Wealth & Risk Management Blog

William Byrnes (Texas A&M) tax & compliance articles

Posts Tagged ‘Investor’

SEC Warns Investors about Principal Protected Notes

Posted by William Byrnes on November 3, 2011


In a low-interest rate world, high-yield investments offering principal protection are enticing to investors. But the complexity of some high-end investment products has the Financial Industry Regulatory Authority (FINRA) and Securities and Exchange Commission’s (SEC) warning investors to look before they leap.

In an alert titled Structured Notes with Principal Protection: Note the Terms of Your Investment, the regulators warn investors that these structured products may not be what they seem. Although they are marketed under a variety of names with a “principal protection” component—e.g. “absolute return” and “minimum return”—the true extent of their safety is never obvious . Investors need to read the fine print to decide whether they are suitable for their investing needs and risk tolerance.

Read this complete analysis of the impact at AdvisorFX (sign up for a free trial subscription with full access to all the planning libraries and client presentations if you are not already a subscriber).

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Life Partners Holdings Hit with Class-Action Lawsuit

Posted by William Byrnes on April 2, 2011


Life Partners Holdings, Inc. investors have filed a class-action lawsuit against the Waco Texas based life settlement provider, alleging that its directors and officers violated securities laws. The lawsuit comes a month after an announcement was made that the publically-traded company is the subject of an SEC investigation into the life expectancies the company uses to value the life insurance policies it sells to its customers.  Life Partners is accused of misleading its customers—investors in life insurance policy—about the life expectancies of insureds on the policies it sells, with insureds outliving the life settlement company’s life expectancy estimates 90% of the time.  Read this complete analysis of the impact at AdvisorFX (sign up for a free trial subscription with full access to all of the planning libraries and client presentations if you are not already a subscriber).

For previous coverage of life settlements in Advisor’s Journal, see Life Settlement Provider Accused of Falsifying Life Span Reports (CC 11-23)Life Settlements Funds Performance Fees under Scrutiny (CC 10-116)Should the Basis of a Life Contract be Adjusted by Mortality Charges? Rev. Rul. 2009-13 Says Yes in Context of Life Settlements; Certain Amounts over Adjusted Basis Treated as Capital Gains (CC 09-19).

For in-depth analysis of life settlements, see Advisor’s Main Library: A—Life Settlements—Introduction.

 

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New York Court of Appeals Issues Decision on STOLI Arrangement

Posted by William Byrnes on January 8, 2011


The Court of Appeals of New York—the state’s highest court— issued a decision as to whether New York’s insurable interest law was violated when an insured purchased a life insurance policy and immediately assigned the policy to a third party who did not have an insurable interest in the insured’s life.

The case involves an attorney who purchased $56.2 million in insurance coverage on his own life at the prompting of a STOLI promoter.  The policies were held by life insurance trusts that initially named the attorney’s adult children as beneficiaries of the trust, but the children immediately assigned their interests in the trusts to third party investors.  Investors paid all premiums.

When the attorney died, his wife refused to provide his death certificate to the investors.  She then sued the insurance companies and investors in federal district court, alleging that, because the policies were issued in violation of New York’s insurable interest law, policy proceeds should be paid to her instead of the investors.  Read this complete article at AdvisorFX (sign up for a free trial subscription with full access to all of the planning libraries and client presentations if you are not already a subscriber).

We invite your questions and comments by posting them or by calling the Panel of Experts.

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FINRA Positions Itself to Oversee Advisers

Posted by William Byrnes on December 8, 2010


NASD executive office on K Street in downtown ...

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Buzz about the Financial Industry Regulatory Authority, Inc. (FINRA) taking responsibility for regulation of investment advisers has been circulating for a couple of years now—but the talk is suddenly sounding less like gossip and a lot more like a plan. Last week, FINRA’s chief executive, Richard Ketchum, sent a letter to the SEC touting the benefits of appointing a self-regulatory organization (SRO) to oversee advisors. Although Ketchum’s letter does not directly ask the SEC to cede some of its regulatory authority over advisers to FINRA, hints abound.

The Dodd-Frank Wall Street Reform and Consumer Protection Act, passed earlier this year, mandates an SEC study of its investment advisor examinations and whether delegation of advisor regulation to an SRO would improve examinations.  Read this complete article at AdvisorFX (sign up for a free trial subscription with full access to all of the planning libraries and client presentations if you are not already a subscriber).

For previous coverage of FINRA in Advisor’s Journal, see FINRA Proposes Eliminating Industry Insiders from Arbitration Panels (CC 10-80).

We invite your questions and comments by posting them below, or by calling the Panel of Experts.

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