HB 190: "An Act relating to viatical settlement contracts."
00HOUSE BILL NO. 190 01 "An Act relating to viatical settlement contracts." 02 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF ALASKA: 03 * Section 1. AS 45.55.900 is amended by adding new subsections to read: 04 (g) Except as provided by (h) of this section, an offer or sale of a viatical 05 settlement contract or a security that represents or is secured by a viatical settlement 06 contract is exempt from the registration requirement of AS 45.55.070 if at least 10 07 business days before any offers or sales are made 08 (1) the issuer files with the administrator a notice of the transaction, the 09 fee established by regulation for exemption filings, and the consent to service of 10 process required by AS 45.55.980(g); the notice required in this paragraph must 11 contain 12 (A) the name, address, and telephone number of the issuer and 13 a brief description of the general character and location of the issuer's business; 14 (B) a statement demonstrating eligibility for notice filing under
01 the exemption in this subsection; 02 (C) a description of the security being offered or sold; 03 (D) a description of the kind and amount of commissions, 04 finders' fees, or other remuneration paid directly or indirectly in connection 05 with soliciting a prospective buyer in this state; and 06 (E) the information and documents required under (i) of this 07 section by the administrator by regulation or order; 08 (2) the offer or sale is made by, and commissions or other remuneration 09 in connection with making the sale are made only to, persons registered or required 10 to be registered under AS 45.55.030(a) or (c) and 45.55.040; 11 (3) before a sale, each prospective buyer is furnished information that 12 is sufficient to make an informed investment decision; this information shall be 13 furnished to the administrator on request if not otherwise required to be filed; in this 14 paragraph, "information that is sufficient to make an informed investment decision" 15 includes the issuer's most recent audited income and expense statement and balance 16 sheet, a statement of risks, and a disclosure of any significant negative factor that may 17 affect the outcome of the investment; and 18 (4) the issuer and the issuer's predecessors have been in continuous 19 operation for at least three years and there has been no default during the current fiscal 20 year or within the two preceding fiscal years in the payment of principal, interest, 21 dividends, or other obligation on a security of the issuer or a predecessor of the issuer 22 with a fixed maturity or a fixed interest, dividend, or other provision. 23 (h) The exemption in (g) of this section is not available to an issuer if the 24 issuer, a predecessor of the issuer, an affiliated issuer, a director of the issuer, an 25 officer of the issuer, a general partner of the issuer, a beneficial owner of 10 percent 26 or more of a class of the issuer's equity securities, a promoter of the issuer presently 27 connected with the issuer in any capacity, an underwriter of the securities to be 28 offered, a partner of an underwriter of the securities to be offered, a director of an 29 underwriter of the securities to be offered, or an officer of the underwriter of the 30 securities to be offered 31 (1) has filed within the last five years a registration statement that is
01 the subject of a currently effective registration stop order entered by a state securities 02 administrator or the United States Securities and Exchange Commission; 03 (2) within the last five years has been convicted of 04 (A) a felony; 05 (B) a criminal offense involving fraud or deceit; or 06 (C) a criminal offense in connection with the offer, purchase, 07 or sale of a security; 08 (3) is currently subject to a state or federal administrative enforcement 09 order or judgment entered within the last five years finding fraud or deceit in 10 connection with the purchase or sale of a security; or 11 (4) is currently subject to an order, judgment, or decree of a court of 12 competent jurisdiction entered within the last five years, temporarily, preliminarily, or 13 permanently restraining or enjoining the person subject to the order from engaging in 14 or continuing to engage in conduct or a practice involving fraud or deceit in 15 connection with the purchase or sale of a security. 16 (i) Notwithstanding AS 45.55.150, the administrator may by regulation or order 17 establish requirements for, and require the filing of, a prospectus, pamphlet, circular, 18 form letter, advertisement, or other sales literature used or intended to be used in 19 connection with the offer or sale of a security, whether a viatical settlement contract 20 or a security that represents or is secured by a viatical settlement contract, that is 21 exempt under (g) of this section. 22 * Sec. 2. AS 45.55 is amended by adding a new section to read: 23 Sec. 45.55.933. Right of rescission applicable to sales of viatical settlement 24 contracts. (a) In addition to any other rights provided for under this chapter or 25 otherwise, a person who purchases a viatical settlement contract or a security that is 26 secured by a viatical settlement contract may rescind the purchase. The person may 27 rescind the purchase by giving written notice of rescission to the entity designated for 28 the notice in the disclosure documents by ordinary mail, postage prepaid, within three 29 business days following the later of the day on which the person 30 (1) received the final disclosure document required under this chapter 31 relating to the transaction; or
01 (2) paid the required consideration for the purchase of the viatical 02 settlement contract or a security that is secured by a viatical settlement contract. 03 (b) The notice required under (a) of this section is sufficient if addressed to 04 the entity designated for the notice at the address given in the disclosure statement 05 relating to the transaction. The notice is effective when deposited in the United States 06 mail. The notice is not required to be in a particular form and is sufficient if it 07 expresses the intention of the purchaser to rescind the transaction. 08 * Sec. 3. AS 45.55.935(a) is amended to read: 09 (a) The administrator shall adopt regulations, consistent with the provisions of 10 this chapter, governing administrative hearings conducted by the administrator or a 11 designee of the administrator for the following: 12 (1) orders issued under AS 45.55.120, 45.55.900(d) or (i) , or 45.55.920; 13 in these instances, the administrator shall promptly send a notice of opportunity for 14 hearing to the issuer of the securities and to all persons who have filed with the 15 department a notice of intention to sell the securities; and 16 (2) orders issued under AS 45.55.060; before the administrator enters 17 an order under AS 45.55.060, the administrator shall send to the person involved a 18 notice of opportunity for hearing; if the person involved is an agent, then the 19 administrator shall in addition notify the employing broker-dealer, investment advisor, 20 or issuer. 21 * Sec. 4. AS 45.55.990(7) is amended to read: 22 (7) "issuer" means a person who issues or proposes to issue any 23 security, except that with respect to 24 (A) certificates of deposit, voting-trust certificates, or collateral- 25 trust certificates, or with respect to certificates of interest or shares in an unincorporated 26 investment trust not having a board of directors, or persons performing similar functions or 27 of the fixed, restricted management, or unit type, the term "issuer" means the person or 28 persons performing the acts and assuming the duties of depositor or manager under the 29 provisions of the trust or other agreement or instrument under which the security is issued; 30 (B) a fractional or pooled interest in a viatical settlement 31 contract, the term "issuer" means the person who creates, for the purpose
01 of sale, the fractional, or pooled interest; 02 (C) a viatical settlement contract that is not a fractional or 03 pooled interest in a viatical settlement, the term "issuer" means the person 04 effecting the transaction with the investor in the contract, but does not 05 include a broker-dealer or agent ; 06 * Sec. 5. AS 45.55.990(12) is amended to read: 07 (12) "security" means a note; stock; treasury stock; bond; debenture; 08 evidence of indebtedness; certificate of interest or participation in any profit-sharing 09 agreement; [A] limited liability company interest under AS 10.50; collateral-trust 10 certificate [CERTIFICATES]; preorganization certificate or subscription; transferable 11 share; investment contract; voting-trust certificate; certificate of deposit for a security; 12 viatical settlement contract; [A] certificate of interest or participation in an oil, gas, 13 or mining title or lease or in payments out of production under the title or lease or in 14 any sale of or indenture or bond or contract for the conveyance of land or any interest 15 in land; an option on a contract for the future delivery of agricultural or mineral 16 commodities or any other commodity offered or sold to the public and not regulated 17 by the Commodity Futures Trading Commission; however, the contract or option is not 18 subject to the provisions of AS 45.55.070 if it is sold or purchased on the floor of a 19 bona fide exchange or board of trade and offered or sold to the public by a broker- 20 dealer or agent registered under this chapter; investment of money or money's worth including 21 goods furnished or services performed in the risk capital of a venture with the expectation of 22 some benefit to the investor where the investor has no direct control over the investment or 23 policy decision of the venture; or, in general, any interest or instrument commonly known as 24 a "security," or any certificate of interest or participation in, temporary or interim certificate 25 for, receipt for, guarantee of, or warrant or right to subscribe to or purchase, any of the 26 foregoing; "security" does not include an insurance or endowment policy or annuity contract 27 under which an insurance company promises to pay a fixed or variable sum of money either 28 in a lump sum or periodically for life or for some other specified period; 29 * Sec. 6. AS 45.55.990 is amended by adding new paragraphs to read: 30 (14) "viatical settlement contract" means an agreement for the purchase, 31 sale, assignment, transfer, devise, or bequest of all or a portion of the death benefit or
01 ownership of a life insurance policy or certificate for consideration; "viatical settlement 02 contract" includes a fractional or pooled interest in a viatical settlement contract, but 03 does not include 04 (A) the assignment, transfer, sale, devise, or bequest of a death 05 benefit, life insurance policy, or certificate of insurance by a viator to the 06 viatical settlement provider; 07 (B) the assignment, transfer, sale, devise, or bequest of a life 08 insurance policy, for less than the expected death benefit, by the viator to a 09 friend or family member if the friend or family member does not enter into 10 more than one agreement described in this paragraph in a calendar year; 11 (C) an assignment of a life insurance policy to a bank, savings 12 bank, savings and loan association, credit union, or other licensed lending 13 institution as collateral for a loan; or 14 (D) the exercise by the viator of an accelerated benefits 15 provision under the terms of the life insurance policy. 16 (15) "viatical settlement provider" means a person who is an issuer, has 17 satisfied all requirements of this state to allow the person to do business in this state, 18 and enters into multiple viatical settlement contracts with viators each year for the 19 purpose of selling viatical settlement contracts or pooled or fractional interests in 20 viatical contracts to one or more investors; 21 (16) "viator" means the person whose life is insured by the insurance 22 policy or certificate that is the subject of a viatical settlement contract.