by John Darer CLU ChFC MSSC CeFT RSP CLTC
The State of Connecticut plans to increase its statutory protections for structured settlement annuitants in the event of insolvency of the annuity issuer effective October 1, 2019. Pay attention investors! Structured settlement receivables are excluded.
To eliminate any confusion, changes to the CT statute contain an express exclusion from protection for investors in structured settlement payment rights acquired through a structured settlement transfer regardless of whether that structured settlement transfer occurred prior to the enactment of the new law.
Investors are now potentially “S.O.L” in the event of insolvency so know what you are buying and invest wisely.
[ see C.G.S. 38a-860 (O) structured settlement annuity benefits to which a payee or beneficiary has transferred the payee’s or beneficiary’s rights in a structured settlement factoring transaction as defined in 26 USC 5891(c)(3)(A), regardless of whether the transaction occurred before or after said section became effective]. The new law is part of an Act Concerning Conforming Minor and Technical Changes To Statutes Concerning Insurance and Real Estate.
A Turning Point?
With more and more states becoming informed and tweaking their laws to expressly exclude factored structured settlement payment streams, an ongoing scam of investors may be reaching a turning point.
Various companies are intellectually dishonest, in my opinion, when they peddle factored structured settlement payments to investors as annuities , when the National Association of Insurance Commissioners has clearly stated they are not. Such peddlers of scam labeled “secondary market annuities” induce investors to buy factored structured settlement payment streams in this manner, because “annuity” is a familiar term to investors seeking stable income. The view of the State of Connecticut regulators is consistent with the position of the National Association of Insurance Commissioners and other states such as West Virginia. Investors who buy such instruments from the scam labelling peddlers and thinking they are buying an annuity, do so at their own peril.
Retirees have lost their investment in factored structured settlement payments sold to them by peddlers who scam labeled them annuities in the solicitation. A slew of others who were sold such investments by 4 entities are continuing to face uncertainty about when they will receive the payments they thought they bought, or whether they will receive those payments at all. One of the investors has sought redress by filing a FINRA complaint against one of the 4 companies after payments due January 2018 never arrived. They still have not arrived.
How Can Investors Protect Themselves?
- Any investor faced with a slick sales pitch by one of the scam labeling merchants of “secondary market annuities” (also marketed under the acronym SMA, SMIA) should ask for a written disclosure on company letterhead disclosing the differences between what is being sold to them and an annuity. Preserve the document.
- Anyone who is calling structured settlement receivables an annuity is intentionally deceiving you or ignorant.
CT General Statutes Sec. 38a-432a-4. Definitions
As used in sections 38a-432a-1 to 38a-432a-8, inclusive, of the Regulations of Connecticut State Agencies:
(2) “Annuity” means “annuities” as defined in section 38a-1 of the Connecticut General Statutes, that is or are individually solicited, whether the product is classified as an individual or group annuity;
Suitability in Annuity Transactions
Furthermore, the sale of legitimate annuities to investors, including retirees would require complaince under Connecticut law TITLE 38a. Insurance Department Suitability in Annuity Transactions Inclusive Sections
§§ 38a-432a-1—38a-432a-
Settlement Planners and Financial Planners navigating these waters may want to do a rethink
- Financial advisors who push scam labeled “secondary market annuities” to investors (and their compliance departments) should investigate their current business practices and determine if continuing to market something as an annuity, which it isn’t , in marketing to investors is consistent with regulations, particularly truth in advertising.
- Settlement Planners who recklessly use any of the scam labeled terms while calling themselves (or insinuating they are fiduciary are needlessly putting ththemselves in the danger zone.