viatical settlements are of emerging interest since they may very well become Wall Street's next big securitized products. Still, the SEC has limited authority over viatical settlements. A task force has been established to examine whether sufficient regulation is in place to protect senior investors against fraudulent activity. Apart from fraud, the SEC has expressed concern that many seniors may not understand the consequences of selling their life insurance policies to investors. These consequences include the loss of tax benefits and the inability to obtain life insurance in the future.

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.