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					                                   South Carolina General Assembly
                                       116th Session, 2005-2006

S. 201

STATUS INFORMATION

General Bill
Sponsors: Senator Alexander
Document Path: l:\council\bills\dka\3063dw05.doc
Companion/Similar bill(s): 3309

Introduced in the Senate on January 12, 2005
Currently residing in the Senate Committee on Banking and Insurance

Summary: Viatical and Life Settlements Act


HISTORY OF LEGISLATIVE ACTIONS

    Date   Body Action Description with journal page number
 1/12/2005 Senate Introduced and read first time SJ-13
 1/12/2005 Senate Referred to Committee on Banking and Insurance SJ-13

View the latest legislative information at the LPITS web site


VERSIONS OF THIS BILL

1/12/2005
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 9                             A BILL
10
11   TO AMEND THE CODE OF LAWS OF SOUTH CAROLINA,
12   1976, BY ADDING CHAPTER 64 TO TITLE 38 SO AS TO
13   ENACT THE VIATICAL SETTLEMENTS ACT, TO PROVIDE
14   FOR THE PROTECTION OF CONTRACTUAL AND
15   PROPERTY RIGHTS OF A LIFE INSURANCE POLICY
16   OWNER TO SEEK A VIATICAL SETTLEMENT, TO
17   ESTABLISH CONSUMER PROTECTIONS BY PROVIDING
18   FOR THE REGULATION OF A VIATICAL SETTLEMENT
19   TRANSACTION, TO PROVIDE FOR THE LICENSING AND
20   REGULATION OF A VIATICAL SETTLEMENT PROVIDER
21   AND OTHERS INVOLVED IN A VIATICAL SETTLEMENT
22   TRANSACTION, TO PROVIDE FOR ANTI-FRAUD
23   MEASURES, AND TO PROVIDE PENALTIES FOR
24   VIOLATIONS.
25
26   Be it enacted by the General Assembly of the State of South
27   Carolina:
28
29   SECTION 1. Title 38 of the 1976 Code is amended by adding:
30
31                             “CHAPTER 64
32
33                        Viatical Settlements Act
34
35     Section 38-64-10. This chapter may be cited as the Viatical
36   Settlements Act.
37
38      Section 38-64-20. As used in this chapter:
39      (1) „Advertising‟ means any written, electronic, or printed
40   communication or any communication by means of recorded
41   telephone messages or transmitted on radio, television, the
42   Internet, or similar communications media, including film strips,

     [201]                           1
 1   motion pictures, and videos, published, disseminated, circulated, or
 2   placed directly before the public in this State, for the purpose of
 3   creating an interest in or inducing a person to sell a policy pursuant
 4   to a viatical settlement contract.
 5      (2) „Business of viatical settlements‟ means an activity
 6   involved in, but not limited to, the offering, solicitation,
 7   negotiation, procurement, effectuation, purchasing, investing,
 8   financing, monitoring, tracking, underwriting, selling, transferring,
 9   assigning, pledging, hypothecating, or in any other manner of
10   viatical settlement contracts.
11      (3) „Chronically ill‟ means:
12         (a) being unable to perform at least two activities of daily
13   living including, but not limited to, eating, toileting, transferring,
14   bathing, dressing, or continence;
15         (b) requiring substantial supervision to protect the individual
16   from threats to health and safety due to severe cognitive
17   impairment; or
18         (c) having a level of disability similar to that described in
19   subitem (a) as determined by the Director of Health and Human
20   Services.
21      (4)(a) „Financing entity‟ means an underwriter, placement
22   agent, lender, purchaser of securities, purchaser of a policy or
23   certificate from a viatical settlement provider, credit enhancer, or
24   an entity that has a direct ownership in a policy that is the subject
25   of a viatical settlement contract, but:
26             (i) whose principal activity related to the transaction is
27   providing funds to effect the viatical settlement or purchase of one
28   or more purchased policies; and
29            (ii) who has an agreement in writing with one or more
30   licensed viatical settlement providers to finance the acquisition of
31   viatical settlement contracts.
32         (b) „Financing entity‟ does not include a nonaccredited
33   investor.
34      (5) „Fraudulent viatical settlement act‟ includes:
35         (a) acts or omissions committed by a person who, knowingly
36   or with intent to defraud, for the purpose of depriving another of
37   property or for pecuniary gain, commits, or permits its employees
38   or its agents to engage in acts including:
39             (i) presenting, causing to be presented, or preparing with
40   knowledge or belief that it will be presented to or by a viatical
41   settlement provider, financing entity, insurer, insurance producer,
42   or another person, false material information, or concealing


     [201]                             2
 1   material information, as part of, in support of, or concerning a fact
 2   material to one or more of the following:
 3                (A) an application for the issuance of a viatical
 4   settlement contract or policy;
 5                (B) the underwriting of a viatical settlement contract or
 6   policy;
 7                (C) a claim for payment or benefit pursuant to a viatical
 8   settlement contract or policy;
 9                (D) premiums paid on a policy;
10                (E) payments and changes in ownership or beneficiary
11   made in accordance with the terms of a viatical settlement contract
12   or policy;
13                (F) the reinstatement or conversion of a policy;
14                (G) in the solicitation, offer, effectuation, or sale of a
15   viatical settlement contract or policy;
16                (H) the issuance of written evidence of viatical
17   settlement contract or insurance; or
18                (I) a financing transaction;
19            (ii) employing any device, scheme, or artifice to defraud
20   related to purchased policies;
21         (b) in the furtherance of a fraud or to prevent the detection of
22   a fraud a person commits or permits its employees or its agents to:
23              (i) remove, conceal, alter, destroy, or sequester from the
24   director the assets or records of a licensee or other person engaged
25   in the business of viatical settlements;
26             (ii) misrepresent or conceal the financial condition of a
27   licensee, financing entity, insurer, or other person;
28            (iii) transact the business of viatical settlements in
29   violation of laws requiring a license, certificate of authority, or
30   other legal authority for the transaction of the business of viatical
31   settlements; or
32            (iv) file with the director or the chief insurance regulatory
33   official of another jurisdiction a document containing false
34   information or otherwise conceals information about a material
35   fact from the director;
36         (c) embezzlement, theft, misappropriation, or conversion of
37   monies, funds, premiums, credits, or other property of a viatical
38   settlement provider, insurer, insured, seller, policyowner, or
39   another person engaged in the business of viatical settlements or
40   insurance;
41         (d) recklessly entering into, negotiating, otherwise dealing in
42   a viatical settlement contract, the subject of which is a policy that
43   was obtained by presenting false information concerning a fact

     [201]                              3
 1   material to the policy, or by concealing, for the purpose of
 2   misleading another, information concerning a fact material to the
 3   policy, where the seller or the seller‟s agent intended to defraud the
 4   insurance company that issued the policy. „Recklessly‟ means
 5   engaging in the conduct in conscious and clearly unjustifiable
 6   disregard of a substantial likelihood of the existence of the relevant
 7   facts or risks, this disregard involving a gross deviation from
 8   acceptable standards of conduct; or
 9         (e) attempting to commit, assist, aid, or abet in the
10   commission of, or conspiracy to commit the acts or omissions
11   specified in this subsection.
12      (6) „Life insurance producer‟ means a person licensed as a
13   resident or nonresident insurance producer pursuant to Section
14   38-43-10 who has received qualification for life insurance
15   coverage pursuant to Section 38-43-75(1).
16      (7) „Person‟ means a natural person or a legal entity including,
17   but not limited to, an individual, partnership, limited liability
18   company, association, trust, or corporation.
19      (8) „Policy‟ means an individual or group policy, group
20   certificate, contract, or arrangement of life insurance affecting the
21   rights of a resident of this State or bearing a reasonable relation to
22   this State, regardless of whether delivered or issued for delivery in
23   this State.
24      (9) „Purchased policy‟ means a policy that has been acquired
25   by a viatical settlement provider pursuant to a viatical settlement
26   contract.
27      (10) „Related provider trust‟ means a titling trust or other trust
28   established by a licensed viatical settlement provider or a financing
29   entity for the sole purpose of holding the ownership or beneficial
30   interest in purchased policies in connection with a financing
31   transaction. The trust shall have a written agreement with the
32   licensed viatical settlement provider under which the licensed
33   viatical settlement provider is responsible for ensuring compliance
34   with all statutory and regulatory requirements and under which the
35   trust agrees to make all records and files related to viatical
36   settlement transactions available to the director as if those records
37   and files were maintained directly by the licensed viatical
38   settlement provider.
39      (11) „Seller‟ means the owner of a policy, who is a resident of
40   this State, who enters or seeks to enter into a viatical settlement
41   contract. For the purposes of this chapter, a seller is not limited to
42   an owner of a policy insuring the life of an individual with a


     [201]                             4
 1   terminal or chronic illness or condition except where specifically
 2   addressed. Seller does not include:
 3        (a) a licensee as provided by this chapter, including a life
 4   insurance producer;
 5        (b) an accredited investor or qualified institutional buyer as
 6   defined, respectively, in Regulation D, Rule 501 or Rule 144A of
 7   the Federal Securities Act of 1933, as amended;
 8        (c) a financing entity;
 9        (d) a special purpose entity; or
10        (e) a related provider trust.
11      (12) „Viatical settlement contract‟ means a written agreement
12   establishing the terms under which compensation or anything of
13   value is paid, which compensation or value is less than the
14   expected death benefit of the policy, in return for the seller‟s
15   assignment, transfer, sale, devise, or bequest of the death benefit or
16   ownership of any portion of the policy. A viatical settlement
17   contract also includes a contract for a loan or other financing
18   transaction with a seller secured primarily by an individual or
19   group life insurance policy, other than a loan by a life insurance
20   company pursuant to the terms of the policy, or a loan secured by
21   the cash value of a policy. A viatical settlement contract includes
22   an agreement with a seller to transfer ownership or change the
23   beneficiary designation at a later date regardless of the date that
24   compensation is paid to the seller. A viatical settlement contract
25   does not mean a written agreement entered into between a seller
26   and a person having an insurable interest in the insured‟s life.
27      (13) „Viatical settlement provider‟ means a person, other than a
28   seller, who enters into or effectuates a viatical settlement contract.
29   Viatical settlement provider does not include:
30        (a) a bank, savings bank, savings and loan association, credit
31   union, or other licensed lending institution that takes an
32   assignment of a policy as collateral for a loan;
33        (b) the issuer of a policy providing accelerated benefits
34   pursuant to the policy;
35        (c) an authorized or eligible insurer that provides stop loss
36   coverage to a viatical settlement provider, financing entity, special
37   purpose entity, or related provider trust;
38        (d) a natural person who enters into or effectuates no more
39   than one agreement in a calendar year for the transfer of policies
40   for any value less than the expected death benefit;
41        (e) a financing entity;
42        (f) a special purpose entity;
43        (g) a related provider trust; or

     [201]                             5
 1         (h) an accredited investor or qualified institutional buyer as
 2   defined, respectively, in Regulation D, Rule 501 or Rule 144A of
 3   the Federal Securities Act of 1933, as amended, and who
 4   purchases a purchased policy from a viatical settlement provider.
 5      (14) „Special purpose entity‟ means a corporation, partnership,
 6   trust, limited liability company, or other similar entity formed only
 7   to provide either, directly or indirectly, access to institutional
 8   capital markets for a financing entity or licensed viatical settlement
 9   provider.
10      (15) „Terminally ill‟ means having an illness or sickness that
11   reasonably is expected to result in death in twenty-four months or
12   less.
13
14      Section 38-64-30. (A)(1) A person shall not act on behalf of a
15   viator or otherwise negotiate viatical settlement contracts between
16   a viator and one or more viatical settlement providers without first
17   having been licensed as a life insurance producer for at least one
18   year. For purposes of this section, the one year requirement is
19   deemed to be satisfied if such person has been licensed as a
20   resident life insurance producer in his or her home state for at least
21   one year.
22        (2) A life insurance producer, as defined in Section
23   38-64-20(6), and who meets the requirements of this subsection
24   (A) must be permitted to negotiate, as defined in Section
25   38-1-20(28.3), viatical settlement contracts between a seller and
26   one or more viatical settlement providers. Not later than thirty
27   days from the first day of negotiating a viatical settlement on
28   behalf of a seller, the producer shall notify the director of the
29   activity on a form prescribed by the director, and shall pay any
30   applicable fees to be determined by the director. Notification must
31   include an acknowledgment by the producer that he operates in
32   accordance with this chapter.
33        (3) Notwithstanding item (1) of this subsection, a person
34   licensed as an attorney, certified public accountant or a financial
35   planner accredited by a nationally recognized accreditation agency,
36   who is retained to represent the viator and whose compensation is
37   not paid directly or indirectly by the viatical settlement provider
38   may negotiate viatical settlement contracts without having to
39   obtain a license as a life insurance producer.
40      (B)(1) A person may not operate as a viatical settlement
41   provider without first obtaining a viatical settlement provider
42   license from the director of the state of residence of the seller.


     [201]                             6
 1         (2) Application for a viatical settlement provider license
 2   must be made to the director by the applicant on a form prescribed
 3   by the director, and an application must be accompanied by the
 4   fees to be determined by the director. An application for a viatical
 5   settlement provider license pursuant to the provisions of this
 6   section must be approved or denied by the director within sixty
 7   calendar days following receipt of a completed application by the
 8   director. The director shall notify applicants that the application is
 9   complete. An application for license is considered approved after
10   that time.
11         (3) A license may be renewed from year to year on the
12   anniversary date upon payment of the annual renewal fees to be
13   determined by the director. Failure to pay the fees by the renewal
14   date results in expiration of the license.
15         (4) Notwithstanding items (2) and (3) of this subsection, the
16   license and renewal fees for a viatical settlement provider license
17   may not exceed that established for an insurer as provided in
18   Section 38-7-10.
19         (5) The applicant for a viatical settlement provider license
20   shall provide information on forms prescribed by the director. The
21   director has authority, at any time, to require the applicant to fully
22   disclose the identity of all stockholders, partners, officers,
23   members, and employees, except stockholders owning fewer than
24   five percent of the shares of an applicant whose shares are publicly
25   traded, and the director may refuse to issue a license in the name of
26   a legal entity if not satisfied that any officer, employee,
27   stockholder, partner, or member of it who may materially influence
28   the applicant‟s conduct meets the standards of this chapter.
29         (6) A license issued to a legal entity authorizes all partners,
30   officers, members, and designated employees to act as viatical
31   settlement providers, as applicable, under the license, and all those
32   persons must be named in the application and any supplements to
33   the application.
34         (7) Upon the filing of an application and the payment of the
35   license fee, the director shall make an investigation of each
36   applicant for a license as a viatical settlement provider and issue a
37   license if the director finds that the applicant:
38           (a) has provided a detailed plan of operation;
39           (b) is competent and trustworthy and intends to act in
40   good faith in the capacity involved by the license for which he has
41   applied;



     [201]                             7
 1           (c) has a good business reputation and has had experience,
 2   training, or education so as to be qualified in the business for the
 3   license in which he has applied;
 4           (d) if a legal entity, provides a certificate of good standing
 5   from the state of its domicile; and
 6           (e) has provided an anti-fraud plan that meets the
 7   requirements of Section 38-64-120(G).
 8        (8) The director may not issue a license to a nonresident
 9   applicant, unless a written designation of an agent for service of
10   process is filed and maintained with the director or the applicant
11   has filed with the director, the applicant‟s written irrevocable
12   consent that any action against the applicant may be commenced
13   against the applicant by service of process on the director.
14        (9) A viatical settlement provider shall provide to the
15   director new or revised information about officers, ten percent or
16   more stockholders, partners, directors, members, or designated
17   employees within thirty days of the change.
18
19      Section 38-64-40. (A) The director may refuse to issue,
20   suspend, revoke, or refuse to renew the license of a viatical
21   settlement provider if the director finds that:
22         (1) there was any material misrepresentation in the
23   application for the license;
24         (2) the licensee or any officer, partner, member, or key
25   management personnel has been convicted of fraudulent or
26   dishonest practices, is subject to a final administrative action, or is
27   otherwise shown to be untrustworthy or incompetent;
28         (3) demonstrates a pattern of unreasonable payments to
29   sellers;
30         (4) the licensee or any officer, partner, member, or key
31   management personnel has been found guilty of, or has pleaded
32   guilty or nolo contendere to, any felony, or to a misdemeanor
33   involving fraud or moral turpitude, regardless of whether a
34   judgment of conviction has been entered by the court;
35         (5) has entered into any viatical settlement contract that has
36   not been approved pursuant to this chapter;
37         (6) has failed to honor contractual obligations set out in a
38   viatical settlement contract;
39         (7) the licensee no longer meets the requirements for initial
40   licensure;
41         (8) has assigned, transferred, or pledged a purchased policy
42   to a person other than a viatical settlement provider licensed in this
43   State, an accredited investor or qualified institutional buyer as

     [201]                              8
 1   defined, respectively, in Regulation D, Rule 501 or Rule 144A of
 2   the Federal Securities Act of 1933, as amended, financing entity,
 3   special purpose entity, or related provider trust; or
 4        (9) the viatical settlement provider licensee or any officer,
 5   partner, member, or key management personnel has violated a
 6   provision of this chapter.
 7     (B) If the director denies a license application or suspends,
 8   revokes, or refuses to renew the license of a viatical settlement
 9   provider, the director shall conduct a hearing in accordance with
10   Article 3, Chapter 23, Title 1.
11
12      Section 38-64-50. A person may not use a viatical settlement
13   contract or provide to a seller a disclosure statement form in this
14   State unless filed with and approved by the director. The director
15   shall disapprove a viatical settlement contract form or disclosure
16   statement form if, in the director‟s opinion, the contract or
17   provisions contained in it are unreasonable, contrary to the
18   interests of the public, or otherwise misleading or unfair to the
19   seller.
20
21      Section 38-64-60. (A) Each viatical settlement provider shall
22   file with the director by March first of each year an annual
23   statement containing information as the director prescribes by
24   regulation. This information is limited to only those transactions
25   where the seller is a resident of this State and does not include
26   individual transaction data regarding the business of viatical
27   settlements or data which compromises the privacy of personal,
28   financial, and health information of the seller or insured.
29      (B) Except as otherwise allowed or required by law, a viatical
30   settlement provider, life insurance producer, information bureau,
31   rating agency or company, or another person with actual
32   knowledge of a seller or insured‟s identity, may not disclose that
33   identity as a seller or insured, or the seller‟s or insured‟s financial
34   or medical information to another person unless the disclosure is:
35         (1) necessary to effect a viatical settlement contract between
36   the seller and a viatical settlement provider and the seller or
37   insured or both, as may be required, have provided prior written
38   consent to the disclosure;
39         (2) provided in response to an investigation or examination
40   by the director or another governmental officer or agency or
41   pursuant to the requirements of Section 38-64-120;
42         (3) a term of or condition to the transfer of a policy by one
43   viatical settlement provider to another viatical settlement provider;

     [201]                              9
 1         (4) necessary to permit a financing entity, related provider
 2   trust, or special purpose entity to finance the purchase of policies
 3   by a viatical settlement provider and the seller and insured have
 4   provided prior written consent to the disclosure;
 5         (5) necessary to allow the viatical settlement provider or
 6   their authorized representatives to make contacts for the purpose of
 7   determining health status; or
 8         (6) required to purchase stop loss coverage.
 9
10      Section 38-64-70. (A)(1) The director may conduct an
11   examination pursuant to the provisions of this chapter of a licensee
12   as often as he considers appropriate.
13         (2) For purposes of completing an examination of a licensee
14   pursuant to the provisions of this chapter, the director may
15   examine or investigate a person, or the business of a person, in so
16   far as the examination or investigation is necessary or material to
17   the examination of the licensee.
18         (3) Instead of an examination pursuant to the provisions of
19   this chapter of any foreign or alien licensee licensed in this State,
20   the director may accept an examination report on the licensee as
21   prepared by the director for the licensee‟s state of domicile or
22   port-of-entry state.
23      (B)(1) A person required to be licensed by this chapter shall
24   retain for five years copies of:
25           (a) proposed, offered, or executed contracts, underwriting
26   documents, policy forms, and applications from the date of the
27   execution of the contract;
28           (b) all checks, drafts, or other evidence and
29   documentation related to the payment, transfer, deposit, or release
30   of funds from the date of the transaction; and
31           (c) all other records and documents related to the
32   requirements of this chapter.
33      (2) This section does not relieve a person of the obligation to
34   produce these documents to the director after the retention period
35   has expired if the person has retained the documents.
36      (3) A record required to be retained by this section must be
37   legible and complete and may be retained in paper, photograph,
38   microprocess, magnetic, mechanical, or electronic media, or by
39   any process that accurately reproduces or forms a durable medium
40   for the reproduction of a record.
41      (C)(1) Upon determining that an examination must be
42   conducted, the director shall issue an examination warrant
43   appointing one or more examiners to perform the examination and

     [201]                            10
 1   instructing them as to the scope of the examination. In conducting
 2   the examination, the examiner shall observe those guidelines and
 3   procedures set forth in the Examiners‟ Handbook adopted by the
 4   National Association of Insurance Commissioners (NAIC). The
 5   director also may employ other guidelines or procedures as the
 6   director considers appropriate.
 7        (2) Each licensee or person from whom information is
 8   sought, its officers, directors, and agents shall provide to the
 9   examiners timely, convenient, and free access at all reasonable
10   hours at its offices to all books, records, accounts, papers,
11   documents, assets, and computer or other recordings relating to the
12   property, assets, business, and affairs of the licensee being
13   examined. The officers, directors, employees, and agents of the
14   licensee or person shall facilitate the examination and aid in the
15   examination so far as it is in their power to do so. The refusal of a
16   licensee, by its officers, directors, employees, or agents, to submit
17   to examination or to comply with any reasonable written request of
18   the director is grounds for suspension or refusal of, or nonrenewal
19   of a license or an authority held by the licensee to engage in the
20   business of viatical settlements or other business subject to the
21   director‟s jurisdiction.       Any proceedings for suspension,
22   revocation, or refusal of a license or an authority must be
23   conducted pursuant to Article 3 of Chapter 23 of Title 1.
24        (3) The director shall have the power to issue subpoenas, to
25   administer oaths, and to examine under oath a person as to any
26   matter pertinent to the examination. Upon the failure or refusal of
27   a person to obey a subpoena, the director may petition a court of
28   competent jurisdiction, and upon proper showing, the court may
29   enter an order compelling the witness to appear and testify or
30   produce documentary evidence. Failure to obey the court order is
31   punishable as contempt of court.
32        (4) When making an examination pursuant to the provisions
33   of this chapter, the director may retain attorneys, appraisers,
34   independent actuaries, independent certified public accountants, or
35   other professionals and specialists as examiners, the reasonable
36   cost must be borne by the licensee that is the subject of the
37   examination.
38        (5) Nothing contained in this chapter may be construed to
39   limit the director‟s authority to terminate or suspend an
40   examination in order to pursue other legal or regulatory action
41   pursuant to the insurance laws of this State. Findings of fact and
42   conclusions made pursuant to any examination is prima facie
43   evidence in any legal or regulatory action.

     [201]                            11
 1         (6) Nothing contained in this chapter may be construed to
 2   limit the director‟s authority to use and, if appropriate, to make
 3   public any final or preliminary examination report, any examiner
 4   or licensee work papers or other documents, or any other
 5   information discovered or developed during the course of an
 6   examination in the furtherance of a legal or regulatory action
 7   which the director, in his discretion, considers appropriate.
 8         (7) The licensee shall pay the charges incurred in the
 9   examination, including the expenses of the director or his designee
10   and the expenses and compensation of the director‟s examiners and
11   assistants. If a licensee feels the fees assessed are unreasonable in
12   relation to the examination performed, the licensee may appeal the
13   assessments to the Administrative Law Judge Division. The
14   director or his designee promptly shall institute a civil action to
15   recover the expenses of examination against a licensee which
16   refuses or fails to pay. Examination fees must be retained by the
17   department and are considered „other funds‟.
18      (D)(1) Examination reports must be comprised of only facts
19   appearing upon the books, records, or other documents of the
20   licensee, its agents, or other persons examined, or as ascertained
21   from the testimony of its officers or agents or other persons
22   examined concerning its affairs, and those conclusions and
23   recommendations as the examiners find reasonably warranted from
24   the facts.
25         (2) No later than sixty days following completion of the
26   examination, the examiner in charge shall file with the director a
27   verified written report of examination under oath. Upon receipt of
28   the verified report, the director shall transmit the report to the
29   licensee examined, together with a notice that shall afford the
30   licensee examined a reasonable opportunity of not more than thirty
31   days to make a written submission or rebuttal with respect to any
32   matters contained in the examination report.
33         (3) If the director determines that regulatory action is
34   appropriate as a result of an examination, the director may initiate
35   any proceedings or actions provided by law.
36      (E)(1) Names and individual identification data for all sellers
37   are considered private and confidential information and must not
38   be disclosed by the director, unless required by law.
39         (2)(a) Except as otherwise provided in this chapter, all
40   examination reports, working papers, recorded information,
41   documents, and copies of them produced by, obtained by, or
42   disclosed to the director or another person in the course of an
43   examination made under this chapter, or in the course of analysis

     [201]                            12
 1   or investigation by the director of the financial condition or market
 2   conduct of a licensee are:
 3              (i) confidential by law and privileged;
 4              (ii) not subject to the provisions of Chapter 4, Title 30,
 5   the Freedom of Information Act;
 6              (iii) not subject to subpoena; and
 7               (iv) not subject to discovery or admissible in evidence in
 8   any private civil action.
 9           (b) The director is authorized to use the documents,
10   materials, or other information in the furtherance of a regulatory or
11   legal action brought as part of the director‟s official duties.
12        (3) Documents, materials, or other information including,
13   but not limited to, all working papers and copies of them, in the
14   possession or control of the NAIC and its affiliates and
15   subsidiaries are:
16           (a) confidential by law and privileged;
17           (b) not subject to subpoena; and
18           (c) not subject to discovery or admissible in evidence in
19   any private civil action if they are:
20              (i) created, produced, or obtained by or disclosed to the
21   NAIC and its affiliates and subsidiaries in the course of assisting
22   an examination made under this chapter, or assisting a director in
23   the analysis or investigation of the financial condition or market
24   conduct of a licensee; or
25              (ii) disclosed to the NAIC and its affiliates and
26   subsidiaries pursuant to the provisions of item (4) by a director.
27        (4) For the purposes of item (2), „act‟ includes the law of
28   another state or jurisdiction that is substantially similar to this
29   chapter.
30        (5) The director or a person that received the documents,
31   material, or other information while acting under the authority of
32   the director, including the NAIC and its affiliates and subsidiaries,
33   is not permitted to testify in any private civil action concerning any
34   confidential documents, materials, or information subject to item
35   (1).
36        (6) In order to assist in the performance of the director‟s
37   duties, the director:
38           (a) may share documents, materials, or other information,
39   including the confidential and privileged documents, materials, or
40   information subject to item (1), with other state, federal, and
41   international regulatory agencies, with the NAIC and its affiliates
42   and subsidiaries, and with state, federal, and international law
43   enforcement authorities, provided that the recipient agrees to

     [201]                             13
 1   maintain the confidentiality and privileged status of the document,
 2   material, or other information;
 3            (b) may receive documents, materials, or information,
 4   including otherwise confidential and privileged documents,
 5   materials, or information, from the NAIC and its affiliates and
 6   subsidiaries, and from regulatory and law enforcement officials of
 7   other foreign or domestic jurisdictions, and shall maintain as
 8   confidential or privileged any document, material, or information
 9   received with notice or the understanding that it is confidential or
10   privileged under the laws of the jurisdiction that is the source of
11   those documents, materials, or information.
12         (7) No waiver of any applicable privilege or claim of
13   confidentiality in the documents, materials, or information may
14   occur as a result of disclosure to the director pursuant to the
15   provisions of this section or as a result of the sharing of those
16   documents, materials, or information as authorized in item (5).
17         (8) A privilege established under the law of any state or
18   jurisdiction that is substantially similar to the privilege established
19   pursuant to the provisions of this subsection is available and
20   enforced in any proceeding in, and in any court of, this State.
21         (9) Nothing contained in this chapter prevents or may be
22   construed as prohibiting the director from disclosing the content of
23   an examination report, preliminary examination report or results,
24   or any matter relating to it, to the director of another state or
25   country, or to law enforcement officials of this or another state or
26   agency of the federal government at any time or to the NAIC, so
27   long as that agency or office receiving the report or matters
28   relating to it agrees, in writing, to hold it confidential and in a
29   manner consistent with this chapter.
30      (F)(1) An examiner may not be appointed by the director if the
31   examiner, either directly or indirectly, has a conflict of interest or
32   is affiliated with the management of or owns a pecuniary interest
33   in a person subject to examination pursuant to the provisions of
34   this chapter. This section may not be construed to automatically
35   preclude an examiner from being:
36            (a) a seller;
37            (b) an insured in a purchased policy; or
38            (c) a beneficiary in an policy that is proposed to the
39   subject of a viatical settlement contract.
40         (2) Notwithstanding the requirements of this subsection, the
41   director may retain from time to time, on an individual basis,
42   qualified actuaries, certified public accountants, or other similar
43   individuals who are independently practicing their professions,

     [201]                             14
 1   even though these persons may at some time be similarly
 2   employed or retained by persons subject to examination pursuant
 3   to the provisions of this chapter.
 4      (G)(1) A cause of action may not arise or a liability may not be
 5   imposed against the director, the director‟s authorized
 6   representatives, or an examiner appointed by the director for a
 7   statement made or conduct performed in good faith while carrying
 8   out the provisions of this chapter.
 9         (2) A cause of action may not arise or a liability may not be
10   imposed against a person for the act of communicating or
11   delivering information or data to the director, the director‟s
12   authorized representative, or examiner pursuant to an examination
13   made pursuant to the provisions of this chapter, if the act of
14   communication or delivery was performed in good faith and
15   without fraudulent intent or the intent to deceive. This item does
16   not abrogate or modify in any way any common law or statutory
17   privilege or immunity before enjoyed by a person identified in
18   item (1) of this subsection.
19         (3) A person identified in item (1) or (2) is entitled to an
20   award of attorney‟s fees and costs if he is the prevailing party in a
21   civil cause of action for libel, slander, or another relevant tort
22   arising out of activities in carrying out the provisions of this
23   chapter. For purposes of this section a proceeding is „substantially
24   justified‟ if it had a reasonable basis in law or fact at the time that
25   it was initiated.
26      (H) The director may investigate suspected fraudulent viatical
27   settlement acts and persons engaged in the business of viatical
28   settlements.
29
30      Section 38-64-80. (A) With each application for a viatical
31   settlement contract, a viatical settlement provider or life insurance
32   producer shall provide the seller with at least the following
33   disclosures no later than the time the application for the viatical
34   settlement contract is signed by all parties. The disclosures must be
35   provided in a separate document that is signed by the seller and the
36   viatical settlement provider or life insurance producer, and shall
37   provide the following information:
38         (1) that there exist possible alternatives to a viatical
39   settlement contract including any accelerated death benefits or
40   policy loans offered under the seller‟s life insurance policy;
41         (2) that some or all of the proceeds of the viatical settlement
42   contract may be taxable under federal income tax and state


     [201]                             15
 1   franchise and income taxes, and assistance may be sought from a
 2   professional tax advisor;
 3         (3) those proceeds of the viatical settlement contract that
 4   may be subject to the claims of creditors;
 5         (4) receipt of the proceeds of a viatical settlement contract
 6   that adversely may affect the seller‟s eligibility for Medicaid or
 7   other government benefits or entitlements, and advice may be
 8   obtained from the appropriate government agencies;
 9         (5) that the seller has the right to rescind a viatical settlement
10   contract before the earlier of thirty calendar days after the date
11   upon which the viatical settlement contract is executed by all
12   parties or for fifteen calendar days after the receipt of the viatical
13   settlement proceeds by the seller, as provided in Section
14   38-64-90(C). Rescission, if exercised by the seller, is effective
15   only if both notice of the rescission is given and repayment of all
16   proceeds and any premiums, loans, and loan interest to the viatical
17   settlement provider is made within the rescission period. If the
18   insured dies during the rescission period, the viatical settlement
19   contract is deemed to have been rescinded, subject to repayment of
20   all viatical settlement proceeds and any premiums, loans, and loan
21   interest to the viatical settlement provider is made within the
22   rescission period;
23         (6) funds that must be sent to the seller within three business
24   days after the viatical settlement provider has received the insurer
25   or group administrator‟s acknowledgment that ownership of the
26   purchased policy has been transferred and the beneficiary has been
27   designated;
28         (7) that entering into a viatical settlement contract may cause
29   other rights or benefits, including conversion rights and waiver of
30   premium benefits that may exist under the policy, to be forfeited
31   by the seller. Assistance may be sought from a financial adviser;
32         (8) that the disclosure to a seller must include distribution of
33   a brochure, approved by the director, describing the process of
34   viatical settlements;
35         (9) that the disclosure document must contain the following
36   language:      „All medical, financial, or personal information
37   solicited or obtained by a viatical settlement provider or life
38   insurance producer about an insured, including the insured‟s
39   identity or the identity of family members, a spouse, or a
40   significant other may be disclosed as necessary to effect the
41   viatical settlement contract between the seller and the viatical
42   settlement provider. If you are asked to provide this information,
43   you will be asked to consent to the disclosure. The information

     [201]                              16
 1   may be provided to someone who buys the policy or provides
 2   funds for the purchase. You may be asked to renew your
 3   permission to share information every two years;
 4         (10) that the insured may be contacted by either the viatical
 5   settlement provider or its authorized representative for the purpose
 6   of determining the insured‟s health status. This contact is limited
 7   to once every three months if the insured has a life expectancy of
 8   more than one year, and no more than once each month if the
 9   insured has a life expectancy of one year or less.
10      (B) A viatical settlement provider shall provide the seller with
11   at least the following disclosures no later than the date the viatical
12   settlement contract is signed by all parties. The disclosures must be
13   displayed conspicuously in the viatical settlement contract or in a
14   separate document signed by the seller and the viatical settlement
15   provider, and provide the following information:
16         (1) the affiliation, if any, between the viatical settlement
17   provider and the issuer of the insurance policy to be acquired
18   pursuant to a viatical settlement contract;
19         (2) the name, address, and telephone number of the viatical
20   settlement provider;
21         (3) if a policy to be acquired pursuant to a viatical settlement
22   contract has been issued as a joint policy or involves family riders
23   or any coverage of a life other than the insured under the policy to
24   be acquired pursuant to a viatical settlement contract, the seller
25   must be informed of the possible loss of coverage on the other
26   lives under the policy and must be advised to consult with his
27   insurance producer or the insurer issuing the policy for advice on
28   the proposed viatical settlement contract;
29         (4) the dollar amount of the current death benefit payable to
30   the viatical settlement provider under the policy. If known, the
31   viatical settlement provider also shall disclose the availability of
32   additional guaranteed insurance benefits, the dollar amount of
33   accidental death and dismemberment benefits under the policy or
34   certificate, and the viatical settlement provider‟s interest in those
35   benefits;
36         (5) the name, business address, and telephone number of the
37   independent third party escrow agent, and the fact that the seller
38   may inspect or receive copies of the relevant escrow or trust
39   agreements or documents.
40      (C) If the viatical settlement provider transfers ownership or
41   changes the beneficiary of the policy, the viatical settlement
42   provider shall communicate the change in ownership or
43   beneficiary to the insured within twenty days after the change.

     [201]                             17
 1
 2      Section 38-64-90. (A)(1) A viatical settlement provider
 3   entering into a viatical settlement contract first shall obtain:
 4           (a) if the seller is the insured, a written statement from a
 5   licensed attending physician that the seller is of sound mind and
 6   under no constraint or undue influence to enter into a viatical
 7   settlement contract; and
 8           (b) a document in which the insured consents to the
 9   release of his medical records to a viatical settlement provider or
10   insurance producer and, if the policy was issued less than two
11   years from the date of application for a viatical settlement contract,
12   to the insurance company that issued the policy.
13         (2) The insurer shall respond to a request for verification of
14   coverage submitted by a viatical settlement provider or life
15   insurance producer not later than thirty calendar days of the date
16   the request is received. The request for verification of coverage
17   must be made on a form approved by the director. The insurer
18   shall complete and issue the verification of coverage or indicate in
19   which respects it is unable to respond. In its response, the insurer
20   shall indicate whether, based on the medical evidence and
21   documents provided, the insurer intends to pursue an investigation
22   at this time regarding the validity of the insurance contract,
23   possible fraud, and shall provide sufficient detail of all reasons for
24   the investigation to the viatical settlement provider or life
25   insurance producer.
26         (3) Before or at the time of execution of the viatical
27   settlement contract, the viatical settlement provider shall obtain a
28   witnessed document in which the seller consents to the viatical
29   settlement contract, represents that the seller has a full and
30   complete understanding of the viatical settlement contract, that the
31   seller has a full and complete understanding of the benefits of the
32   policy, acknowledges that the seller is entering into the viatical
33   settlement contract freely and voluntarily, and, for persons with a
34   terminal or chronic illness or condition, acknowledges that the
35   insured has a terminal or chronic illness and that the terminal or
36   chronic illness or condition was diagnosed after the policy was
37   issued.
38         (4) If a life insurance producer performs any of these
39   activities required of the viatical settlement provider, the viatical
40   settlement provider is deemed to have fulfilled the requirements of
41   this section.



     [201]                             18
 1      (B) Medical information solicited or obtained by a licensee is
 2   subject to the applicable provisions of state law relating to
 3   confidentiality of medical information.
 4      (C) A viatical settlement contract entered into in this State shall
 5   provide the seller with an unconditional right to rescind the
 6   contract before the earlier of thirty calendar days after the date
 7   upon which the viatical settlement contract is executed by all
 8   parties or fifteen calendar days after the receipt of the viatical
 9   settlement proceeds by the seller. Rescission, if exercised by the
10   seller, is effective only if both notice of the rescission is given and
11   repayment of all proceeds and any premiums, loans, and loan
12   interest to the viatical settlement provider is made within the
13   rescission period. If the insured dies during the rescission period,
14   the viatical settlement contract must be deemed to have been
15   rescinded, subject to repayment of all viatical settlement proceeds
16   and any premiums, loans, and loan interest to the viatical
17   settlement provider is made within the rescission period.
18      (D) The viatical settlement provider shall instruct the seller to
19   send the executed documents required to effect the change in
20   ownership, assignment, or change in beneficiary directly to the
21   independent escrow agent. Within three business days after the
22   date the escrow agent receives the documents, or from the date the
23   viatical settlement provider receives the documents, if the seller
24   erroneously provides the documents directly to the viatical
25   settlement provider, the viatical settlement provider shall pay or
26   transfer the proceeds of the viatical settlement contract into an
27   escrow or trust account maintained in a state or federally-chartered
28   financial institution whose deposits are insured by the Federal
29   Deposit Insurance Corporation (FDIC). Upon payment of the
30   viatical settlement proceeds into the escrow account, the escrow
31   agent shall deliver the original change in ownership, assignment,
32   or change in beneficiary forms to the viatical settlement provider
33   or related provider trust. Upon the escrow agent‟s receipt of the
34   acknowledgment of the properly completed transfer of ownership,
35   assignment, or designation of beneficiary from the insurance
36   company, the escrow agent shall pay the viatical settlement
37   proceeds to the seller.
38      (E) Failure to tender consideration to the seller for the viatical
39   settlement contract within the time disclosed pursuant to Section
40   38-64-80(A)(6) renders the viatical settlement contract voidable by
41   the seller for lack of consideration until the time consideration is
42   tendered to and accepted by the seller.


     [201]                             19
 1      (F) A contact with the insured, for the purpose of determining
 2   the health status of the insured by the viatical settlement provider
 3   after the viatical settlement contract has been executed, only may
 4   be made by the licensed viatical settlement provider or its
 5   authorized representatives and is limited to once every three
 6   months for insureds with a life expectancy of more than one year,
 7   and not more than once each month for insureds with a life
 8   expectancy of one year or less. The viatical settlement provider
 9   shall explain the procedure for these contacts at the time the
10   viatical settlement contract is entered into. The limitations
11   provided for in this subsection do not apply to a contact with an
12   insured for reasons other than determining the insured‟s health
13   status. A viatical settlement provider is responsible for the actions
14   of his authorized representatives.
15
16      Section 38-64-100. (A) It is a violation of this chapter for a
17   person to enter into a viatical settlement contract within a two-year
18   period commencing with the date of issuance of the policy unless
19   the seller certifies to the viatical settlement provider that one or
20   more of the following conditions have been met within the
21   two-year period:
22         (1) the policy was issued upon the seller‟s exercise of
23   conversion rights arising out of a group or individual policy,
24   provided the total of the time covered under the conversion policy
25   plus the time covered under the prior policy is at least twenty-four
26   months. The time covered under a group policy must be calculated
27   without regard to a change in insurance carriers, provided the
28   coverage has been continuous and under the same group
29   sponsorship; or
30         (2)(a) the seller submits independent evidence to the viatical
31   settlement provider that one or more of the following conditions
32   have been met within the two-year period:
33              (i) the seller or insured is terminally or chronically ill;
34   or
35              (ii) the seller or insured disposes of his ownership
36   interests in a closely held corporation, pursuant to the terms of a
37   buyout or other similar agreement in effect at the time the
38   insurance policy was initially issued.
39           (b) copies of the independent evidence described in item
40   (2) and documents required by Section 38-64-90(A) must be
41   submitted to the insurer when the viatical settlement provider
42   submits a request to the insurer for verification of coverage. The
43   copies must be accompanied by a letter of attestation from the

     [201]                             20
 1   viatical settlement provider that the copies are true and correct
 2   copies of the documents received by the viatical settlement
 3   provider;
 4           (c) if the viatical settlement provider submits to the
 5   insurer a copy of independent evidence provided for in item (2)(a)
 6   when the viatical settlement provider submits a request to the
 7   insurer to effect the transfer of the policy to the viatical settlement
 8   provider, the copy is deemed to conclusively establish that the
 9   viatical settlement contract satisfies the requirements of this
10   section and the insurer shall respond timely to the request.
11      (B) It is unlawful for an insurance company to prohibit, restrict,
12   limit, or impair a life insurance producer from lawfully negotiating
13   a viatical settlement on behalf of a seller, aiding and assisting a
14   seller with a viatical settlement, or otherwise participating in a
15   viatical settlement transaction provided for in this chapter or to
16   engage in any transaction, act, practice, or course of business or
17   dealing which restricts, limits, or impairs in any way the lawful
18   transfer of ownership, change of beneficiary, or assignment of a
19   policy to effectuate a viatical settlement contract.
20
21      Section 38-64-110. (A) The purpose of this section is to provide
22   a prospective seller with clear and unambiguous statements in the
23   advertisement of a viatical settlement contract and to assure the
24   clear, truthful, and adequate disclosure of the benefits, risks,
25   limitations, and exclusions of a viatical settlement contract. This
26   purpose is to be accomplished by the establishment of guidelines
27   and standards of permissible and impermissible conduct in the
28   advertising of a viatical settlement contract to assure that a product
29   description is presented in a manner that prevents unfair,
30   deceptive, or misleading advertising and is conducive to accurate
31   presentation and description of a viatical settlement contract
32   through the advertising media and material used by a licensee.
33      (B) This section applies to an advertising of a viatical
34   settlement contract or a related product or service intended for
35   dissemination in this State, including Internet advertising viewed
36   by a person located in this State. Where disclosure requirements
37   are established pursuant to federal regulation, this section must be
38   interpreted so as to minimize or eliminate conflict with federal
39   regulation wherever possible.
40      (C) Each viatical settlement licensee shall establish and at all
41   times maintain a system of control over the content, form, and
42   method of dissemination of an advertisement of its contracts,
43   products, and services. An advertisement, regardless of by whom

     [201]                             21
 1   written, created, designed, or presented, is the responsibility of the
 2   licensee, as well as the individual who created or presented the
 3   advertisement. A system of control by the licensee must include
 4   regular routine notification, at least once a year, to agents and
 5   others authorized to disseminate advertisements, of the
 6   requirements and procedures for approval before the use of an
 7   advertisement not furnished by the licensee.
 8       (D) An advertisement must be truthful and not misleading in
 9   fact or by implication. The form and content of an advertisement
10   of a viatical settlement contract must be sufficiently complete and
11   clear so as to avoid deception. It may not have the capacity or
12   tendency to mislead or deceive. Whether an advertisement has the
13   capacity or tendency to mislead or deceive must be determined by
14   the director from the overall impression that the advertisement may
15   be reasonably expected to create upon a person of average
16   education or intelligence within the segment of the public to which
17   it is directed.
18       (E) The information required to be disclosed pursuant to the
19   provisions of this section may not be minimized, rendered obscure,
20   or presented in an ambiguous fashion or intermingled with the text
21   of the advertisement so as to be confusing or misleading.
22         (1) An advertisement may not omit material information or
23   use words, phrases, statements, references, or illustrations if the
24   omission or use has the capacity, tendency, or effect of misleading
25   or deceiving the public as to the nature or extent of any benefit,
26   loss covered, or state or federal tax consequence. The fact that the
27   viatical settlement contract offered is made available for inspection
28   before consummation of the sale, or an offer is made to refund the
29   payment if the seller is not satisfied, or that the viatical settlement
30   contract includes a „free look‟ period that satisfies or exceeds legal
31   requirements, does not remedy misleading statements.
32         (2) An advertisement may not use the name or title of a life
33   insurance company or a life insurance policy unless the
34   advertisement has been approved by the insurer.
35         (3) An advertisement may not state or imply that interest
36   charged on an accelerated death benefit or a policy loan is unfair,
37   inequitable, or in any manner an incorrect or improper practice.
38         (4) The words „free‟, „no cost‟, „without cost‟, „no additional
39   cost‟, at no extra cost‟, or words of similar import may not be used
40   with respect to a benefit or service unless true. An advertisement
41   may specify the charge for a benefit or service or may state that a
42   charge is included in the payment or use other appropriate
43   language.

     [201]                             22
 1         (5)(a) Any testimonial, appraisal, or analysis used in an
 2   advertisement must:
 3               (i) be genuine;
 4               (ii) represent the current opinion of the author;
 5               (iii) be applicable to the viatical settlement contract,
 6   product, or service advertised, if any; and
 7               (iv) be accurately reproduced with sufficient
 8   completeness to avoid misleading or deceiving prospective sellers
 9   as to the nature or scope of any testimonial, appraisal, analysis, or
10   endorsement.
11            (b) In using any testimonial, appraisal, or analysis, the
12   viatical settlement licensee makes as its own all the statements
13   contained in them, and the statements are subject to all the
14   provisions of this section.
15            (c) If the individual making a testimonial, appraisal,
16   analysis, or an endorsement has a financial interest in the viatical
17   settlement provider or related entity as a stockholder, director,
18   officer, employee, or otherwise, or receives a benefit, directly or
19   indirectly, other than required union scale wages, that fact must be
20   disclosed prominently in the advertisement.
21            (d) An advertisement may not state or imply that a viatical
22   settlement contract, benefit, or service has been approved or
23   endorsed by a group of individuals, society, association, or other
24   organization, unless that is the fact and unless any relationship
25   between an organization and the licensee is disclosed. If the entity
26   making the endorsement or testimonial is owned, controlled, or
27   managed by the licensee or receives payment or other
28   consideration from the licensee for making an endorsement or
29   testimonial, that fact must be disclosed in the advertisement.
30            (e) If an endorsement refers to benefits received under a
31   viatical settlement contract, all pertinent information must be
32   retained for a period of five years after its use.
33      (F) An advertisement may not contain statistical information
34   unless it accurately reflects recent and relevant facts. The source
35   of all statistics used in an advertisement must be identified.
36      (G) An advertisement may not disparage insurers, viatical
37   settlement providers, insurance producers, policies, services, or
38   methods of marketing.
39      (H) The name of the viatical settlement licensee must be
40   identified clearly in all advertisements about the licensee or its
41   viatical settlement contract, products, or services, and if any
42   specific viatical settlement contract is advertised, the viatical
43   settlement contract must be identified either by form number or

     [201]                            23
 1   some other appropriate description. If an application is part of the
 2   advertisement, the name of the viatical settlement provider must be
 3   shown on the application.
 4      (I) An advertisement may not use a trade name, group
 5   designation, name of the parent company of a licensee, name of a
 6   particular division of the licensee, service mark, slogan, symbol, or
 7   other device or reference without disclosing the name of the
 8   licensee, if the advertisement has the capacity or tendency to
 9   mislead or deceive as to the true identity of the licensee, or to
10   create the impression that a company other than the licensee has
11   any responsibility for the financial obligation under a viatical
12   settlement contract.
13      (J) An advertisement may not use any combination of words,
14   symbols, or physical materials that by their content, phraseology,
15   shape, color, or other characteristics are so similar to a
16   combination of words, symbols, or physical materials used by a
17   government program or agency or otherwise appear to be of such a
18   nature that they tend to mislead prospective sellers into believing
19   that the solicitation is in some manner connected with a
20   government program or agency.
21      (K) An advertisement may state that a licensee is licensed in the
22   state where the advertisement appears, provided it does not
23   exaggerate that fact or suggest or imply that the competing
24   licensee may not be so licensed. The advertisement may ask the
25   audience to consult the licensee‟s web site or contact that state‟s
26   department of insurance to find out if that state requires licensing
27   and, if so, whether the licensee or any other company is licensed.
28      (L) An advertisement may not create the impression that the
29   viatical settlement provider, its financial condition or status, the
30   payment of its claims, or the merits, desirability, or advisability of
31   its viatical settlement contracts are recommended or endorsed by
32   any government entity.
33      (M) The name of the actual licensee must be stated in all of its
34   advertisements. An advertisement may not use a trade name, any
35   group designation, name of any affiliate or controlling entity of the
36   licensee, service mark, slogan, symbol, or other device in a manner
37   that has the capacity or tendency to mislead or deceive as to the
38   true identity of the actual licensee or create the false impression
39   that an affiliate or controlling entity has any responsibility for the
40   financial obligation of the licensee.
41      (N) An advertisement may not, directly or indirectly, create the
42   impression that any division or agency of the state or of the United
43   States government endorses, approves, or favors:

     [201]                             24
 1         (1) a licensee or its business practices or methods of
 2   operation;
 3         (2) the merits, desirability, or advisability of a viatical
 4   settlement contract;
 5         (3) any viatical settlement contract; or
 6         (4) any policy or life insurance company.
 7      (O) If the advertiser emphasizes the speed with which the
 8   viatical settlement contract occurs, the advertising must disclose
 9   the average time frame from completed application to the date of
10   offer and from acceptance of the offer to receipt of the funds by the
11   seller.
12      (P) If the advertising emphasizes the dollar amounts available
13   to sellers, the advertising shall disclose the average purchase price
14   as a percent of face value obtained by sellers contracting with the
15   licensee during the past six months.
16
17      Section 38-64-120. (A)(1) A person may not commit a
18   fraudulent viatical settlement act.
19         (2) A person, knowingly or intentionally, may not interfere
20   with the enforcement of the provisions of this chapter or
21   investigations of suspected or actual violations of this chapter.
22         (3) A person in the business of viatical settlements,
23   knowingly or intentionally, may not permit a person convicted of a
24   felony involving dishonesty or breach of trust to participate in the
25   business of viatical settlements.
26      (B)(1) A viatical settlement contract and an application for a
27   viatical settlement contract, regardless of the form of transmission,
28   must contain the following statement or a substantially similar
29   statement:
30      „Any person who knowingly presents false information in an
31   application for insurance or viatical settlement contract is guilty of
32   a crime and, upon conviction, may be subject to fines or
33   confinement in prison, or both.‟
34         (2) The lack of a statement as provided for in item (1) does
35   not constitute a defense in any prosecution for a fraudulent viatical
36   settlement act.
37      (C)(1) A person engaged in the business of viatical settlements
38   having knowledge or a reasonable belief that a fraudulent viatical
39   settlement act is being, will be, or has been committed shall
40   provide to the director the information required by, and in a
41   manner prescribed by, the director.
42         (2) Another person having knowledge or a reasonable belief
43   that a fraudulent viatical settlement act is being, will be, or has

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 1   been committed may provide to the director the information
 2   required by, and in a manner prescribed by, the director.
 3      (D)(1) A civil liability may not be imposed on and a cause of
 4   action may not arise from a person‟s furnishing information
 5   concerning suspected, anticipated, or completed fraudulent viatical
 6   settlement acts, or suspected or completed fraudulent insurance
 7   acts, if the information is provided to or received from:
 8            (a) the director or the director‟s employees, agents, or
 9   representatives;
10            (b) federal, state, or local law enforcement or regulatory
11   officials or their employees, agents, or representatives;
12            (c) a person involved in the prevention and detection of
13   fraudulent viatical settlement acts or that person‟s agents,
14   employees, or representatives;
15            (d) the National Association of Insurance Commissioners
16   (NAIC), National Association of Securities Dealers (NASD), the
17   North American Securities Administrators Association (NASAA),
18   or their employees, agents, or representatives, or other regulatory
19   body overseeing life insurance or viatical settlement contracts; or
20            (e) the insurer that issued the policy covering the life of
21   the insured.
22         (2) Item (1) does not apply to a statement made with actual
23   malice. In an action brought against a person for filing a report or
24   furnishing other information concerning a fraudulent viatical
25   settlement act or a fraudulent insurance act, the party bringing the
26   action shall plead specifically any allegation that item (1) does not
27   apply because the person filing the report or furnishing the
28   information did so with actual malice.
29         (3) A person identified in item (1) is entitled to an award of
30   attorney‟s fees and costs if he is the prevailing party in a civil
31   cause of action for libel, slander, or another relevant tort arising
32   out of activities in carrying out the provisions of this chapter and
33   the party bringing the action was not substantially justified in
34   doing so.       For purposes of this section, a proceeding is
35   „substantially justified‟ if it had a reasonable basis in law or fact at
36   the time that it was initiated.
37         (4) This section does not abrogate or modify common law or
38   statutory privileges or immunities enjoyed by a person described in
39   item (1).
40         (5) Item (1) does not apply to a person‟s furnishing
41   information concerning his own suspected, anticipated, or
42   completed fraudulent viatical settlement acts or suspected,
43   anticipated, or completed fraudulent insurance acts.

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 1      (E)(1) The documents and evidence provided pursuant to
 2   subsection (D) or obtained by the director in an investigation of
 3   suspected or actual fraudulent viatical settlement acts are
 4   privileged and confidential and are not a public record and are not
 5   subject to discovery or subpoena in a civil or criminal action.
 6         (2) Item (1) does not prohibit release by the director of
 7   documents and evidence obtained in an investigation of suspected
 8   or actual fraudulent viatical settlement acts:
 9            (a) in administrative or judicial proceedings to enforce
10   laws administered by the director;
11            (b) to federal, state, or local law enforcement or regulatory
12   agencies, to an organization established for the purpose of
13   detecting and preventing fraudulent viatical settlement acts, or to
14   the NAIC; or
15            (c) at the discretion of the director, to a person in the
16   business of viatical settlements that is aggrieved by a fraudulent
17   viatical settlement act.
18         (3) Release of documents and evidence provided by item (2)
19   does not abrogate or modify the privilege granted in item (1).
20      (F) This chapter does not:
21         (1) preempt the authority or relieve the duty of other law
22   enforcement or regulatory agencies to investigate, examine, and
23   prosecute suspected violations of law;
24         (2) prevent or prohibit a person from disclosing voluntarily
25   information concerning fraudulent viatical settlement acts to a law
26   enforcement or regulatory agency other than the insurance
27   department; or
28         (3) limit the powers granted elsewhere by the laws of this
29   State to the director or an insurance fraud unit to investigate and
30   examine possible violations of law and to take appropriate action
31   against wrongdoers.
32      (G) A viatical settlement provider shall adopt anti-fraud
33   initiatives reasonably calculated to detect, prosecute, and prevent
34   fraudulent viatical settlement acts. The director may order or, if a
35   licensee requests, may grant these modifications of the following
36   required initiatives as necessary to ensure an effective anti-fraud
37   program. The modifications may be more or less restrictive than
38   the required initiatives so long as the modifications reasonably
39   may be expected to accomplish the purpose of this section.
40   Anti-fraud initiatives includes:
41         (1) fraud investigators, who may be a viatical settlement
42   provider or employees or independent contractors of those viatical
43   settlement providers; and

     [201]                             27
 1        (2) an anti-fraud plan that be submitted to the director. The
 2   anti-fraud plan must include, but not be limited to a description:
 3           (a) of the procedures for detecting and investigating
 4   possible fraudulent viatical settlement acts and procedures for
 5   resolving material inconsistencies between medical records and
 6   insurance applications;
 7           (b) of the procedures for reporting possible fraudulent
 8   viatical settlement acts to the director;
 9           (c) of the plan for anti-fraud education and training of
10   underwriters and other personnel; and
11           (d) or chart outlining the organizational arrangement of
12   the anti-fraud personnel who are responsible for the investigation
13   and reporting of possible fraudulent viatical settlement acts and
14   investigating unresolved material inconsistencies between medical
15   records and insurance applications.
16        (3) Anti-fraud plans submitted to the director are privileged
17   and confidential and are not a public record pursuant to the
18   provisions of Chapter 4, Title 30, and are not subject to discovery
19   or subpoena in a civil or criminal action.
20
21      Section 38-64-130. (A) In addition to the penalties and other
22   enforcement provisions of this chapter, if a person violates the
23   provisions of this chapter or any regulation implementing this
24   chapter, the director may seek an injunction in a court of
25   competent jurisdiction and may apply for temporary and
26   permanent orders as the director determines are necessary to
27   restrain the person from committing the violation.
28      (B) A person damaged by the acts of a person in violation of
29   this chapter may bring a civil action against the person committing
30   the violation in a court of competent jurisdiction.
31      (C) The director may issue, in accordance with Article 3,
32   Chapter 23, Title 1, a cease and desist order upon a person that
33   violates any provision of this chapter, any regulation, or order
34   adopted by the director, or any written agreement entered into with
35   the director.
36      (D) When the director finds that an activity in violation of this
37   chapter presents an immediate danger to the public that requires an
38   immediate final order, the director may issue an emergency cease
39   and desist order reciting with particularity the facts underlying the
40   findings. The emergency cease and desist order is effective
41   immediately upon service of a copy of the order on the respondent
42   and remains effective for ninety days. If the director begins
43   nonemergency cease and desist proceedings, the emergency cease

     [201]                            28
 1   and desist order remains effective, absent an order by a court of
 2   competent jurisdiction pursuant to Article 3, Chapter 23, Title 1.
 3      (E) In addition to the penalties and other enforcement
 4   provisions of this chapter, a person who violates this chapter is
 5   subject to civil penalties of up to ten thousand dollars for each
 6   violation. Imposition of civil penalties is pursuant to an order of
 7   the director issued under Article 3, Chapter 23, Title 1. The
 8   director‟s order may require a person found to be in violation of
 9   this chapter to make restitution to a person aggrieved by violations
10   of this chapter.
11      (F)(1) A person who violates a provision of this chapter, upon
12   conviction, must be ordered to pay restitution to a person
13   aggrieved by the violation of this chapter. Restitution must be
14   ordered in addition to a fine or imprisonment, but not instead of a
15   fine or imprisonment.
16         (2) A person who violates a provision of this chapter, upon
17   conviction, must be sentenced based on the greater of the value of
18   property, services, or other benefits wrongfully obtained or
19   attempted to obtain, or the aggregate economic loss suffered by
20   any person as a result of the violation. A person may be fined not
21   more than:
22           (a) one hundred thousand dollars or imprisoned not more
23   than twenty years, or both, if the value of viatical settlement
24   contract is more than thirty-five thousand dollars;
25           (b) twenty thousand dollars or imprisoned not more than
26   ten years, or both, if the value of viatical settlement contract is
27   more than twenty-five hundred dollars but not more than
28   thirty-five thousand dollars;
29           (c) ten thousand dollars or imprisoned not more than five
30   years, or both, if the value of viatical settlement contract is more
31   than five hundred dollars but not more than two thousand five
32   hundred dollars; or
33           (d) three thousand dollars or imprisoned not more than
34   one year, or both, if the value of viatical settlement contract is five
35   hundred dollars or less.
36         (3) A person convicted of a fraudulent viatical settlement act
37   must be ordered to pay restitution to a person aggrieved by the
38   fraudulent viatical settlement act. Restitution must be ordered in
39   addition to a fine or imprisonment but not instead of a fine or
40   imprisonment.
41         (4) In a prosecution provided by this section under item (3)
42   of this subsection, the value of the a viatical settlement contract
43   within a six-month period may be aggregated and the defendant

     [201]                             29
 1   charged accordingly in applying the provisions of this section. If
 2   two or more offenses are committed by the same person in two or
 3   more counties, the accused may be prosecuted in a county in which
 4   one of the offenses was committed for all of the offenses
 5   aggregated as provided by this section. The statute of limitations
 6   does not begin to run until the insurance company or law
 7   enforcement agency is aware of the fraud, but the prosecution may
 8   not be commenced later than seven years after the act has
 9   occurred.
10
11     Section 38-64-140. A violation of this chapter is considered an
12   unfair trade practice pursuant to the provisions of Chapter 5, Title
13   39, and subject to the penalties contained in that chapter.
14
15      Section 38-64-150. The director has the authority to:
16      (1) promulgate regulations implementing this chapter;
17      (2) establish standards for evaluating reasonableness of
18   payments under a viatical settlement contract for a person who is
19   terminally or chronically ill. This authority includes, but is not
20   limited to, regulation of discount rates used to determine the
21   amount paid in exchange for assignment, transfer, sale, devise, or
22   bequest of a benefit under a policy. A viatical settlement provider,
23   where the insured is not terminally or chronically ill, shall pay an
24   amount greater than the cash surrender value or accelerated death
25   benefit then available;
26      (3) establish appropriate licensing requirements, fees, and
27   standards for continued licensure for a viatical settlement provider
28   and a fee for life insurance producers as provided for in Section
29   38-64-30;
30      (4) require a bond or other mechanism for financial
31   accountability for a viatical settlement provider; and
32      (5) adopt rules governing the relationship and responsibilities
33   of an insurer and a viatical settlement provider, life insurance
34   producer, and others in the business of viatical settlements during
35   the period of consideration or effectuation of a viatical settlement
36   contract.
37
38      Section 38-64-160. Nothing in this chapter preempts or
39   otherwise limits the provisions of the South Carolina Uniform
40   Securities Act (Chapter 1, Title 35) or any regulations, orders,
41   policy statements, notices, bulletins, or other interpretations issued
42   by or through the Attorney General or his designee acting pursuant
43   to the South Carolina Uniform Securities Act. Compliance with

     [201]                             30
 1   the provisions of this chapter does not constitute compliance with
 2   any applicable provision of the South Carolina Uniform Securities
 3   Act and any amendments to it or any regulations, orders, policy
 4   statements, notices, bulletins, or other interpretations issued by or
 5   through the Attorney General or his designee acting pursuant to the
 6   South Carolina Uniform Securities Act.”
 7
 8   SECTION 2. A viatical settlement provider lawfully transacting
 9   business in this State may continue to do so pending approval or
10   disapproval of the person‟s application for a license as long as the
11   application is filed with the director not later than thirty days after
12   publication by the director of an application form for licensure of
13   these viatical settlement providers.
14
15   SECTION 3. Notwithstanding the provisions of Chapter 64, Title
16   38 of the 1976 Code, a person who has lawfully negotiated viatical
17   settlement contracts between a seller and one or more viatical
18   settlement providers for at least one year immediately before the
19   effective date of this act may continue to negotiate viatical
20   settlements in this State for a period of one year from the effective
21   date of this act, provided that the person registers with the director
22   on a form that may be prescribed by the director. This registration
23   form must be published by the director not later than thirty days
24   from the effective date of this act and shall require a person
25   registering to evidence that he has lawfully negotiated viatical
26   settlement contracts and include an acknowledgment by the person
27   that he will operate in accordance with and comply with Chapter
28   64.
29
30   SECTION 4. If any section, subsection, paragraph, subparagraph,
31   sentence, clause, phrase, or word of this act is for any reason held
32   to be unconstitutional or invalid, such holding shall not affect the
33   constitutionality or validity of the remaining portions of this act,
34   the General Assembly hereby declaring that it would have passed
35   this act, and each and every section, subsection, paragraph,
36   subparagraph, sentence, clause, phrase, and word thereof,
37   irrespective of the fact that any one or more other sections,
38   subsections, paragraphs, subparagraphs, sentences, clauses,
39   phrases, or words hereof may be declared to be unconstitutional,
40   invalid, or otherwise ineffective.
41
42   SECTION 5. This act takes effect one hundred eighty days after
43   approval by the Governor.

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