Senate Study Bill 3268 SENATE FILE BY (PROPOSED COMMITTEE ON COMMERCE BILL BY CHAIRPERSON WARNSTADT) Passed Senate, Date Passed House, Date Vote: Ayes Nays Vote: Ayes Nays Approved A BILL FOR 1 An Act providing for life settlement arrangements, providing 2 penalties, providing for fees, and providing an effective 3 date. 4 BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA: 5 TLSB 5896XC 82 6 da/rj/24 PAG LIN 1 1 DIVISION I 1 2 LIFE SETTLEMENT CONTRACTS 1 3 Section 1. NEW SECTION. 508G.1 SHORT TITLE. 1 4 This chapter may be cited as the "Life Settlements Act". 1 5 Sec. 2. NEW SECTION. 508G.2 DEFINITIONS. 1 6 As used in this chapter, unless the context otherwise 1 7 requires: 1 8 1. "Advertisement" means any written, electronic, or 1 9 printed communication or any communication by means of 1 10 recorded telephone messages or transmitted on radio, 1 11 television, the internet, or similar communications media, 1 12 including film strips, motion pictures, and videos, published, 1 13 disseminated, circulated, or placed before the public, 1 14 directly or indirectly, for the purpose of creating an 1 15 interest in or inducing a person to purchase or sell, assign, 1 16 devise, bequest, or transfer the death benefit or ownership of 1 17 a life insurance policy or an interest in a life insurance 1 18 policy pursuant to a life settlement contract. 1 19 2. "Broker" means a person who, on behalf of an owner and 1 20 for a fee, commission or other valuable consideration, offers 1 21 or attempts to negotiate a life settlement contract between an 1 22 owner and a provider. A broker represents only the owner and 1 23 owes a fiduciary duty to the owner to act according to the 1 24 owner's instructions, and in the best interest of the owner, 1 25 notwithstanding the manner in which the broker is compensated. 1 26 A broker does not include an attorney, certified public 1 27 accountant, or financial planner retained in the type of 1 28 practice customarily performed in the attorney's, 1 29 accountant's, or planner's professional capacity to represent 1 30 the owner whose compensation is not paid directly or 1 31 indirectly by the provider or any other person, except the 1 32 owner. 1 33 3. "Business of life settlement" means an activity 1 34 involved in but not limited to offering to enter into, 1 35 soliciting, negotiating, procuring, effectuating, monitoring, 2 1 or tracking, of life settlement contracts. 2 2 4. "Chronically ill" means any of the following: 2 3 a. Being unable to perform at least two activities of 2 4 daily living such as eating, toileting, transferring, bathing, 2 5 dressing, or continence. 2 6 b. Requiring substantial supervision to protect the 2 7 individual from threats to health and safety due to severe 2 8 cognitive impairment. 2 9 c. Having a level of disability similar to that described 2 10 in paragraph "a" as determined by the United States secretary 2 11 of health and human services. 2 12 5. "Commissioner" means the commissioner of insurance. 2 13 6. a. "Financing entity" means a person who is an 2 14 underwriter, placement agent, lender, purchaser of securities, 2 15 purchaser of a policy or certificate from a provider, credit 2 16 enhancer, or any entity that has a direct ownership in a 2 17 policy or certificate that is the subject of a life settlement 2 18 contract, if all of the following apply: 2 19 (1) The person's principal activity related to the 2 20 transaction is providing funds to effect the life settlement 2 21 contract or purchase of one or more policies. 2 22 (2) The person has an agreement in writing with one or 2 23 more providers to finance the acquisition of one or more life 2 24 settlement contracts. 2 25 b. "Financing entity" does not include a nonaccredited 2 26 investor or purchaser. 2 27 7. "Financing transaction" means a transaction in which a 2 28 licensed provider obtains financing from a financing entity 2 29 including but not limited to any secured or unsecured 2 30 financing, any securitization transaction, or any securities 2 31 offering which either is registered or exempt from 2 32 registration under federal and state securities law, including 2 33 chapter 502. 2 34 8. "Fraudulent life settlement act" includes any of the 2 35 following: 3 1 a. An act or omission committed by a person who, knowingly 3 2 and with intent to defraud, for the purpose of depriving 3 3 another of property or for pecuniary gain, commits, or permits 3 4 its employees or its agents to engage in, an act including but 3 5 not limited to any of the following: 3 6 (1) Presenting, causing to be presented, or preparing with 3 7 knowledge and belief that it will be presented to or by a 3 8 provider, premium finance lender, broker, insurer, insurance 3 9 producer, or any other person, false material information, or 3 10 concealing material information, as part of, in support of, or 3 11 concerning a fact material to one or more of the following: 3 12 (a) An application for the issuance of a life settlement 3 13 contract or insurance policy. 3 14 (b) The underwriting of a life settlement contract or 3 15 insurance policy. 3 16 (c) A claim for payment or benefit pursuant to a life 3 17 settlement contract or life insurance policy. 3 18 (d) Premiums paid on a life insurance policy. 3 19 (e) Payments and changes in ownership or beneficiary made 3 20 in accordance with the terms of a life settlement contract or 3 21 life insurance policy. 3 22 (f) The reinstatement or conversion of a life insurance 3 23 policy. 3 24 (g) In the solicitation, offer to enter into, or 3 25 effectuation of a life settlement contract or life insurance 3 26 policy. 3 27 (h) The issuance of written evidence of a life settlement 3 28 contract or life insurance policy. 3 29 (i) Any application for or the existence of, or any 3 30 payments related to, a loan secured directly or indirectly by 3 31 any interest in a life insurance policy. 3 32 (j) A stranger=originated life insurance policy. 3 33 (2) Failing to disclose to the insurer where the request 3 34 for such disclosure has been asked for by the insurer that the 3 35 prospective insured has undergone a life expectancy evaluation 4 1 by any person or entity other than the insurer or its 4 2 authorized representatives in connection with the issuance of 4 3 the life insurance policy. 4 4 (3) Employing any device, scheme, or artifice to defraud 4 5 in the business of life settlements. 4 6 (4) In the solicitation, application or issuance of a life 4 7 insurance policy, employing any device, scheme or artifice in 4 8 violation of state insurable interest laws. 4 9 b. In the furtherance of a fraud, or to prevent the 4 10 detection of a fraud, a person commits or permits its employee 4 11 or its agent to do any of the following: 4 12 (1) Remove, conceal, alter, destroy, or sequester from the 4 13 commissioner the assets or records of a licensee or other 4 14 person engaged in the business of life settlements. 4 15 (2) Misrepresent or conceal the financial condition of a 4 16 licensee, financing entity, insurer, or other person. 4 17 (3) Transact the business of life settlements in violation 4 18 of laws requiring a license, certificate of authority, or 4 19 other legal authority for the transaction of the business of 4 20 life settlements. 4 21 (4) File with the commissioner or the chief insurance 4 22 regulatory official of another jurisdiction a document 4 23 containing false information or otherwise concealing 4 24 information about a material fact from the commissioner. 4 25 (5) Engage in embezzlement, theft, misappropriation, or 4 26 conversion of moneys, funds, premiums, credits, or other 4 27 property of a provider, broker insurer, insured, owner, or any 4 28 other person engaged in the business of life settlement 4 29 contracts or insurance policy. 4 30 (6) Knowingly and with intent to defraud, enter into, 4 31 broker, or otherwise deal in a life settlement contract, the 4 32 subject of which is a life insurance policy that was obtained 4 33 by presenting false information concerning any fact material 4 34 to the life insurance policy or by concealing, for the purpose 4 35 of misleading another, information concerning any fact 5 1 material to the life insurance policy, where the owner or the 5 2 owner's agent intended to defraud the life insurance policy's 5 3 issuer. 5 4 (7) Attempt to commit, assist, aid, or abet in the 5 5 commission of, or conspiracy to commit an act or omission 5 6 specified in this subsection. 5 7 (8) Misrepresent the state of residence of an owner to be 5 8 a state or jurisdiction that does not have a law substantially 5 9 similar to this chapter for the purpose of evading or avoiding 5 10 the provisions of this chapter. 5 11 9. "Insured" means the person covered under the life 5 12 insurance policy being considered for sale in a life 5 13 settlement contract. 5 14 10. "Life expectancy" means the arithmetic mean of the 5 15 number of months the insured under the life insurance policy 5 16 to be settled can be expected to live as determined by a life 5 17 expectancy company considering medical records and appropriate 5 18 experiential data. 5 19 11. "Life insurance policy" means an individual or group 5 20 policy, group certificate, contract, or arrangement of life 5 21 insurance owned by a resident of this state, regardless of 5 22 whether delivered or issued for delivery in this state. 5 23 12. "Life insurance producer" or "producer" means any 5 24 person licensed in this state as a resident or nonresident 5 25 insurance producer who has received qualification or authority 5 26 for life insurance coverage or a life line of coverage 5 27 pursuant to title XIII, subtitle I of the Code. 5 28 13. a. "Life settlement contract" means a written 5 29 agreement entered into between a provider and an owner, 5 30 establishing the terms under which compensation or anything of 5 31 value will be paid, which compensation or thing of value is 5 32 less than the expected death benefit of the life insurance 5 33 policy or life insurance certificate, in return for the 5 34 owner's assignment, transfer, sale, devise, or bequest of the 5 35 death benefit or any portion of a life insurance policy or 6 1 life insurance certificate for compensation, provided, 6 2 however, that the minimum value for a life settlement contract 6 3 shall be greater than a cash surrender value or accelerated 6 4 death benefit available at the time of an application for a 6 5 life settlement contract. 6 6 b. "Life settlement contract" also includes the transfer 6 7 for compensation or value of ownership or beneficial interest 6 8 in a trust or other entity that owns such policy if the trust 6 9 or other entity was formed or availed of for the principal 6 10 purpose of acquiring one or more life insurance contracts, 6 11 which life insurance contract insures the life of a person 6 12 residing in this state. 6 13 c. "Life settlement contract" also includes any of the 6 14 following: 6 15 (1) A written agreement for a loan or other lending 6 16 transaction, secured primarily by an individual or group life 6 17 insurance policy. 6 18 (2) A premium finance loan made for a life insurance 6 19 policy on or before the date of issuance of the life insurance 6 20 policy where any of the following applies: 6 21 (a) The loan proceeds are not used solely to pay premiums 6 22 for the life insurance policy and any costs or expenses 6 23 incurred by the lender or the borrower in connection with the 6 24 financing. 6 25 (b) The owner receives on the date of the premium finance 6 26 loan a guarantee of the future life settlement value of the 6 27 life insurance policy. 6 28 (c) The owner agrees on the date of the premium finance 6 29 loan to sell the life insurance policy or any portion of its 6 30 death benefit on any date following the issuance of the life 6 31 insurance policy. 6 32 d. "Life settlement contract" does not include any of the 6 33 following: 6 34 (1) A life insurance policy loan by a life insurance 6 35 company pursuant to the terms of the life insurance policy or 7 1 accelerated death provisions contained in the life insurance 7 2 policy, whether issued with the original life insurance policy 7 3 or as a rider. 7 4 (2) A premium finance loan or any loan made by a bank or 7 5 other licensed financial institution, provided that a default 7 6 on such loan or a transfer of the life insurance policy in 7 7 connection with such default is pursuant to an agreement or 7 8 understanding with any other person for the purpose of evading 7 9 regulation under this chapter. 7 10 (3) A collateral assignment of a life insurance policy by 7 11 an owner. 7 12 (4) A loan made by a lender, provided such loan is not 7 13 described in paragraph "c", and is not otherwise a life 7 14 settlement contract. 7 15 (5) An agreement where all the parties (a) are closely 7 16 related to the insured by blood or law or (b) have a lawful 7 17 substantial economic interest in the continued life, health, 7 18 and bodily safety of the person insured, or are trusts 7 19 established primarily for the benefit of such parties. 7 20 (6) Any designation, consent, or agreement by an insured 7 21 who is an employee of an employer in connection with the 7 22 purchase by the employer, or trust established by the 7 23 employer, of life insurance on the life of the employee. 7 24 (7) A bona fide business succession planning arrangement 7 25 that is between any of the following: 7 26 (a) One or more shareholders in a corporation or between a 7 27 corporation and one or more of its shareholders or one or more 7 28 trusts established by its shareholders. 7 29 (b) One or more partners in a partnership or between a 7 30 partnership and one or more of its partners or one or more 7 31 trusts established by its partners. 7 32 (c) One or more members in a limited liability company or 7 33 between a limited liability company and one or more of its 7 34 members or one or more trusts established by its members. 7 35 (8) An agreement entered into by a service recipient, or a 8 1 trust established by the service recipient, and a service 8 2 provider, or a trust established by the service provider, who 8 3 performs significant services for the service recipient's 8 4 trade or business. 8 5 (9) Any other contract, transaction, or arrangement that 8 6 qualifies as a life settlement contract but that the 8 7 commissioner determines is not of the type intended to be 8 8 regulated by this chapter. 8 9 14. "Net death benefit" means the amount of the life 8 10 insurance policy or life insurance certificate to be settled 8 11 less any outstanding debts or liens. 8 12 15. "Owner" means the owner of a life insurance policy or 8 13 a life insurance certificate holder under a group policy, with 8 14 or without a terminal illness, who enters or seeks to enter 8 15 into a life settlement contract. 8 16 a. "Owner" includes but is not limited to an owner of a 8 17 life insurance policy or a life insurance certificate holder 8 18 under a group policy that insures the life of an individual 8 19 with a terminal or chronic illness or condition. 8 20 b. "Owner" does not include any of the following: 8 21 (1) A provider or other licensee under this chapter. 8 22 (2) A qualified institutional buyer as defined in 17 8 23 C.F.R. } 230.144 promulgated by the United States securities 8 24 and exchange commission under the federal Securities Act of 8 25 1933, as amended, 15 U.S.C. } 77a et seq. 8 26 (3) A financing entity. 8 27 (4) A special purpose entity. 8 28 (5) A related provider trust. 8 29 16. "Premium finance loan" means a loan made primarily for 8 30 the purposes of making premium payments on a life insurance 8 31 policy, which loan is secured by an interest in such life 8 32 insurance policy. 8 33 17. a. "Provider" means a person, other than an owner, 8 34 who enters into or effectuates a life settlement contract with 8 35 an owner. 9 1 b. "Provider" does not include any of the following: 9 2 (1) A bank, savings bank, savings and loan association, or 9 3 credit union. 9 4 (2) A licensed lending institution or creditor or secured 9 5 party pursuant to a premium finance loan agreement which takes 9 6 an assignment of a life insurance policy or certificate issued 9 7 pursuant to a group life insurance policy as collateral for a 9 8 loan. 9 9 (3) The insurer of a life insurance policy or rider to the 9 10 extent of providing accelerated death benefits, riders, or 9 11 cash surrender value. 9 12 (4) A natural person who enters into or effectuates not 9 13 more than one agreement in a calendar year for the transfer of 9 14 a life insurance policy or certificate issued pursuant to a 9 15 group life insurance policy, for compensation or anything of 9 16 value less than the expected death benefit payable under the 9 17 policy. 9 18 (5) A purchaser. 9 19 (6) An authorized or eligible insurer that provides stop 9 20 loss coverage to a provider, purchaser, financing entity, 9 21 special purpose entity, or related provider trust. 9 22 (7) A financing entity. 9 23 (8) A special purpose entity. 9 24 (9) A related provider trust. 9 25 (10) A broker. 9 26 (11) An accredited investor or qualified institutional 9 27 buyer as defined, respectively, in 17 C.F.R. } 230.501(a) or 9 28 17 C.F.R. } 230.144A as promulgated by the United States 9 29 securities and exchange commission under the federal 9 30 Securities Act of 1933, as amended, 15 U.S.C. } 77a et seq., 9 31 who purchases a life settlement policy from a provider. 9 32 18. "Purchased policy" means a policy or group certificate 9 33 that has been acquired by a provider pursuant to a life 9 34 settlement contract. 9 35 19. "Purchaser" means a person who pays compensation or 10 1 anything of value as consideration for a beneficial interest 10 2 in a trust which is vested with, or for the assignment, 10 3 transfer or sale of, an ownership or other interest in a life 10 4 insurance policy or a certificate issued pursuant to a group 10 5 life insurance policy which has been the subject of a life 10 6 settlement contract. 10 7 20. a. "Related provider trust" means a titling trust or 10 8 other trust established by a licensed provider or a financing 10 9 entity for the sole purpose of holding the ownership or 10 10 beneficial interest in purchased policies in connection with a 10 11 financing transaction. 10 12 b. In order to qualify as a related provider trust, the 10 13 trust must have a written agreement with the licensed provider 10 14 under which the licensed provider is responsible for ensuring 10 15 compliance with all statutory and regulatory requirements and 10 16 under which the trust agrees to make all records and files 10 17 relating to life settlement transactions available to the 10 18 commissioner as if those records and files were maintained 10 19 directly by the licensed provider. 10 20 21. "Settled policy" means a life insurance policy or life 10 21 insurance certificate that has been acquired by a provider 10 22 pursuant to a life settlement contract. 10 23 22. "Special purpose entity" means a corporation, 10 24 partnership, trust, limited liability company, or other legal 10 25 entity formed solely to provide, either directly or 10 26 indirectly, access to institutional capital markets as 10 27 follows: 10 28 a. For a financing entity or provider. 10 29 b. In connection with a transaction in which the 10 30 securities in the special purpose entity are acquired by the 10 31 owner or by a qualified institutional buyer as defined in 17 10 32 C.F.R. } 230.144 promulgated by the United States securities 10 33 and exchange commission under the federal Securities Act of 10 34 1933, as amended, 15 U.S.C. } 77a et seq. 10 35 c. In connection with a transaction in which the 11 1 securities pay a fixed rate of return commensurate with 11 2 established asset=backed institutional capital markets. 11 3 23. "Stranger=originated life insurance" means the 11 4 procurement of new life insurance by persons or entities that 11 5 lack insurable interest on the insured and, at policy 11 6 inception, such person or entity owns or controls the policy 11 7 or the majority of the death benefit in the life insurance 11 8 policy and the insured or the insured's beneficiaries receive 11 9 little or none of the proceeds of the death benefits of the 11 10 life insurance policy. 11 11 24. "Terminally ill" means having an illness or sickness 11 12 that can reasonably be expected to result in death in 11 13 twenty=four months or less. 11 14 Sec. 3. NEW SECTION. 508G.3 LICENSING REQUIREMENTS. 11 15 1. A person, wherever located, shall not act as a provider 11 16 or broker with an owner or multiple owners residing in this 11 17 state, without first having obtained a license from the 11 18 commissioner. If there is more than one owner on a single 11 19 policy and the owners are residents of different states, the 11 20 life settlement contract shall be governed by the law of the 11 21 state in which the owner having the largest percentage 11 22 ownership resides or, if the owners hold equal ownership, the 11 23 state of residence of one owner agreed upon in writing by all 11 24 owners. 11 25 2. An application for a provider or broker license shall 11 26 be made to the commissioner by the applicant on a form 11 27 prescribed by the commissioner, and the application shall be 11 28 accompanied by a fee in an amount established by the 11 29 commissioner, provided, however, that a license or renewal fee 11 30 for a provider license shall be reasonable and that a license 11 31 or renewal fee for a broker license shall not exceed the fee 11 32 established for an insurance producer. 11 33 3. A life insurance producer who has been duly licensed as 11 34 a resident insurance producer with a life line of authority in 11 35 this state or in the life insurance producer's home state for 12 1 at least one year and is licensed as a nonresident producer in 12 2 this state shall be deemed to meet the licensing requirements 12 3 of this section and shall be permitted to operate as a broker. 12 4 4. Not later than thirty days from the first day of 12 5 operating as a broker, the life insurance producer shall 12 6 notify the commissioner that the life insurance producer is 12 7 acting as a broker on a form prescribed by the commissioner, 12 8 and shall pay an applicable fee established by rules adopted 12 9 by the commissioner. Notification shall include an 12 10 acknowledgment by the life insurance producer that the life 12 11 insurance producer will operate as a broker in accordance with 12 12 this chapter. 12 13 5. The insurer that issued the life insurance policy that 12 14 is the subject of a life settlement contract shall not be 12 15 responsible for any act or omission of a broker, provider, or 12 16 purchaser arising out of or in connection with the life 12 17 settlement transaction, unless the insurer receives 12 18 compensation for the placement of a life settlement contract 12 19 from the broker, provider, or purchaser in connection with the 12 20 life settlement contract. 12 21 6. A person licensed as an attorney, certified public 12 22 accountant, or financial planner accredited by a nationally 12 23 recognized accreditation agency, who is retained to represent 12 24 the owner, whose compensation is not paid directly or 12 25 indirectly by the provider or purchaser, may negotiate life 12 26 settlement contracts on behalf of the owner without having to 12 27 obtain a license as a broker. 12 28 7. The term of a provider license shall be equal to that 12 29 of a domestic stock life insurance company and the term of a 12 30 broker license shall be equal to that of an insurance producer 12 31 license. A license requiring periodic renewal may be renewed 12 32 on its anniversary date upon payment of the periodic renewal 12 33 fee as specified in subsection 2. A failure to pay a fee on 12 34 or before the renewal date shall result in revocation of the 12 35 license. 13 1 8. The applicant shall provide such information as the 13 2 commissioner may require on forms prepared by the 13 3 commissioner. The commissioner may, at any time, require such 13 4 applicant to fully disclose the identity of its stockholders 13 5 except for a stockholder owning fewer than ten percent of the 13 6 shares of an applicant whose shares are publicly traded; 13 7 partners; officers; and employees. The commissioner may, in 13 8 the exercise of the commissioner's sole discretion, refuse to 13 9 issue such a license in the name of any person if not 13 10 satisfied that any officer, employee, stockholder, or partner 13 11 of the applicant who may materially influence the applicant's 13 12 conduct meets the standards of this chapter. 13 13 9. A license issued to a partnership, corporation, limited 13 14 liability company, or other entity authorizes a person who is 13 15 a member, officer, or designated employee to act as a licensee 13 16 under the license, if the person is named in the application 13 17 or a supplement to the application. 13 18 10. Upon the filing of an application and the payment of 13 19 the license fee, the commissioner shall make an investigation 13 20 of each applicant and may issue a license if the commissioner 13 21 finds that all of the following apply: 13 22 a. If the applicant is a provider, the applicant has 13 23 provided a detailed plan of operation. 13 24 b. The applicant is competent and trustworthy and intends 13 25 to transact its business in good faith. 13 26 c. The applicant has a good business reputation and has 13 27 had experience, training, or education so as to be qualified 13 28 in the business for which the license is applied. 13 29 d. If the applicant is a legal entity, is formed or 13 30 organized pursuant to the laws of this state or is a foreign 13 31 legal entity authorized to transact business in this state, or 13 32 provides a certificate of good standing from the state of its 13 33 domicile. 13 34 e. The applicant has provided to the commissioner an 13 35 antifraud plan that meets the requirements of section 508G.14 14 1 and includes all of the following: 14 2 (1) A description of the procedures for detecting and 14 3 investigating a possible fraudulent act and procedure for 14 4 resolving material inconsistencies between a medical record 14 5 and insurance applications. 14 6 (2) A description of the procedures for reporting a 14 7 fraudulent insurance act to the commissioner. 14 8 (3) A description of the plan for antifraud education and 14 9 training of its underwriters and other personnel. 14 10 (4) A written description or chart outlining the 14 11 arrangement of the antifraud personnel who are responsible for 14 12 the investigation and reporting of a possible fraudulent 14 13 insurance act and investigating any unresolved material 14 14 inconsistency between a medical record and the insurance 14 15 application. 14 16 11. The commissioner shall not issue a license to a 14 17 nonresident applicant, unless a written designation of an 14 18 agent for service of process is filed and maintained with the 14 19 commissioner or unless the applicant has filed with the 14 20 commissioner the applicant's written irrevocable consent that 14 21 any action against the applicant may be commenced against the 14 22 applicant by service of process on the commissioner. 14 23 12. A licensee shall file with the commissioner on or 14 24 before the first day of March of each year an annual statement 14 25 containing such information as the commissioner by rule may 14 26 prescribe. 14 27 13. A provider shall not use any person to perform the 14 28 functions of a broker unless the person holds a license as a 14 29 broker as provided in this section. 14 30 14. A broker shall not use a person to perform the 14 31 functions of a provider unless such person holds a license as 14 32 a provider as provided in this section. 14 33 15. A provider or broker shall provide to the commissioner 14 34 new or revised information about an officer, ten percent or 14 35 more stockholders, a partner, director, members, or a 15 1 designated employee within thirty days of a change. 15 2 16. An individual licensed as a broker shall complete on a 15 3 biennial basis fifteen hours of training related to a life 15 4 settlement or a life settlement transaction, as required by 15 5 the commissioner. However, a life insurance producer who is 15 6 operating as a broker pursuant to this section shall not be 15 7 subject to the requirements of this subsection. A person 15 8 failing to meet the requirements of this subsection shall be 15 9 subject to the penalties imposed by the commissioner. 15 10 Sec. 4. NEW SECTION. 508G.4 LICENSE SUSPENSION, 15 11 REVOCATION, OR REFUSAL TO RENEW. 15 12 1. The commissioner may suspend, revoke, or refuse to 15 13 renew the license of a licensee if the commissioner finds any 15 14 of the following: 15 15 a. There was any material misrepresentation in the 15 16 application for the license. 15 17 b. The licensee or any officer, partner, member, or 15 18 director has been guilty of a fraudulent or dishonest 15 19 practice, is subject to a final agency action under chapter 15 20 17A, or is otherwise shown to be untrustworthy or incompetent 15 21 to act as a licensee. 15 22 c. The provider demonstrates a pattern of unreasonably 15 23 withholding payments to policy owners. 15 24 d. The licensee no longer meets the requirements for 15 25 initial licensure. 15 26 e. The licensee or any officer, partner, member, or 15 27 director has been convicted of a felony, or of any misdemeanor 15 28 of which criminal fraud or moral turpitude is an element; or 15 29 the licensee has pleaded guilty or nolo contendere with 15 30 respect to any felony or any misdemeanor of which criminal 15 31 fraud or moral turpitude is an element, regardless of whether 15 32 a judgment of conviction has been entered by the court. 15 33 f. The provider has entered into a life settlement 15 34 contract that has not been approved pursuant to this chapter. 15 35 g. The provider has failed to honor contractual 16 1 obligations set out in a life settlement contract. 16 2 h. The provider has assigned, transferred, or pledged a 16 3 settled policy to a person other than a provider licensed in 16 4 this state; a purchaser; an accredited investor or qualified 16 5 institutional buyer as defined, respectively, in 17 C.F.R. } 16 6 230.501(a) or 17 C.F.R. } 230.144A as promulgated by the 16 7 United States securities and exchange commission under the 16 8 federal Securities Act of 1933, as amended, 15 U.S.C. } 77a et 16 9 seq.; a financing entity; a special purpose entity; or a 16 10 related provider trust. 16 11 i. The licensee or any officer, partner, member, or key 16 12 management personnel has violated any of the provisions of 16 13 this chapter. 16 14 2. Before the commissioner denies a license application or 16 15 suspends, revokes, or refuses to renew the license of any 16 16 licensee under this chapter, the commissioner shall conduct a 16 17 contested case proceeding in accordance with chapter 17A. 16 18 Sec. 5. NEW SECTION. 508G.5 CONTRACT REQUIREMENTS. 16 19 1. A person shall not use any form of life settlement 16 20 contract in this state unless it has been filed with and 16 21 approved, if required, by the commissioner in a manner that 16 22 conforms with the filing procedures and any time restrictions 16 23 or deeming provisions, if any, for life insurance forms, 16 24 policies, and contracts. 16 25 2. An insurer shall not, as a condition of responding to a 16 26 request for verification of coverage or in connection with the 16 27 transfer of a life insurance policy pursuant to a life 16 28 settlement contract, require that the owner, insured provider, 16 29 or broker sign any form, disclosure, consent, waiver, or 16 30 acknowledgment that has not been expressly approved by the 16 31 commissioner for use in connection with life settlement 16 32 contracts in this state. 16 33 3. A person shall not use a life settlement contract form 16 34 or provide to an owner a disclosure statement form in this 16 35 state unless first filed with and approved by the 17 1 commissioner. The commissioner shall disapprove a life 17 2 settlement contract form or disclosure statement form if, in 17 3 the commissioner's opinion, the contract or provisions 17 4 contained in such form fail to meet the requirements of 17 5 sections 508G.8, 508G.9, or 508G.11, or are unreasonable, 17 6 contrary to the interests of the public, or otherwise 17 7 misleading or unfair to the owner. At the commissioner's 17 8 discretion, the commissioner may require the submission of 17 9 advertising material. 17 10 Sec. 6. NEW SECTION. 508G.6 REPORTING REQUIREMENTS AND 17 11 PRIVACY. 17 12 1. For any life insurance policy settled within five years 17 13 of policy issuance, each provider shall file with the 17 14 commissioner on or before March 1 of each year an annual 17 15 statement containing such information as the commissioner may 17 16 prescribe by rule. In addition to any other requirements, the 17 17 annual statement shall specify the total number, aggregate 17 18 face amount, and life settlement proceeds of life insurance 17 19 policies settled during the immediately preceding calendar 17 20 year, together with a breakdown of the information by policy 17 21 issue year for each insurer. 17 22 a. Such information shall be limited to only those 17 23 transactions where the insured is a resident of this state and 17 24 shall not include individual transaction data regarding the 17 25 business of life settlements or information that there is a 17 26 reasonable basis to believe could be used to identify the 17 27 owner or the insured. 17 28 b. A provider that willfully fails to file an annual 17 29 statement as required in this section, or willfully fails to 17 30 reply within thirty days to a written inquiry by the 17 31 commissioner in connection to the filing of the annual 17 32 statement, shall, in addition to other penalties provided by 17 33 this chapter, be subject to a civil penalty of up to two 17 34 hundred fifty dollars per day of delay, not to exceed 17 35 twenty=five thousand dollars in the aggregate, for each such 18 1 failure. 18 2 2. A provider, broker, insurer, insurance producer, 18 3 information bureau, rating agency, or company, or any other 18 4 person with actual knowledge of an insured's identity, shall 18 5 not disclose the identity of an insured or information that 18 6 there is a reasonable basis to believe could be used to 18 7 identify the insured or the insured's financial or medical 18 8 information to any other person unless the disclosure is any 18 9 of the following: 18 10 a. Necessary to effect a life settlement contract between 18 11 the owner and a provider and the owner and insured have 18 12 provided prior written consent to the disclosure. 18 13 b. Necessary to effectuate the sale of life settlement 18 14 contracts, or interest in a life insurance contract as an 18 15 investment, provided the sale is conducted in accordance with 18 16 applicable federal securities law, including chapter 502, and 18 17 provided further that the owner and the insured have both 18 18 provided prior written consent to the disclosure. 18 19 c. Is provided in response to an investigation or 18 20 examination by the commissioner or any other governmental 18 21 officer or agency or pursuant to the requirements of section 18 22 508G.13. 18 23 d. Is a term or condition to the transfer of a policy by 18 24 one provider to another provider, in which case the receiving 18 25 provider shall be required to otherwise comply with the 18 26 confidentiality requirements of this subsection. 18 27 e. (1) Is necessary to allow the provider or broker or 18 28 its authorized representatives to make a contact for the 18 29 purpose of determining health status. A provider or broker 18 30 shall require its authorized representative to agree in 18 31 writing to adhere to the privacy provisions of this chapter. 18 32 (2) An authorized representative does not include any 18 33 person who has or may have any financial interest in the life 18 34 settlement contract other than a provider, licensed broker, 18 35 financing entity, related provider trust, or special purpose 19 1 entity. 19 2 f. Is required to purchase stop loss coverage. 19 3 3. Nonpublic personal information solicited or obtained in 19 4 connection with a proposed or actual life settlement contract 19 5 shall be subject to the provisions applicable to financial 19 6 institutions under the federal Gramm Leach Bliley Act, 15 19 7 U.S.C. } 6801 et seq., and all other federal and state laws 19 8 relating to confidentiality of nonpublic personal information. 19 9 Sec. 7. NEW SECTION. 508G.7 EXAMINATION. 19 10 1. The commissioner may, when the commissioner deems it 19 11 reasonably necessary to protect the interests of the public, 19 12 examine the business and affairs of any licensee or applicant 19 13 for a license. The commissioner may order any licensee or 19 14 applicant to produce any records, books, files, or other 19 15 information reasonably necessary to ascertain whether such 19 16 licensee or applicant is acting or has acted in violation of 19 17 the law or otherwise contrary to the interests of the public. 19 18 The expenses incurred in conducting any examination shall be 19 19 paid by the licensee or applicant. 19 20 2. In lieu of an examination under this section of any 19 21 foreign or alien licensee licensed in this state, the 19 22 commissioner may, at the commissioner's discretion, accept an 19 23 examination report on the licensee as prepared by the 19 24 commissioner for the licensee's state of domicile or 19 25 port=of=entry state. 19 26 3. Notwithstanding chapter 22, the name and individual 19 27 identification data for each owner and insured shall be 19 28 considered private and confidential information and shall not 19 29 be disclosed by the commissioner unless required by law. 19 30 4. The records of all consummated transactions and life 19 31 settlement contracts shall be maintained by the provider for 19 32 three years after the death of the insured and shall be 19 33 available to the commissioner for inspection during reasonable 19 34 business hours. 19 35 5. For the conduct of examinations, all of the following 20 1 shall apply: 20 2 a. Upon determining that an examination is appropriate, 20 3 the commissioner shall issue an examination warrant appointing 20 4 one or more examiners to perform the examination and 20 5 instructing them as to the scope of the examination. In 20 6 conducting the examination, an examiner shall use methods 20 7 common to the examination of any life settlement licensee and 20 8 may use those guidelines and procedures set forth in an 20 9 examiners' handbook adopted by a national organization as 20 10 required by the commissioner. 20 11 b. A licensee or other person from whom information is 20 12 sought, its officers, directors, or agents shall provide to an 20 13 examiner timely, convenient, and free access at all reasonable 20 14 hours at its office to all books, records, accounts, papers, 20 15 documents, assets, and computer or other recordings relating 20 16 to the property, assets, business, and affairs of the licensee 20 17 or other person being examined. The officer, director, 20 18 employee, or agent of the licensee or other person shall 20 19 facilitate the examination and aid in the examination so far 20 20 as it is in the person's power to do so. The refusal of a 20 21 licensee, by an officer, director, employee, or agent, to 20 22 submit to examination or to comply with any reasonable written 20 23 request of the commissioner shall be grounds for suspension or 20 24 refusal of, or nonrenewal of any license or authority held by 20 25 the licensee to engage in the business of life settlements or 20 26 other business subject to the commissioner's jurisdiction. 20 27 Any proceedings for suspension, revocation, or refusal of a 20 28 license or authority shall be conducted pursuant to chapter 20 29 17A. 20 30 c. The commissioner may issue subpoenas, administer oaths, 20 31 and examine under oath any person as to any matter pertinent 20 32 to the examination. Upon the failure or refusal of a person 20 33 to obey a subpoena, the commissioner may petition a court of 20 34 competent jurisdiction, and upon proper showing, the court may 20 35 enter an order compelling the witness to appear and testify or 21 1 produce documentary evidence. 21 2 d. When making an examination under this chapter, the 21 3 commissioner may retain one or more attorneys, appraisers, 21 4 independent actuaries, independent certified public 21 5 accountants, or other professionals and specialists as 21 6 examiners, the reasonable cost of which shall be borne by the 21 7 licensee that is the subject of the examination. 21 8 e. This chapter shall not be construed to limit the 21 9 commissioner's authority to terminate or suspend an 21 10 examination in order to pursue other legal or administrative 21 11 action pursuant to the insurance laws of this state. Findings 21 12 of fact and conclusions made pursuant to any examination shall 21 13 be prima facie evidence in any legal or regulatory action. 21 14 f. This chapter shall not be construed to limit the 21 15 commissioner's authority to use and, if appropriate, to make 21 16 public any final or preliminary examination report, any 21 17 examiner or licensee work papers or other documents, or any 21 18 other information discovered or developed during the course of 21 19 any examination in the furtherance of any legal or 21 20 administrative action which the commissioner may, in the 21 21 commissioner's sole discretion, deem appropriate. 21 22 6. For the examination report, all of the following apply: 21 23 a. An examination report shall be comprised of only facts 21 24 appearing upon the books, from the testimony of its officers 21 25 or agents or other persons examined concerning its affairs, 21 26 and such conclusions and recommendations as the examiners find 21 27 reasonably warranted from the facts. 21 28 b. Not later than sixty days following completion of the 21 29 examination, the examiner in charge shall file with the 21 30 commissioner a verified written report of examination under 21 31 oath. Upon receipt of the verified report, the commissioner 21 32 shall transmit the report to the licensee examined, together 21 33 with a notice that shall afford the licensee examined a 21 34 reasonable opportunity of not more than thirty days to make a 21 35 written submission or rebuttal with respect to any matter 22 1 contained in the examination report and which shall become 22 2 part of the report or to request an administrative hearing on 22 3 any matter in dispute as provided in chapter 17A. 22 4 c. In the event the commissioner determines that 22 5 regulatory action is appropriate as a result of an 22 6 examination, the commissioner may initiate any proceeding or 22 7 action provided by law. 22 8 7. For the confidentiality of examination information, all 22 9 of the following apply: 22 10 a. The name and individual identification data for each 22 11 owner, purchaser, or insured shall be considered private and 22 12 confidential information and shall not be disclosed by the 22 13 commissioner, unless the disclosure is to another regulator or 22 14 is required by law. 22 15 b. Except as otherwise provided in this chapter, an 22 16 examination report, working papers, recorded information, 22 17 documents or materials, and copies produced by, obtained by, 22 18 or disclosed to the commissioner or any other person in the 22 19 course of an examination made under this chapter, or in the 22 20 course of analysis or investigation by the commissioner of the 22 21 financial condition or market conduct of a licensee shall be 22 22 confidential by law and privileged, shall not be subject to 22 23 chapter 22, shall not be subject to subpoena, and shall not be 22 24 subject to discovery or admissible in evidence in any private 22 25 civil action. The commissioner may use the examination 22 26 report, working papers, recorded information, documents, 22 27 materials, or other information in the furtherance of any 22 28 administrative or legal action brought as part of the 22 29 commissioner's official duties. The licensee being examined 22 30 may have access to all documents used to make the report. 22 31 8. For conflict of interest, all of the following apply: 22 32 a. An examiner shall not be appointed by the commissioner 22 33 if the examiner, either directly or indirectly, has a conflict 22 34 of interest or is affiliated with the management of or owns a 22 35 pecuniary interest in any person subject to examination under 23 1 this chapter. This section shall not be construed to 23 2 automatically preclude an examiner from being any of the 23 3 following: 23 4 (1) An owner. 23 5 (2) An insured in a life settlement contract or life 23 6 insurance policy. 23 7 (3) A beneficiary in a life insurance policy that is 23 8 proposed for a life settlement contract. 23 9 b. Notwithstanding the requirements of this subsection, 23 10 the commissioner may retain from time to time, on an 23 11 individual basis, one or more qualified actuaries, certified 23 12 public accountants, or other similar individuals who are 23 13 independently practicing their professions, even though these 23 14 persons may from time to time be similarly employed or 23 15 retained by persons subject to examination under this chapter. 23 16 9. For immunity from liability, all of the following shall 23 17 apply: 23 18 a. A cause of action shall not arise and liability shall 23 19 not be imposed against the commissioner, the commissioner's 23 20 authorized representative, or any examiner appointed by the 23 21 commissioner for any statements made or conduct performed in 23 22 good faith while carrying out the provisions of this chapter. 23 23 b. A cause of action shall not arise, and liability shall 23 24 not be imposed, against any person for communicating or 23 25 delivering information or data to the commissioner or the 23 26 commissioner's authorized representative or examiner pursuant 23 27 to an examination made under this chapter, if the 23 28 communication or delivery was performed in good faith and 23 29 without fraudulent intent or the intent to deceive. This 23 30 paragraph does not abrogate or modify in any way any common 23 31 law or statutory privilege or immunity enjoyed by any person 23 32 identified in paragraph "a". 23 33 c. (1) A person identified in paragraph "a" or "b" shall 23 34 be entitled to an award of attorney fees and costs if the 23 35 person is the prevailing party in a civil cause of action for 24 1 libel, slander, or any other relevant tort arising out of 24 2 activities in carrying out the provisions of this chapter and 24 3 the party bringing the action was not substantially justified 24 4 in doing so. 24 5 (2) For purposes of subparagraph (1), a proceeding is 24 6 substantially justified if it has a reasonable basis in law or 24 7 fact at the time that it was initiated. 24 8 10. The commissioner may investigate a suspected 24 9 fraudulent life settlement act and a person engaged in the 24 10 business of life settlements. 24 11 11. The commission by rule may establish reasonable costs 24 12 for examinations imposed upon a person. 24 13 Sec. 8. NEW SECTION. 508G.8 ADVERTISING. 24 14 1. A broker or provider licensed pursuant to this chapter 24 15 may conduct or participate in an advertisement within this 24 16 state. Such advertisement shall comply with all statutes or 24 17 rules adopted by the commissioner that are applicable to life 24 18 insurers or to brokers, and providers licensed pursuant to 24 19 this chapter. 24 20 2. An advertisement shall be accurate, truthful, and not 24 21 misleading in fact or by implication. 24 22 3. A person shall not do any of the following: 24 23 a. Directly or indirectly market, advertise, solicit, or 24 24 otherwise promote the purchase of a life insurance policy for 24 25 the sole purpose of or with an emphasis on settling the life 24 26 insurance policy. 24 27 b. Use the words "free", "no cost", or words of similar 24 28 import in the marketing, advertising, soliciting, or otherwise 24 29 promoting of the purchase of a life insurance policy. 24 30 Sec. 9. NEW SECTION. 508G.9 DISCLOSURES TO OWNERS. 24 31 1. A provider shall provide in writing, a separate 24 32 disclosure document that is signed by the owner and provider, 24 33 to the owner not later than the date the life settlement 24 34 contract is signed by all parties. 24 35 a. The disclosure document shall include all of the 25 1 following information: 25 2 (1) That possible alternatives to life settlement 25 3 contracts exist including but not limited to accelerated 25 4 benefits offered by the issuer of the life insurance policy. 25 5 (2) That some or all of the proceeds of a life settlement 25 6 contract may be taxable and that assistance should be sought 25 7 from a professional tax advisor. 25 8 (3) That the proceeds from a life settlement contract 25 9 could be subject to the claims of creditors. 25 10 (4) That receipt of proceeds from a life settlement 25 11 contract may adversely affect the recipient's eligibility for 25 12 public assistance or other government benefits or entitlements 25 13 and that advice should be obtained from the appropriate 25 14 agencies. 25 15 (5) That the owner has a right to rescind a life 25 16 settlement contract within fifteen days of the date it is 25 17 executed by all parties and the owner has received the 25 18 disclosures required in this section. Recision, if exercised 25 19 by the owner, is effective only if both notice of the recision 25 20 is given, and the owner repays all proceeds and any premiums, 25 21 loans, and loan interest paid on account of the provider 25 22 within the recision period. If the insured dies during the 25 23 recision period, the contract shall be deemed to have been 25 24 rescinded subject to repayment by the owner or the owner's 25 25 estate of all proceeds and any premiums, loans, and loan 25 26 interest to the provider. 25 27 (6) That proceeds will be sent to the owner within three 25 28 business days after the provider has received the insurer or 25 29 group administrator's acknowledgment that ownership of the 25 30 life insurance policy or interest in the life insurance 25 31 certificate has been transferred and the beneficiary has been 25 32 designated in accordance with the terms of the life settlement 25 33 contract. 25 34 (7) That entering into a life settlement contract may 25 35 cause other rights or benefits, including conversion rights 26 1 and waiver of premium benefits that may exist under the life 26 2 insurance policy or certificate of a group life insurance 26 3 policy, to be forfeited by the owner and that assistance 26 4 should be sought from a professional financial advisor. 26 5 (8) (a) The amount and method of calculating the 26 6 compensation paid or to be paid to the broker, or any other 26 7 person acting for the owner in connection with the 26 8 transaction. 26 9 (b) As used in subparagraph subdivision (a), compensation 26 10 includes anything of value paid or given. 26 11 (9) The date by which the funds will be available to the 26 12 owner and the transmitter of the funds. 26 13 (10) That the commissioner requires delivery of a buyer's 26 14 guide or a similar consumer advisory package in the form 26 15 prescribed by the commissioner to owners during the 26 16 solicitation process. 26 17 (11) The following language: 26 18 "All medical, financial, or personal information solicited 26 19 or obtained by a provider or broker about an insured, 26 20 including the insured's identity or the identity of family 26 21 members, a spouse, or a significant other may be disclosed as 26 22 necessary to effect the life settlement contract between the 26 23 owner and provider. If you are asked to provide this 26 24 information, you will be asked to consent to the disclosure. 26 25 The information may be provided to someone who buys the policy 26 26 or provides funds for the purchase. You may be asked to renew 26 27 your permission to share information every two years." 26 28 (12) That the commissioner requires providers and brokers 26 29 to print separate signed fraud warnings on their applications 26 30 and on their life settlement contracts as follows: 26 31 "Any person who knowingly presents false information in an 26 32 application for a life insurance policy or life settlement 26 33 contract is guilty of a crime and may be subject to fines and 26 34 confinement in prison." 26 35 (13) That the insured may be contacted by either the 27 1 provider or broker or its authorized representative for the 27 2 purpose of determining the insured's health status or to 27 3 verify the insured's address. This contact is limited to once 27 4 every three months if the insured has a life expectancy of 27 5 more than one year, and no more than once per month if the 27 6 insured has a life expectancy of one year or less. 27 7 (14) The affiliation, if any, between the provider and the 27 8 issuer of the life insurance policy to be settled. 27 9 (15) That a broker represents exclusively the owner, and 27 10 not the insurer or the provider or any other person, and owes 27 11 a fiduciary duty to the owner, including a duty to act 27 12 according to the owner's instructions and in the best interest 27 13 of the owner. 27 14 (16) The name, address, and telephone number of the 27 15 provider. 27 16 (17) The name, business address, and telephone number of 27 17 the independent third=party escrow agent, and the fact that 27 18 the owner may inspect or receive copies of the relevant escrow 27 19 or trust agreements or documents. 27 20 (18) That a change of ownership could in the future limit 27 21 the insured's ability to purchase future insurance on the 27 22 insured's life because of a limit on the amount of coverage 27 23 insurers will issue on one life. 27 24 b. The written disclosure as provided in paragraph "a" 27 25 shall be conspicuously displayed in any life settlement 27 26 contract furnished to the owner by a provider including the 27 27 disclosure of any affiliations or contractual arrangements 27 28 between the provider and the broker. 27 29 2. A broker shall provide the owner and the provider with 27 30 at least the following disclosures not later than the date the 27 31 life settlement contract is signed by all parties. The 27 32 disclosures shall be conspicuously displayed in the life 27 33 settlement contract or in a separate document signed by the 27 34 owner and provide all of the following information: 27 35 a. The name, business address, and telephone number of the 28 1 broker. 28 2 b. A full, complete, and accurate description of all the 28 3 offers, counteroffers, acceptances, and rejections relating to 28 4 the proposed life settlement contract. 28 5 c. A written disclosure of any affiliation or contractual 28 6 arrangement between the broker and any person making an offer 28 7 in connection with the proposed life settlement contract. 28 8 d. The name of each broker who receives compensation and 28 9 the amount of compensation received by that broker, which 28 10 compensation includes anything of value paid or given to the 28 11 broker in connection with the life settlement contract. 28 12 e. (1) A complete reconciliation of the gross offer or 28 13 bid by the provider to the net amount of proceeds or value to 28 14 be received by the owner. 28 15 (2) For the purpose of subparagraph (1), "gross offer" or 28 16 "bid" means the total amount or value offered by the provider 28 17 for the purchase of one or more life insurance policies, 28 18 inclusive of commissions and fees. 28 19 f. The failure to provide the disclosures or rights 28 20 described in this section is deemed an unfair trade practice 28 21 pursuant to section 508G.17. 28 22 Sec. 10. NEW SECTION. 508G.10 DISCLOSURE BY INSURER. 28 23 1. In addition to other questions an insurer may lawfully 28 24 pose to a life insurance applicant, insurers may inquire in 28 25 the application for insurance whether the proposed owner 28 26 intends to pay premiums with the assistance of financing from 28 27 a lender that will use the policy as collateral to support the 28 28 financing. 28 29 a. If, as described in the definition of life settlement 28 30 contract in section 508G.2, the loan provides funds which can 28 31 be used for a purpose other than paying for the premiums, 28 32 costs, and expenses associated with obtaining and maintaining 28 33 the life insurance policy and loan, the application shall be 28 34 rejected as a violation of the prohibited practices in section 28 35 508G.13. 29 1 b. If the financing does not violate section 508G.13 in 29 2 the manner provided in paragraph "a", the insurer may do any 29 3 of the following: 29 4 (1) Make a disclosure, including but not limited to such 29 5 as the following, to the applicant and the insured, either on 29 6 the application or an amendment to the application to be 29 7 completed no later than the delivery of the policy: 29 8 "If you have entered into a loan arrangement where the life 29 9 insurance policy is used as collateral, and the life insurance 29 10 policy does change ownership at some point in the future in 29 11 satisfaction of the loan, the following may be true: 29 12 A change of ownership could lead to a stranger owning an 29 13 interest in the insured's life. 29 14 A change of ownership could in the future limit your 29 15 ability to purchase future insurance on the insured's life 29 16 because of a limit on the amount of coverage insurers will 29 17 issue on one life. 29 18 Should there be a change of ownership and you wish to 29 19 obtain more insurance coverage on the insured's life in the 29 20 future, the insured's higher issue age, a change in health 29 21 status, or other factors may reduce the ability to obtain 29 22 coverage or may result in significantly higher premiums. 29 23 You should consult a professional advisor, since a change 29 24 in ownership in satisfaction of the loan may result in tax 29 25 consequences to the owner, depending on the structure of the 29 26 loan." 29 27 (2) Require certifications, such as the following, from 29 28 the applicant or the insured: 29 29 "I have not entered into any agreement or arrangement 29 30 providing for the future sale of this life insurance policy. 29 31 My loan arrangement for this life insurance policy provides 29 32 funds sufficient to pay for some or all of the premiums, 29 33 costs, and expenses associated with obtaining and maintaining 29 34 my life insurance policy, but I have not entered into any 29 35 agreement by which I am to receive consideration in exchange 30 1 for procuring this life insurance policy. 30 2 The borrower has an insurable interest in the insured." 30 3 2. With respect to each life insurance policy issued by an 30 4 insurer, the insurer shall send written notice to the owner of 30 5 an individual life insurance policy, or a certificate holder 30 6 under a group life insurance policy, where the insured person 30 7 under such life insurance policy is age sixty or older or is 30 8 known to be terminally ill or chronically ill, that a life 30 9 settlement is an available alternative transaction to such 30 10 owner at the time of each of the following: 30 11 a. When an insurer receives from such owner a request to 30 12 surrender, in whole or in part, an individual life insurance 30 13 policy, or a certificate under a group life insurance policy. 30 14 b. When an insurer receives from such owner a request to 30 15 receive an accelerated death benefit under an individual life 30 16 insurance policy, or a certificate under a group life 30 17 insurance policy. 30 18 c. When an insurer receives from such owner a request to 30 19 collaterally assign an individual life insurance policy, or a 30 20 certificate under a group life insurance policy as security 30 21 for a loan. 30 22 d. When an insurer sends to such owner a notice of lapse 30 23 of an individual life insurance policy, or a certificate under 30 24 a group life insurance policy. 30 25 e. At any other time the commissioner may require by rule. 30 26 Sec. 11. NEW SECTION. 508G.11 GENERAL RULES. 30 27 1. A provider entering into a life settlement contract 30 28 with an owner of a life insurance policy, where the insured is 30 29 terminally ill or chronically ill, shall first obtain all of 30 30 the following: 30 31 a. If the owner is the insured, a written statement from a 30 32 licensed attending physician that the owner is of sound mind 30 33 and under no constraint or undue influence to enter into a 30 34 life settlement contract. 30 35 b. A document in which the insured consents to the release 31 1 of the owner's medical records to a provider, broker, or 31 2 insurance producer and, if the life insurance policy was 31 3 issued less than two years from the date of application for a 31 4 life settlement contract, to the insurance company that issued 31 5 the policy. 31 6 2. An insurer shall respond to a request for verification 31 7 of coverage submitted by a provider, broker, or life insurance 31 8 producer not later than thirty calendar days of the date the 31 9 request is received. The request for verification of coverage 31 10 must be made on a form approved by the commissioner. The 31 11 insurer shall complete and issue the verification of coverage 31 12 or indicate in which respects it is unable to respond. In its 31 13 response, the insurer shall indicate whether, based on the 31 14 medical evidence and documents provided, the insurer intends 31 15 to pursue an investigation at this time regarding the validity 31 16 of the life insurance policy. 31 17 3. Before or at the time of the execution of the life 31 18 settlement contract, the provider shall obtain a witnessed 31 19 document in which the owner consents to the life settlement 31 20 contract, represents that the owner has a full and complete 31 21 understanding of the life settlement contract, that the owner 31 22 has a full and complete understanding of the benefits of the 31 23 life insurance policy, acknowledges that the owner is entering 31 24 into the life settlement contract freely and voluntarily, and, 31 25 for persons with a terminal or chronic illness or condition, 31 26 acknowledges that the insured has a terminal or chronic 31 27 illness and that the terminal or chronic illness or condition 31 28 was diagnosed after the life insurance policy was issued. 31 29 4. The insurer shall not unreasonably delay effecting 31 30 change of ownership or beneficiary with any life settlement 31 31 contract lawfully entered into in this state or with a 31 32 resident of this state. 31 33 5. If a broker or life insurance producer performs any 31 34 activities required of the provider, the provider is deemed to 31 35 have fulfilled the requirements of this section. 32 1 6. If a broker performs verification of coverage 32 2 activities required of the provider, the provider is deemed to 32 3 have fulfilled the requirements of section 508G.9, subsection 32 4 1. 32 5 7. Within twenty days after an owner executes the life 32 6 settlement contract, a provider shall give written notice to 32 7 the insurer that issued the life insurance policy that the 32 8 policy has become subject to a life settlement contract. The 32 9 notice shall be accompanied by the documents required by 32 10 section 508G.10, subsection 1, paragraph "b". 32 11 8. All medical information solicited or obtained by any 32 12 licensee shall be subject to the applicable provision of state 32 13 law relating to confidentiality of medical information, if not 32 14 otherwise provided in this chapter. 32 15 9. A life settlement contract entered into in this state 32 16 shall provide that the owner may rescind the contract on or 32 17 before fifteen days after the date it is executed by all 32 18 parties. Recision, if exercised by the owner, is effective 32 19 only if both notice of the recision is given, and the owner 32 20 repays all proceeds and any premiums, loans, and loan interest 32 21 paid on account of the provider within the recision period. 32 22 If the insured dies during the recision period, the contract 32 23 shall be deemed to have been rescinded subject to repayment by 32 24 the owner or the owner's estate of all proceeds and any 32 25 premiums, loans, and loan interest to the provider. 32 26 10. Within three business days after receipt from the 32 27 owner of documents to effect the transfer of the insurance 32 28 policy, the provider shall pay the proceeds of the settlement 32 29 to a trust or escrow account managed by a trustee or escrow 32 30 agent in a state or federally chartered financial institution 32 31 pending acknowledgment of the transfer by the issuer of the 32 32 policy. The trustee or escrow agent shall be required to 32 33 transfer the proceeds due to the owner within three business 32 34 days of acknowledgment of the transfer from the insurer. 32 35 11. A failure to tender life settlement contract proceeds 33 1 to the owner by the date disclosed to the owner renders the 33 2 contract voidable by the owner for lack of consideration until 33 3 the time the proceeds are tendered to and accepted by the 33 4 owner. A failure to give written notice of the right of 33 5 recision shall toll the right of recision until thirty days 33 6 after the written notice of the right of recision has been 33 7 given. 33 8 12. Any fee paid by a provider, party, individual, or an 33 9 owner to a broker in exchange for services provided to the 33 10 owner pertaining to a life settlement contract shall be 33 11 computed as a percentage of the offer obtained, not the face 33 12 value of the life insurance policy. This section shall not be 33 13 construed as prohibiting a broker from reducing the broker's 33 14 fee below this percentage if the broker so chooses. 33 15 13. A broker shall disclose to the owner anything of value 33 16 paid or given to the broker, which relates to a life 33 17 settlement contract. 33 18 14. A person shall not at any time prior to, or at the 33 19 time of, the application for, or issuance of, a life insurance 33 20 policy, or during a two=year period commencing with the date 33 21 of issuance of the life insurance policy, enter into a life 33 22 settlement contract regardless of the date the compensation is 33 23 to be provided and regardless of the date the assignment, 33 24 transfer, sale, devise, bequest, or surrender of the policy is 33 25 to occur. This prohibition shall not apply if the owner 33 26 certifies to the provider that any of the following applies: 33 27 a. The life insurance policy was issued upon the owner's 33 28 exercise of conversion rights arising out of a group or 33 29 individual life insurance policy, provided the total of the 33 30 time covered under the conversion policy plus the time covered 33 31 under the prior life insurance policy is at least twenty=four 33 32 months. The time covered under a group life insurance policy 33 33 must be calculated without regard to a change in insurers, 33 34 provided the coverage has been continuous and under the same 33 35 group sponsorship. 34 1 b. The owner submits independent evidence to the provider 34 2 that one or more of the following conditions have been met 34 3 within the two=year period: 34 4 (1) The owner or insured is terminally ill or chronically 34 5 ill. 34 6 (2) The owner or insured disposes of the owner's or 34 7 insured's ownership interests in a closely held corporation, 34 8 pursuant to the terms of a buyout or other similar agreement 34 9 in effect at the time the life insurance policy was initially 34 10 issued. 34 11 (3) The owner's spouse dies. 34 12 (4) The owner divorces the owner's spouse. 34 13 (5) The owner retires from full=time employment. 34 14 (6) The owner becomes physically or mentally disabled and 34 15 a physician determines that the disability prevents the owner 34 16 from maintaining full=time employment. 34 17 (7) A final order, judgment, or decree is entered by a 34 18 court of competent jurisdiction, on the application of a 34 19 creditor of the owner, adjudicating the owner bankrupt or 34 20 insolvent, or approving a petition seeking reorganization of 34 21 the owner or appointing a receiver, trustee, or liquidator to 34 22 all or a substantial part of the owner's assets. 34 23 c. Copies of the independent evidence required by 34 24 subsection 14, paragraph "b", shall be submitted to the 34 25 insurer when the provider submits a request to the insurer for 34 26 verification of coverage. The copies shall be accompanied by 34 27 a letter of attestation from the provider that the copies are 34 28 true and correct copies of the documents received by the 34 29 provider. This section does not prohibit an insurer from 34 30 exercising its right to contest the validity of any life 34 31 insurance policy. 34 32 d. If the provider submits to the insurer a copy of 34 33 independent evidence provided for in paragraph "b", 34 34 subparagraph (1), when the provider submits a request to the 34 35 insurer to effect the transfer of the policy to the provider, 35 1 the copy is deemed to establish that the life settlement 35 2 contract satisfies the requirements of this section. 35 3 Sec. 12. NEW SECTION. 508G.12 AUTHORITY TO ADOPT RULES 35 4 == CONFLICT OF LAWS. 35 5 1. The commissioner may adopt rules implementing this 35 6 chapter and regulating the activities and relationships of 35 7 providers, brokers, insurers, and their agents, pursuant to 35 8 chapter 17A. 35 9 2. For conflict of laws, all of the following shall apply: 35 10 a. If there is more than one owner on a single policy, and 35 11 the owners are residents of different states, the life 35 12 settlement contract shall be governed by the law of the state 35 13 in which the owner having the largest percentage ownership 35 14 resides or, if the owners hold equal ownership, the state of 35 15 residence of one owner agreed upon in writing by all of the 35 16 owners. The law of the state of the insured shall govern in 35 17 the event that equal owners fail to agree in writing upon a 35 18 state of residence for jurisdictional purposes. 35 19 b. A provider from this state who enters into a life 35 20 settlement contract with an owner who is a resident of another 35 21 state that has enacted statutes or adopted regulations 35 22 governing life settlement contracts shall be governed in the 35 23 effectuation of that life settlement contract by the statutes 35 24 and regulations of the owner's state of residence. If the 35 25 state in which the owner is a resident has not enacted 35 26 statutes or regulations governing life settlement contracts, 35 27 the provider shall give the owner notice that neither state 35 28 regulates the transaction into which the owner is entering. 35 29 For transactions in those states, however, the provider shall 35 30 maintain all records required as if the transactions were 35 31 executed in the state of residence. The forms used in those 35 32 states need not be approved by the commissioner. 35 33 c. If there is a conflict in the laws that apply to an 35 34 owner and a purchaser in any individual transaction, the laws 35 35 of the state that apply to the owner shall take precedence and 36 1 the provider shall comply with those laws. 36 2 Sec. 13. NEW SECTION. 508G.13 PROHIBITED PRACTICES. 36 3 1. A person shall not do any of the following: 36 4 a. Enter into a life settlement contract if the person 36 5 knows or reasonably should have known that the life insurance 36 6 policy was obtained by means of a false, deceptive, or 36 7 misleading application for such life insurance policy. 36 8 b. Engage in any transaction, practice, or course of 36 9 business if such person knows or reasonably should have known 36 10 that the intent was to avoid the notice requirements of this 36 11 chapter. 36 12 c. Engage in any fraudulent act or practice in connection 36 13 with any transaction relating to any settlement involving an 36 14 owner who is a resident of this state. 36 15 d. Issue, solicit, market, or otherwise promote the 36 16 purchase of a life insurance policy for the purpose of or with 36 17 an emphasis on settling the life insurance policy. 36 18 e. Enter into a life settlement contract on a life 36 19 insurance policy that was the subject of a premium finance 36 20 loan as described in the definition of life settlement 36 21 contract in section 508G.2. 36 22 f. With respect to any life settlement contract or life 36 23 insurance policy and a broker, knowingly solicit an offer 36 24 from, effectuate a life settlement contract with, or make a 36 25 sale to any provider, financing entity, or related provider 36 26 trust that is controlling, controlled by, or under common 36 27 control with such broker. 36 28 g. With respect to any life settlement contract or life 36 29 insurance policy and a provider, knowingly enter into a life 36 30 settlement contract with an owner, if, in connection with such 36 31 life settlement contract, anything of value will be paid to a 36 32 broker that is controlling, controlled by, or under common 36 33 control with such provider or the financing entity or related 36 34 provider trust that is involved in such life settlement 36 35 contract. 37 1 h. With respect to a provider, enter into a life 37 2 settlement contract unless the life settlement promotional, 37 3 advertising, and marketing materials, as may be adopted by 37 4 rule, have been filed with the commissioner. In no event 37 5 shall any marketing materials expressly reference that the 37 6 insurance is free for any period of time. The inclusion of 37 7 any reference in the marketing materials that would cause an 37 8 owner to reasonably believe that the insurance is free for any 37 9 period of time shall be considered a violation of this 37 10 chapter. 37 11 i. With respect to any life insurance producer, insurer, 37 12 broker, or provider, make any statement or representation to 37 13 the applicant or policyholder in connection with the sale or 37 14 financing of a life insurance policy to the effect that the 37 15 insurance is free or without cost to the policyholder for any 37 16 period of time unless provided in the policy. 37 17 2. A violation of this section shall be deemed a 37 18 fraudulent life settlement act. 37 19 Sec. 14. NEW SECTION. 508G.14 FRAUD PREVENTION AND 37 20 CONTROL. 37 21 1. This subsection applies to a fraudulent life settlement 37 22 act, interference, and convicted felons as follows: 37 23 a. A person shall not commit a fraudulent life settlement 37 24 act. 37 25 b. A person shall not knowingly and intentionally 37 26 interfere with the enforcement of the provisions of this 37 27 chapter or an investigation of suspected or actual violations 37 28 of this chapter. 37 29 c. A person in the business of life settlements shall not 37 30 knowingly or intentionally permit any person convicted of a 37 31 felony involving dishonesty or breach of trust to participate 37 32 in the business of life settlements. 37 33 2. This subsection applies to required fraud warnings as 37 34 follows: 37 35 a. A life settlement contract and an application for a 38 1 life settlement contract, regardless of the form of 38 2 transmission, shall contain the following statement or a 38 3 substantially similar statement: 38 4 "Any person who knowingly presents false information in an 38 5 application for a life insurance policy or life settlement 38 6 contract is guilty of a crime and may be subject to fines and 38 7 confinement in prison." 38 8 b. The lack of a statement as required in paragraph "a" 38 9 does not constitute a defense in any prosecution for a 38 10 fraudulent life settlement act. 38 11 3. This section applies to the mandatory reporting of 38 12 fraudulent life settlement acts as follows: 38 13 a. Any person engaged in the business of life settlements 38 14 having knowledge or a reasonable belief that a fraudulent life 38 15 settlement act is being, will be, or has been committed shall 38 16 provide to the commissioner the information required by, and 38 17 in a manner prescribed by, the commissioner. 38 18 b. Any other person having knowledge or a reasonable 38 19 belief that a fraudulent life settlement act is being, will 38 20 be, or has been committed may provide to the commissioner the 38 21 information required by, and in a manner prescribed by, the 38 22 commissioner. 38 23 4. This subsection applies to immunity from liability as 38 24 follows: 38 25 a. Civil liability shall not be imposed on and a cause of 38 26 action shall not arise from a person's furnishing information 38 27 concerning suspected, anticipated, or a completed fraudulent 38 28 life settlement act, if the information is provided to or 38 29 received from any of the following: 38 30 (1) The commissioner or the commissioner's employees, 38 31 agents, or representatives. 38 32 (2) Federal, state, or local law enforcement or regulatory 38 33 officials or their employees, agents, or representatives. 38 34 (3) A person involved in the prevention and detection of 38 35 fraudulent life settlement acts or that person's agents, 39 1 employees, or representatives. 39 2 (4) Any regulatory body or its employees, agents, or 39 3 representatives, overseeing life insurance, life settlements, 39 4 securities, or investment fraud. 39 5 (5) The life insurer that issued the life insurance policy 39 6 covering the life of the insured. 39 7 (6) The licensee and any agents, employees, or 39 8 representatives. 39 9 b. Paragraph "a" shall not apply to a statement made with 39 10 actual malice. In an action brought against a person for 39 11 filing a report or furnishing other information concerning a 39 12 fraudulent life settlement act, the party bringing the action 39 13 shall plead specifically any allegation that paragraph "a" 39 14 does not apply because the person filing the report or 39 15 furnishing the information did so with actual malice. 39 16 c. (1) A person identified in paragraph "a" shall be 39 17 entitled to an award of attorney fees and costs if the person 39 18 is the prevailing party in a civil cause of action for libel, 39 19 slander, or any other relevant tort arising out of activities 39 20 in carrying out the provisions of this chapter and the party 39 21 bringing the action was not substantially justified in doing 39 22 so. 39 23 (2) For purposes of this paragraph "c", a proceeding is 39 24 substantially justified if it had a reasonable basis in law or 39 25 fact at the time that it was initiated. 39 26 d. This section does not abrogate or modify common law or 39 27 statutory privileges or immunities enjoyed by a person 39 28 described in paragraph "a". 39 29 5. This subsection applies to confidentiality as follows: 39 30 a. The documents and evidence provided pursuant to 39 31 subsection 4 or obtained by the commissioner in an 39 32 investigation of a suspected or actual fraudulent life 39 33 settlement act shall be privileged and confidential and shall 39 34 not be subject to chapter 22, and shall not be subject to 39 35 discovery or subpoena in a civil or criminal action. 40 1 b. Paragraph "a" does not prohibit a release by the 40 2 commissioner of documents and evidence obtained in an 40 3 investigation of a suspected or actual fraudulent life 40 4 settlement act to any of the following: 40 5 (1) In administrative or judicial proceedings to enforce 40 6 laws administered by the commissioner. 40 7 (2) To federal, state, or local law enforcement or 40 8 regulatory agencies, to an organization established for the 40 9 purpose of detecting and preventing fraudulent life settlement 40 10 acts or to the national association of insurance 40 11 commissioners. 40 12 (3) At the discretion of the commissioner, to a person in 40 13 the business of life settlements that is aggrieved by a 40 14 fraudulent life settlement act. 40 15 c. Release of documents and evidence under paragraph "b" 40 16 does not abrogate or modify the privilege granted in paragraph 40 17 "a". 40 18 6. This chapter shall not do any of the following: 40 19 a. Preempt the authority or relieve the duty of other law 40 20 enforcement or regulatory agencies to investigate, examine, or 40 21 prosecute suspected violations of law. 40 22 b. Preempt, supersede, or limit any provision of any state 40 23 securities law or any rule, order, or notice issued under this 40 24 chapter. 40 25 c. Prevent or prohibit a person from voluntarily 40 26 disclosing information concerning life settlement fraud to a 40 27 law enforcement or regulatory agency other than the 40 28 commissioner. 40 29 d. Limit the powers granted elsewhere by the laws of this 40 30 state to the commissioner or the insurance division, or an 40 31 insurance fraud unit, to investigate and examine possible 40 32 violations of law and to take appropriate action against 40 33 wrongdoers. 40 34 7. This subsection applies to life settlement antifraud 40 35 initiatives as follows: 41 1 a. A provider or broker shall have in place antifraud 41 2 initiatives reasonably calculated to detect, prosecute, and 41 3 prevent a fraudulent life settlement act. At the discretion 41 4 of the commissioner, the commissioner may order, or a licensee 41 5 may request and the commissioner may grant, such modifications 41 6 of the following required initiatives as necessary to ensure 41 7 an effective antifraud program. The modifications may be more 41 8 or less restrictive than the required initiatives so long as 41 9 the modifications may reasonably be expected to accomplish the 41 10 purpose of this section. The antifraud initiatives shall 41 11 include all of the following: 41 12 (1) Fraud investigators, who may be provider or broker 41 13 employees or independent contractors. 41 14 (2) An antifraud plan, which shall be submitted to the 41 15 commissioner. The antifraud plan shall include but not be 41 16 limited to any of the following: 41 17 (a) A description of the procedures for detecting and 41 18 investigating possible fraudulent life settlement acts and 41 19 procedures for resolving material inconsistencies between 41 20 medical records and insurance applications. 41 21 (b) A description of the procedures for reporting possible 41 22 fraudulent life settlement acts to the commissioner. 41 23 (c) A description of the plan for antifraud education and 41 24 training of underwriters and other personnel. 41 25 (d) A description or chart outlining the organizational 41 26 arrangement of the antifraud personnel who are responsible for 41 27 the investigation and reporting of possible fraudulent life 41 28 settlement acts and investigating unresolved material 41 29 inconsistencies between medical records and insurance 41 30 applications. 41 31 b. Antifraud plans submitted to the commissioner shall be 41 32 privileged and confidential, shall not be subject to chapter 41 33 22, and shall not be subject to discovery or subpoena in a 41 34 civil or criminal action. 41 35 Sec. 15. NEW SECTION. 508G.15 INJUNCTIONS == CIVIL 42 1 REMEDIES == CEASE AND DESIST. 42 2 1. In addition to the penalties and other enforcement 42 3 provisions of this chapter, if any person violates this 42 4 chapter or any rule implementing this chapter, the 42 5 commissioner may seek an injunction in a court of competent 42 6 jurisdiction in the county where the person resides or has a 42 7 principal place of business and may apply for temporary and 42 8 permanent orders that the commissioner determines necessary to 42 9 restrain the person from further committing the violation. 42 10 2. A person damaged by an act of another person in 42 11 violation of this chapter or any rule implementing or 42 12 administering this chapter, may bring a civil action for 42 13 damages against the person committing the violation in a court 42 14 of competent jurisdiction. 42 15 3. The commissioner may issue a cease and desist order 42 16 upon a person who violates any provision of this chapter, any 42 17 rule adopted or order issued by the commissioner, or any 42 18 written agreement entered into with the commissioner. 42 19 4. If the commissioner finds that such an action presents 42 20 an immediate danger to the public and requires an immediate 42 21 final order, the commissioner may issue an emergency cease and 42 22 desist order reciting with particularity the facts underlying 42 23 such findings. The emergency cease and desist order is 42 24 effective immediately upon service of a copy of the order on 42 25 the respondent and remains effective for ninety days. If the 42 26 commissioner begins nonemergency cease and desist proceedings 42 27 under subsection 1, the emergency cease and desist order 42 28 remains effective, absent an order by a court of competent 42 29 jurisdiction pursuant to chapter 17A. In the event of a 42 30 willful violation of this chapter, the court may award 42 31 statutory damages in addition to actual damages in an 42 32 additional amount up to three times the actual damage award. 42 33 The provisions of this chapter shall not be waived by 42 34 agreement. A choice of law provision shall not be utilized to 42 35 prevent the application of this chapter to any life settlement 43 1 in which a party to the life settlement is a resident of this 43 2 state. 43 3 Sec. 16. NEW SECTION. 508G.16 PENALTIES. 43 4 1. It is a violation of this chapter for any person, 43 5 provider, broker, or any other party related to the business 43 6 of life settlements, to commit a fraudulent life settlement 43 7 act. 43 8 2. For criminal liability purposes, a person that commits 43 9 a fraudulent life settlement act is guilty of a class "D" 43 10 felony. 43 11 3. In addition to the penalty provided in subsection 2, 43 12 the commissioner may establish, assess, and collect a civil 43 13 penalty not exceeding ten thousand dollars for each violation 43 14 of this chapter, including a person or the person's employee 43 15 licensed pursuant to this chapter, who commits a fraudulent 43 16 life settlement act or violates any other provision of this 43 17 chapter and penalties shall be deposited into the general fund 43 18 of the state. 43 19 4. The license of a person licensed under this chapter 43 20 that commits a fraudulent life settlement act shall be revoked 43 21 for a period of five years. 43 22 Sec. 17. NEW SECTION. 508G.17 UNFAIR TRADE PRACTICES. 43 23 A violation of sections 508G.3 through 508G.16 by a 43 24 provider, broker, or insurer shall be considered an unfair 43 25 trade practice pursuant to chapter 507B. 43 26 DIVISION II 43 27 COORDINATING CHANGES 43 28 Sec. 18. Section 502.102, subsection 17, paragraph d, Code 43 29 2007, is amended to read as follows: 43 30 d. With respect to aviaticallife settlementinvestment43 31 contract as defined in section 508G.2, "issuer" means a person 43 32 involved in creating, transferring, or selling to an investor 43 33 any interest in such a contract, including but not limited to 43 34 fractional or pooled interests, but does not include an agent 43 35 or a broker=dealer. 44 1 Sec. 19. Section 502.102, subsection 28, paragraph f, Code 44 2 2007, is amended to read as follows: 44 3 f. It includes aviaticallife settlementinvestment44 4 contract as defined in section 508G.2. 44 5 Sec. 20. Section 502.102, subsection 31A, Code 2007, is 44 6 amended by striking the subsection. 44 7 Sec. 21. Section 502.201, subsection 9E, Code 2007, is 44 8 amended to read as follows: 44 9 9E.VIATICALLIFE SETTLEMENT CONTRACTS. Aviaticallife 44 10 settlement contract as defined in section 508.102, or 44 11 fractional or pooled interest in such contract, provided any 44 12 of the following conditions are satisfied: 44 13 a. The assignment, transfer, sale, devise, or bequest of a 44 14 death benefit of a life insurance policy or contract is made 44 15 by theviator toowner of a life insurance policy to an 44 16 insurance company as provided underTitle XIII, subtitle 144 17 chapter 508G. 44 18 b. The assignment, transfer, sale, devise, or bequest of a 44 19 life insurance policy or contract, for any value less than the 44 20 expected death benefit, is made by theviatorowner of the 44 21 life insurance policy to a family member or other person who 44 22 enters into no more than one such agreement in a calendar 44 23 year. 44 24 c. A life insurance policy or contract is assigned to a 44 25 bank, savings bank, savings and loan association, credit 44 26 union, or other licensed lending institution as collateral for 44 27 a loan. 44 28 d. Accelerated benefits are exercised as provided in the 44 29 life insurance policy or contract and consistent with 44 30 applicable law. 44 31 e. The assignment, transfer, sale, devise, or bequest of 44 32 the death benefit or ownership of a life insurance policy or 44 33 contract made by the policyholder or contract owner to a 44 34viatical settlementprovider pursuant to a life settlement 44 35 contract, if theviaticallife settlementtransactioncontract 45 1 complies with chapter508E508G, including rules adopted 45 2 pursuant to that chapter. 45 3 Sec. 22. Chapter 508E, Code 2007, is repealed. 45 4 DIVISION III 45 5 TRANSITIONAL PROVISIONS 45 6 Sec. 23. TRANSACTIONS OF BUSINESS. 45 7 1. A provider lawfully transacting business in this state 45 8 prior to July 1, 2009, may continue to do so pending approval 45 9 or disapproval of that person's application for a license as 45 10 long as the application is filed with the commissioner not 45 11 later than thirty days after publication by the commissioner 45 12 of an application form and instructions for licensure of 45 13 providers. If the publication of the application form and 45 14 instructions is made prior to July 1, 2009, the filing of the 45 15 application shall not be later than thirty days after July 1, 45 16 2009. During the time that such an application is pending 45 17 with the commissioner, the applicant may use any form of life 45 18 settlement contract that has been filed with the commissioner 45 19 pending approval of the application, provided that such form 45 20 is otherwise in compliance with the provisions of this Act. 45 21 Any person transacting business in this state under this 45 22 provision shall be obligated to comply with all other 45 23 requirements of this Act. 45 24 2. A person who has lawfully negotiated life settlement 45 25 contracts between any owner residing in this state and one or 45 26 more providers for at least one year immediately prior to July 45 27 1, 2009, may continue to do so pending approval or disapproval 45 28 of that person's application for a license as long as the 45 29 application is filed with the commissioner not later than 45 30 thirty days after publication by the commissioner of an 45 31 application form and instructions for licensure of brokers. 45 32 If the publication of the application form and instructions is 45 33 prior to July 1, 2009, the filing of the application shall not 45 34 be later than thirty days after July 1, 2009. Any person 45 35 transacting business in this state under this provision shall 46 1 be obligated to comply with all other requirements of this 46 2 Act. 46 3 Sec. 24. EFFECTIVE DATE. This Act takes effect July 1, 46 4 2009. 46 5 EXPLANATION 46 6 This bill is based on model legislation adopted by the 46 7 national conference of insurance legislators regulating life 46 8 settlement arrangements, by the commissioner of insurance 46 9 (commissioner). A life insurance settlement is a transaction 46 10 involving the sale of a life insurance policy (policy) issued 46 11 by a life insurance company (insurer) before the policy 46 12 matures. 46 13 DIVISION I == LIFE SETTLEMENTS ACT. The bill provides for 46 14 a new Code chapter referred to as the "Life Settlements Act". 46 15 It provides for the regulation of a life settlement contract 46 16 which is a written agreement executed by a policy owner 46 17 (owner) and another party (provider) establishing the terms 46 18 under which a life insurance company (producer) pays the 46 19 provider the policy's expected death benefit upon the policy's 46 20 maturity. The contract may be negotiated by another party 46 21 (broker) on behalf of the owner and who owes a fiduciary duty 46 22 to the owner. The rights of the proceeds may be transferred 46 23 to another party (purchaser) presumably as an investment. 46 24 LICENSING. The bill provides that a provider or broker 46 25 must be licensed by the commissioner. It provides for 46 26 application procedures, imposes requirements on producers, 46 27 including when acting as a broker, provides for the renewal of 46 28 licenses, and provides for the establishment and imposition of 46 29 licensing fees, and for the imposition of disciplinary action 46 30 for a broker or provider who fails to comply with the bill's 46 31 requirements, including license, suspension, revocation, or a 46 32 failure to renew. 46 33 CONTRACT REQUIREMENTS. The bill provides for the form of 46 34 life settlement contracts including for the filing of 46 35 contracts with the commissioner. 47 1 REPORTING REQUIREMENTS. The bill requires a provider to 47 2 periodically report information regarding life settlement 47 3 contracts to the commissioner, including documentation 47 4 regarding proceeds received under such contracts. It provides 47 5 a civil penalty not to exceed $25,000 for a continuous delay 47 6 in reporting. The bill also provides confidentiality 47 7 provisions. 47 8 EXAMINATION REQUIREMENTS. The bill authorizes the 47 9 commissioner to conduct examinations of brokers and providers 47 10 who are applying for a license or who are doing business under 47 11 a license. It provides for the confidentiality of information 47 12 contained in certain records subject to examination, the 47 13 retention of records by brokers and providers, the appointment 47 14 of examiners, and the payment of examination fees. The bill 47 15 also authorizes the commissioner to issue subpoenas and 47 16 administer oaths and to seek judicial orders compelling 47 17 persons to comply with orders compelling the production of 47 18 information. The bill provides for the production of 47 19 examination reports to be filed with the commissioner, and for 47 20 the confidentiality of information gathered in the course of 47 21 an examination. The bill prohibits an examiner from having a 47 22 conflict of interest and provides for their immunity from 47 23 liability. 47 24 ADVERTISING. The bill regulates how a broker or provider 47 25 may advertise their business, and requires that advertising be 47 26 accurate and truthful. 47 27 DISCLOSURE. The bill requires that a provider furnish an 47 28 owner with a written disclosure statement prior to executing a 47 29 contract. The disclosure statement must describe alternatives 47 30 to the contract, that proceeds may be taxable, subject to the 47 31 claims of creditors, and affect eligibility for public 47 32 assistance. The owner is provided rights to terminate the 47 33 contract upon the repayment of any proceeds received under the 47 34 contract. The disclosure statement must describe the amount 47 35 and the method of calculating compensation to be paid, and 48 1 when the proceeds are to be paid. The disclosure must include 48 2 fraud warnings. The bill also requires a broker to provide an 48 3 owner and provider with a written disclosure statement, 48 4 describing the broker and information regarding negotiations 48 5 by the broker acting on behalf of the owner. 48 6 INSURER MAY REQUIRE INFORMATION. The bill provides that an 48 7 insurer may require information regarding a contractual 48 8 arrangement between a broker and a producer and the terms of a 48 9 contract, including the payment of premiums, and the use of 48 10 financing to pay for the premiums, and warnings regarding an 48 11 applicant's future ability to acquire insurance. 48 12 PROVIDER MAY REQUIRE INFORMATION. The bill provides that a 48 13 provider may require that an owner furnish information 48 14 including information regarding the owner's health status and 48 15 whether the owner is terminally ill or chronically ill. In 48 16 that case, the owner must provide medical evidence regarding 48 17 the owner's mental condition, provide a release of the owner's 48 18 medical records, a verification of coverage, and a signed 48 19 statement that verifies the owner understands the nature of 48 20 the contract. The bill requires that the provider may seek 48 21 assurances that the insurer will not unreasonably delay 48 22 effecting a change in ownership. The information provided to 48 23 a provider is considered confidential. 48 24 RESTRICTIONS. The bill prohibits a person from entering 48 25 into a life settlement contract prior to applying for a life 48 26 insurance policy, unless the policy was issued as a group 48 27 policy or a converted policy, or extraordinary circumstances 48 28 exist, including that the owner is terminally ill or 48 29 chronically ill, or there is a material change in the person's 48 30 financial or personal life (e.g., the owner's spouse dies, the 48 31 owner divorces their spouse, the owner retires, or the owner 48 32 becomes mentally or physically disabled). The change must be 48 33 documented and submitted to the insurer. 48 34 RULEMAKING AND CONFLICT OF LAW. The bill authorizes the 48 35 commissioner to adopt rules necessary to implement and 49 1 administer the bill's provisions. It also provides rules when 49 2 there is a conflict of laws between this state and another 49 3 state. 49 4 PROHIBITED PRACTICES == FRAUD. The bill provides for a 49 5 number of prohibited practices, including prohibiting a person 49 6 from entering into a contract under false, deceptive, or 49 7 misleading conditions, or engaging in fraud. The bill 49 8 prohibits a person from committing a fraudulent life 49 9 settlement act in a manner that deprives another person of 49 10 property by false material information, or concealing material 49 11 information which concerns a material fact. The bill 49 12 prohibits a person from interfering with the enforcement of 49 13 the bill's provisions. It also requires the mandatory 49 14 reporting of fraudulent life settlement acts, and provides for 49 15 the confidentiality of information submitted as part of an 49 16 investigation. The bill requires providers and brokers to 49 17 provide a number of antifraud provisions, including the 49 18 submission of an antifraud plan to the commissioner. 49 19 ENFORCEMENT. The bill authorizes the commissioner to take 49 20 actions necessary to enforce the bill's provisions, including 49 21 seeking injunctive relief. The bill allows a person who is 49 22 injured by a violation of the bill's provisions to bring a 49 23 civil action for damages. The bill authorizes the 49 24 commissioner to take emergency action if necessary, including 49 25 by issuing an order to immediately cease and desist from a 49 26 prohibited practice. 49 27 PENALTIES. The bill provides that a person who commits a 49 28 fraudulent life settlement act is guilty of a class "D" 49 29 felony. A class "D" felony is punishable by confinement for 49 30 no more than five years and a fine of at least $750 but not 49 31 more than $7,500. 49 32 The commissioner may also establish, impose, and assess 49 33 civil penalties for violations of the bill's provisions which 49 34 cannot exceed $10,000 for a single offense. 49 35 DIVISION II == COORDINATING CHANGES. The bill amends Code 50 1 chapter 502, Iowa's so=called "blue sky law", by providing 50 2 that a life settlement contract is not a security. The bill 50 3 substitutes the term "life settlement contract" for "viatical 50 4 contract" which is governed under Code chapter 508E. The bill 50 5 repeals that Code chapter. 50 6 DIVISION III == TRANSITIONAL PROVISIONS. The bill 50 7 preserves certain life settlement arrangements by persons who 50 8 were transacting business in this state prior to the effective 50 9 date of the bill, subject to approval by the commissioner. 50 10 EFFECTIVE DATE. The bill takes effect on July 1, 2009. 50 11 LSB 5896XC 82 50 12 da/rj/24