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H.B. 4
1
VIATICAL SETTLEMENTS
2
2003 GENERAL SESSION
3
STATE OF UTAH
4
Sponsor: Brent D. Parker
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This act modifies the Insurance Code by allowing viatical settlements regardless of
6
whether the viator is terminally ill. The act provides for licensing and examinations of
7
producers and providers of viatical settlements. The act provides guidelines in relation to
8
viatical settlements for reporting, disclosure, advertising, fraud, and other general
9
requirements. The act provides criminal penalties for violations. The act modifies the
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Securities Division - Real Estate Division Code by defining a viatical settlement interest
11
as a security.
12
This act affects sections of Utah Code Annotated 1953 as follows:
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AMENDS:
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31A-21-104, as last amended by Chapter 308, Laws of Utah 2002
15
31A-23-203, as last amended by Chapter 116, Laws of Utah 2001
16
31A-23-204, as last amended by Chapter 308, Laws of Utah 2002
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61-1-13, as last amended by Chapter 160, Laws of Utah 1997
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ENACTS:
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31A-23-221, Utah Code Annotated 1953
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31A-36-101, Utah Code Annotated 1953
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31A-36-102, Utah Code Annotated 1953
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31A-36-103, Utah Code Annotated 1953
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31A-36-104, Utah Code Annotated 1953
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31A-36-105, Utah Code Annotated 1953
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31A-36-106, Utah Code Annotated 1953
26
31A-36-107, Utah Code Annotated 1953
27
31A-36-108, Utah Code Annotated 1953
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31A-36-109, Utah Code Annotated 1953
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31A-36-110, Utah Code Annotated 1953
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31A-36-111, Utah Code Annotated 1953
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31A-36-112, Utah Code Annotated 1953
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31A-36-113, Utah Code Annotated 1953
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31A-36-114, Utah Code Annotated 1953
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31A-36-115, Utah Code Annotated 1953
35
31A-36-116, Utah Code Annotated 1953
36
31A-36-117, Utah Code Annotated 1953
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31A-36-118, Utah Code Annotated 1953
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31A-36-119, Utah Code Annotated 1953
39
Be it enacted by the Legislature of the state of Utah:
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Section 1.
Section
31A-21-104
is amended to read:
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31A-21-104. Insurable interest and consent.
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(1) (a) An insurer may not knowingly provide insurance to a person who does not have
43
or expect to have an insurable interest in the subject of the insurance.
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(b) A person may not knowingly procure, directly, by assignment, or otherwise, an
45
interest in the proceeds of an insurance policy unless that person has or expects to have an
46
insurable interest in the subject of the insurance.
47
(c) Except as provided in Subsections (6), (7), and (8), any insurance provided in
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violation of this Subsection (1) is subject to Subsection (5).
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(2) As used in this chapter:
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(a) (i) "Insurable interest" in a person means:
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(A) for persons closely related by blood or by law, a substantial interest engendered by
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love and affection; or
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(B) in the case of other persons, a lawful and substantial interest in having the life,
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health, and bodily safety of the person insured continue.
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(ii) Policyholders in group insurance contracts do not need an insurable interest if
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certificate holders or persons other than group policyholders who are specified by the
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certificate holders are the recipients of the proceeds of the policies.
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(iii) Each person has an unlimited insurable interest in the person's own life and health.
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(iv) A shareholder or partner has an insurable interest in the life of other shareholders
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or partners for purposes of insurance contracts that are an integral part of a legitimate buy-sell
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agreement respecting shares or a partnership interest in the business.
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(v) Subject to Subsection (9), an employer or an employer sponsored trust for the
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benefit of the employer's employees:
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(A) has an insurable interest in the lives of the employer's:
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(I) directors;
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(II) officers;
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(III) managers;
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(IV) nonmanagement employees; and
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(V) retired employees; and
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(B) may insure the lives listed in Subsection (2)(a)(v)(A):
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(I) on an individual or group basis; and
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(II) with the written consent of the insured.
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(b) "Insurable interest" in property or liability means any lawful and substantial
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economic interest in the nonoccurrence of the event insured against.
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(c) "Viatical settlement" [means a written contract:] is as defined in Section
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31A-36-102
.
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[(i) entered into by a person who is the policyholder of a life insurance policy insuring
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the life of a terminally ill person;]
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[(ii) under which the insured assigns, transfers ownership, irrevocably designates a
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specific person or otherwise alienates all control and right in the insurance policy to another
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person; and]
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[(iii) the proceeds or a part of the proceeds of the contract is paid to the policyholder of
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the insurance policy or the policyholder's designee prior to the death of the subject.]
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(3) (a) Except as provided in Subsection (4), an insurer may not knowingly issue an
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individual life or accident and health insurance policy to a person other than the one whose life
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or health is at risk unless that person, who is 18 years of age or older and not under
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guardianship under Title 75, Chapter 5, Protection of Persons Under Disability and Their
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Property, has given written consent to the issuance of the policy.
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(b) A person shall express consent:
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(i) by signing an application for the insurance with knowledge of the nature of the
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document; or
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(ii) in any other reasonable way.
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(c) Any insurance provided in violation of this Subsection (3) is subject to Subsection
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(5).
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(4) (a) A life or accident and health insurance policy may be taken out without consent
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in a circumstance described in this Subsection (4)(a).
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(i) A person may obtain insurance on a dependent who does not have legal capacity.
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(ii) A creditor may, at the creditor's expense, obtain insurance on the debtor in an
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amount reasonably related to the amount of the debt.
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(iii) A person may obtain life and accident and health insurance on an immediate
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family member who is living with or dependent on the person.
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(iv) A person may obtain an accident and health insurance policy on others that would
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merely indemnify the policyholder against expenses the person would be legally or morally
104
obligated to pay.
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(v) The commissioner may adopt rules permitting issuance of insurance for a limited
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term on the life or health of a person serving outside the continental United States who is in the
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public service of the United States, if the policyholder is related within the second degree by
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blood or by marriage to the person whose life or health is insured.
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(b) Consent may be given by another in a circumstance described in this Subsection
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(4)(b).
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(i) A parent, a person having legal custody of a minor, or a guardian of a person under
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Title 75, Chapter 5, Protection of Persons Under Disability and Their Property, may consent to
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the issuance of a policy on a dependent child or on a person under guardianship under Title 75,
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Chapter 5, Protection of Persons Under Disability and Their Property.
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(ii) A grandparent may consent to the issuance of life or accident and health insurance
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on a grandchild.
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(iii) A court of general jurisdiction may give consent to the issuance of a life or
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accident and health insurance policy on an ex parte application showing facts the court
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considers sufficient to justify the issuance of that insurance.
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(5) (a) An insurance policy is not invalid because the policyholder lacks insurable
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interest or because consent has not been given.
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(b) Notwithstanding Subsection (5)(a), a court with appropriate jurisdiction may:
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(i) order the proceeds to be paid to some person who is equitably entitled to the
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proceeds, other than the one to whom the policy is designated to be payable; or
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(ii) create a constructive trust in the proceeds or a part of the proceeds on behalf of
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such a person, subject to all the valid terms and conditions of the policy other than those
127
relating to insurable interest or consent.
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(6) This section does not prevent any organization described under 26 U.S.C. Sec.
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501(c)(3), (e), or (f), as amended, and the regulations made under this section, and which is
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regulated under Title 13, Chapter 22, Charitable Solicitations Act, from soliciting and
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procuring, by assignment or designation as beneficiary, a gift or assignment of an interest in
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life insurance on the life of the donor or assignor or from enforcing payment of proceeds from
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that interest.
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(7) S [
This section does not prevent
]
AN INSURANCE POLICY TRANSFERRED PURSUANT TO
134a
CHAPTER 36, VIATICAL SETTLEMENTS ACT, IS NOT SUBJECT TO SUBSECTION (5)(b) AND NOTHING
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ELSE IN THIS SECTION SHALL PREVENT
s :
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(a) any policyholder of life insurance, whether or not the policyholder is also the
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subject of the insurance, from entering into a viatical settlement;
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(b) any person from soliciting a person to enter into a viatical settlement; [or]
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(c) a person from enforcing payment of proceeds from the interest obtained under a
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viatical settlement[.]; or
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(d) a provider of viatical settlements, a purchaser of a viatical settlement, a financing
141
entity, a related provider trust, or a special purpose entity from executing any of the following
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with respect to the death benefit or ownership of any portion of a viaticated policy as provided
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for in Section
31A-36-109
:
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(i) an assignment;
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(ii) a sale;
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(iii) a transfer;
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(iv) a devise; or
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(v) a bequest.
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(8) Notwithstanding Subsection (1), an insurer authorized under this title to issue a
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workers' compensation policy may issue a workers' compensation policy to a sole
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proprietorship, corporation, or partnership that elects not to include any owner, corporate
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officer, or partner as an employee under the policy even if at the time the policy is issued the
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sole proprietorship, corporation, or partnership has no employees.
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(9) The extent of an employer's or employer sponsored trust's insurable interest for a
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nonmanagement and retired employee under Subsection (2)(a)(v) is limited to an amount
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commensurate with the employer's unfunded liabilities.
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Section 2.
Section
31A-23-203
is amended to read:
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31A-23-203. General requirements for license issuance and renewal.
159
(1) The commissioner shall issue or renew a license to act as an agent, broker, or
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consultant to any person who, as to the license classification applied for under Section
161
31A-23-204
:
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(a) has satisfied the character requirements under Section
31A-23-205
;
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(b) has satisfied any applicable continuing education requirements under Section
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31A-23-206
;
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(c) has satisfied any applicable examination requirements under Section
31A-23-207
;
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(d) has satisfied any applicable training period requirements under Section
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31A-23-208
;
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(e) if a nonresident:
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(i) has complied with Section
31A-23-209
; and
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(ii) holds an active similar license in that person's state of residence;
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(f) as to applicants for licenses to act as title insurance agents, has satisfied the
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requirements of Section
31A-23-211
; [and]
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(g) as to applicants for licenses to act as providers or producers of viatical settlements,
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has satisfied the requirements of Section
31A-23-221
; and
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[(g)] (h) has paid the applicable fees under Section
31A-3-103
.
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(2) (a) This Subsection (2) applies to the following persons:
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(i) an applicant for a pending producer's license; or
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(ii) a licensed producer.
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(b) A person described in Subsection (2)(a) shall report to the commissioner:
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(i) any administrative action taken against the person:
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(A) in another jurisdiction; or
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(B) by another regulatory agency in this state; and
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(ii) any criminal prosecution taken against the person in any jurisdiction.
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(c) The report required by Subsection (2)(b) shall:
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(i) be filed:
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(A) at the time the person files the application for a producer's license; or
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(B) within 30 days of the initiation of an action or prosecution described in Subsection
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(2)(b); and
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(ii) include a copy of the complaint or other relevant legal documents related to the
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action or prosecution described in Subsection (2)(b).
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(3) (a) The department may request:
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(i) criminal background information maintained pursuant to Title 53, Chapter 10, Part
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2, from the Bureau of Criminal Identification; and
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(ii) complete Federal Bureau of Investigation criminal background checks through the
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national criminal history system.
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(b) Information obtained by the department from the review of criminal history records
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received under Subsection (3)(a) shall be used by the department for the purposes of:
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(i) determining if a person satisfies the character requirements under Section
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31A-23-205
for issuance or renewal of a license;
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(ii) determining if a person has failed to maintain the character requirements under
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Section
31A-23-205
; and
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(iii) preventing persons who violate the federal Violent Crime Control and Law
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Enforcement Act of 1994, 18 U.S.C. Secs. 1033 and 1034, from engaging in the business of
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insurance in the state.
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(c) If the department requests the criminal background information, the department
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shall:
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(i) pay to the Department of Public Safety the costs incurred by the Department of
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Public Safety in providing the department criminal background information under Subsection
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(3)(a)(i);
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(ii) pay to the Federal Bureau of Investigation the costs incurred by the Federal Bureau
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of Investigation in providing the department criminal background information under
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Subsection (3)(a)(ii); and
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(iii) charge the person applying for a license or for renewal of a license a fee equal to
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the aggregate of Subsections (3)(c)(i) and (ii).
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Section 3.
Section
31A-23-204
is amended to read:
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31A-23-204. License classifications.
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A resident or nonresident license issued under this chapter shall be issued under the
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classifications described under Subsections (1) through (6). These classifications are intended
219
to describe the matters to be considered under any education, examination, and training
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required of license applicants under Sections
31A-23-206
through
31A-23-208
.
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(1) An agent and broker license classification includes:
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(a) life insurance, including nonvariable contracts;
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(b) variable contracts;
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(c) accident and health insurance, including contracts issued to policyholders under
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Chapter 7 or 8;
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(d) property/liability insurance, which includes:
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(i) property insurance;
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(ii) liability insurance;
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(iii) surety and other bonds; and
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(iv) policies containing any combination of these coverages;
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(e) title insurance under one of the following categories:
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(i) search, including authority to act as a title marketing representative;
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(ii) escrow, including authority to act as a title marketing representative;
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(iii) search and escrow, including authority to act as a title marketing representative;
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and
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(iv) title marketing representative only;
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(f) workers' compensation insurance; and
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(g) personal lines.
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(2) A limited license classification includes:
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(a) limited line credit insurance;
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(b) travel insurance;
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(c) motor club insurance;
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(d) car rental related insurance;
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(e) legal expense insurance;
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(f) bail bond agent; [and]
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(g) customer service representative[.]; and
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(h) viatical settlements.
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(3) A consultant license classification includes:
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(a) life insurance, including nonvariable contracts;
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(b) variable contracts;
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(c) accident and health insurance, including contracts issued to policyholders under
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Chapter 7 or 8;
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(d) property/liability insurance, which includes:
254
(i) property insurance;
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(ii) liability insurance;
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(iii) surety and other bonds; and
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(iv) policies containing any combination of these coverages; and
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(e) workers' compensation insurance.
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(4) A holder of licenses under Subsections (1)(a) and (1)(c) has all qualifications
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necessary to act as a holder of a license under Subsection (2)(a).
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(5) (a) Upon satisfying the additional applicable requirements, a holder of a brokers
262
license may obtain a license to act as a surplus lines broker.
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(b) A license to act as a surplus lines broker gives the holder the authority to arrange
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insurance contracts with unauthorized insurers under Section
31A-15-103
, but only as to the
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types of insurance under Subsection (1) for which the broker holds a brokers license.
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(6) The commissioner may by rule recognize other agent, broker, limited license, or
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consultant license classifications as to kinds of insurance not listed under Subsections (1), (2),
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and (3).
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Section 4.
Section
31A-23-221
is enacted to read:
270
31A-23-221. Special requirements for providers and producers of viatical
271
settlements.
272
(1) Providers and producers of viatical settlements shall be licensed in accordance with
273
this title, with the additional requirements listed in this section.
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(2) Providers of viatical settlements shall:
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(a) provide a detailed plan of operation with their initial license application and with
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each renewal application;
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(b) if a legal entity, provide a certificate of good standing from the state of its domicile;
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and
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(c) provide an antifraud plan that meets the requirements of Section
31A-36-117
.
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(3) Providers and producers of viatical settlements shall provide with their initial
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license application information describing their viatical settlement experience, training, and
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education.
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(4) A provider or producer of viatical settlements shall provide to the commissioner,
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within 30 days after a change occurs, new or revised information concerning any of the
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following:
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(a) officers;
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(b) holders of more than 10% of its stock;
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(c) partners;
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(d) directors;
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(e) members; and
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(f) designated employees.
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Section 5.
Section
31A-36-101
is enacted to read:
293
CHAPTER 36. VIATICAL SETTLEMENTS ACT
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31A-36-101. Title.
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This chapter is known as the "Viatical Settlements Act."
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Section 6.
Section
31A-36-102
is enacted to read:
297
31A-36-102. Definitions.
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As used in this chapter:
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(1) (a) "Advertising" means any communication placed before the public to:
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(i) create an interest in viatical settlements; or
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(ii) induce a person to sell a policy or an interest in a policy pursuant to a viatical
302
settlement.
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(b) "Advertising" includes the following, if the requirements of Subsection (1)(a) are
304
met:
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(i) any written, electronic, or printed communication;
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(ii) any communication by means of recorded telephone messages;
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(iii) any communication transmitted on radio, television, the Internet, or similar
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communications media; and
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(iv) film strips, motion pictures, and videos.
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(2) "Business of viatical settlements" includes the following:
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(a) offering a viatical settlement;
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(b) solicitation of a viatical settlement;
313
(c) negotiation of a viatical settlement;
314
(d) procurement of a viatical settlement;
315
(e) effectuation of a viatical settlement;
316
(f) purchasing a viatical settlement;
317
(g) investing in a viatical settlement;
318
(h) financing a viatical settlement;
319
(i) monitoring a viatical settlement;
320
(j) tracking a viatical settlement;
321
(k) underwriting a viatical settlement;
322
(l) selling a viatical settlement;
323
(m) transferring a viatical settlement;
324
(n) assigning a viatical settlement;
325
(o) pledging a viatical settlement; and
326
(p) otherwise hypothecating viatical settlements.
327
(3) "Chronically ill" means:
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(a) being unable to perform at least two activities of daily living, such as eating,
329
toileting, moving from one place to another, bathing, dressing, or continence;
330
(b) requiring substantial supervision for protection from threats to health and safety
331
because of severe cognitive impairment; or
332
(c) having a level of disability similar to that described in Subsection (3)(a).
333
(4) (a) "Financing entity" means a person:
334
(i) that has direct ownership in a policy that is the subject of the viatical settlement;
335
(ii) whose principal activity related to the transaction is providing money to effect the
336
viatical settlement; and
337
(iii) that has an agreement in writing with one or more licensed providers of viatical
338
settlements to finance the acquisition of one or more viatical settlements.
339
(b) "Financing entity" includes, if the requirements of Subsection (5)(a) are met, the
340
following:
341
(i) an underwriter;
342
(ii) a placement agent;
343
(iii) an enhancer of credit;
344
(iv) a lender;
345
(v) a purchaser of securities; and
346
(vi) a purchaser of a policy from a provider of viatical settlements.
347
(c) "Financing entity" does not include a nonaccredited investor or a purchaser of
348
viatical settlements.
349
(5) "Policy" means:
350
(a) an individual or group policy;
351
(b) a group certificate; or
352
(c) a contract or arrangement of life insurance, whether or not delivered or issued for
353
delivery in Utah:
354
(i) affecting the rights of a resident of Utah; or
355
(ii) bearing a reasonable relation to Utah.
356
(6) (a) "Producer of viatical settlements" means a person that on behalf of a viator and
357
for consideration offers or attempts to negotiate a viatical settlement between the viator and
358
one or more providers of viatical settlements.
359
(b) "Producer of viatical settlements" does not include an attorney licensed to practice
360
law in any state, certified public accountant, or financial planner accredited by a nationally
361
recognized accrediting agency:
362
(i) that is retained by the viator; and
363
(ii) whose compensation is not paid directly or indirectly by a provider or purchaser of
364
viatical settlements.
365
(7) (a) "Provider of viatical settlements" means a person other than a viator that enters
366
into or effectuates a viatical settlement.
367
(b) "Provider of viatical settlements" does not include:
368
(i) a licensed lender that takes an assignment of a policy as security for a loan,
369
including a:
370
(A) bank;
371
(B) savings bank;
372
(C) savings and loan association;
373
(D) credit union; or
374
(E) other licensed lender;
375
(ii) the issuer of a policy providing accelerated benefits pursuant to the policy;
376
(iii) an authorized or eligible insurer that provides stop-loss coverage to:
377
(A) a provider of viatical settlements;
378
(B) a purchaser of viatical settlements;
379
(C) a financing entity;
380
(D) a special purpose entity; or
381
(E) a related provider trust;
382
(iv) a natural person that enters or effectuates no more than one agreement in a
383
calendar year for the transfer of policies for a value less than the expected death benefit;
384
(v) a financing entity;
385
(vi) a special purpose entity;
386
(vii) a related provider trust;
387
(viii) a purchaser of viatical settlements; or
388
(ix) any of the following that purchases a viaticated policy from a provider of viatical
389
settlements:
390
(A) an accredited investor as defined in Regulation D, Rule 501, 17 C.F.R. Sec.
391
230.501; or
392
(B) a qualified institutional buyer as defined in Rule 144A, 17 C.F.R. Sec. 230.144A.
393
(8) (a) "Purchaser of viatical settlements" means a person that, to derive an economic
394
benefit:
395
(i) gives a sum of money as consideration for a policy or an interest in the death
396
benefits of a policy; or
397
(ii) owns, acquires, or is entitled to a beneficial interest in a trust that:
398
(A) owns a viatical settlement contract; or
399
(B) is the beneficiary of a policy that has been or will be the subject of a viatical
400
settlement.
401
(b) "Purchaser of viatical settlements" does not include:
402
(i) a licensee under this chapter;
403
(ii) an accredited investor as defined in Regulation D, Rule 501, 17 C.F.R. Sec.
404
230.501;
405
(iii) qualified institutional buyer as defined in Rule 144A, 17 C.F.R. Sec. 230.144A;
406
(iv) a financing entity;
407
(v) a special purpose entity; or
408
(vi) a related provider trust.
409
(9) "Related provider trust" means a trust established by a licensed provider of viatical
410
settlements or a financing entity solely to hold the ownership of or beneficial interests in
411
purchased policies in connection with financing.
412
(10) "Special purpose entity" means an organization formed by a licensed provider of
413
viatical settlements solely to enable the provider to gain access to institutional markets for
414
capital.
415
(11) "Terminally ill" means having a condition that reasonably may be expected to
416
result in death within 24 months.
417
(12) (a) "Viatical settlement" means a written agreement for the payment of anything of
418
value, which is less than the expected death benefit of the policy, in exchange for the viator's
419
assignment, sale, transfer, devise, or bequest of the death benefit or ownership of any portion of
420
a policy.
421
(b) "Viatical settlement" includes:
422
(i) an agreement with a viator for a loan or other financing secured primarily by a
423
policy; and
424
(ii) an agreement with a viator to transfer ownership or change the beneficiary in the
425
future, regardless of the date of payment to the viator.
426
(c) "Viatical settlement" does not include:
427
(i) a loan by an insurer pursuant to the terms of a policy; or
428
(ii) a loan secured by the cash value of a policy.
429
(13) "Viaticated policy" means a policy that has been acquired by a provider of viatical
430
settlements pursuant to a viatical settlement.
431
(14) (a) "Viator" means any of the following that seeks to enter into a viatical
432
settlement:
433
(i) the owner of a policy; or
434
(ii) the holder of a certificate of insurance under a policy of group insurance.
435
(b) "Viator" is not limited to a person that is terminally ill or chronically ill except
436
where that limitation is expressly provided.
437
(c) "Viator" does not include:
438
(i) a licensee under this chapter;
439
(ii) an accredited investor as defined in Regulation D, Rule 501, 17 C.F.R. Sec.
440
230.501;
441
(iii) qualified institutional buyer as defined in Rule 144A, 17 C.F.R. Sec. 230.144A;
442
(iv) a financing entity;
443
(v) a special purpose entity; or
444
(vi) a related provider trust.
445
Section 7.
Section
31A-36-103
is enacted to read:
446
31A-36-103. Law governing.
447
If there is more than one viator on a single policy and the viators are residents of
448
different states, the law of the state in which the viator having the largest percentage ownership
449
resides governs the viatical settlement. If the viators own equal fractions of a policy, the
450
viators may agree in writing that the law of the state in which one resides governs the viatical
451
settlement.
452
Section 8.
Section
31A-36-104
is enacted to read:
453
31A-36-104. License requirements, revocation, and denial.
454
(1) A person may not, without first obtaining a license from the commissioner, operate
455
in or from this state as a provider or producer of viatical settlements. Viatical settlements are
456
included within the scope of the life insurance producer line of authority.
457
(2) In addition to the requirements in Sections
31A-23-216
and
31A-23-217
, the
458
commissioner may refuse to issue, suspend, revoke, or refuse to renew the license of a provider
459
or producer of viatical settlements if the commissioner finds that:
460
(a) a provider of viatical settlements demonstrates a pattern of unreasonable payments
461
to viators;
462
(b) the applicant or licensee, or an officer, partner, member, or key management
463
personnel:
464
(i) has, whether or not a judgment of conviction has been entered by the court, been
465
found guilty of, or pleaded guilty or nolo contendere to:
466
(A) a felony; or
467
(B) a misdemeanor involving fraud or moral turpitude; or
468
(ii) violated any provision of this chapter;
469
(c) a provider of viatical settlements has entered into a viatical settlement not approved
470
under this chapter;
471
(d) a provider of viatical settlements has failed to honor obligations of a viatical
472
settlement; or
473
(e) a provider of viatical settlements has assigned, transferred, or pledged a viaticated
474
policy to a person other than:
475
(i) a provider of viatical settlements licensed under this chapter;
476
(ii) a purchaser of the viatical settlement;
477
(iii) an accredited investor as defined in Regulation D, Rule 501, 17 C.F.R. Sec.
478
230.501;
479
(iv) qualified institutional buyer as defined in Rule 144A, 17 C.F.R. Sec. 230.144A;
480
(v) a financing entity;
481
(vi) a special purpose entity; or
482
(vii) a related provider trust.
483
(3) If the commissioner denies a license application or suspends, revokes, or refuses to
484
renew the license of a provider or producer of viatical settlements, the commissioner shall
485
conduct an adjudicative proceeding under Title 63, Chapter 46b, Administrative Procedures
486
Act.
487
Section 9.
Section
31A-36-105
is enacted to read:
488
31A-36-105. Filing and use of forms for viatical settlement and disclosure.
489
(1) Unless the form has been filed with the commissioner under Subsection
490
31A-21-201
(1), a person may not use a form for a:
491
(a) viatical settlement;
492
(b) disclosure to the viator;
493
(c) notice of intent to viaticate;
494
(d) verification of coverage; or
495
(e) application.
496
(2) The commissioner may prohibit the use of a form submitted under Subsection (1)
497
pursuant to Subsection
31A-21-201
(3).
498
(3) The commissioner may require the submission of advertising material before its
499
use.
500
Section 10.
Section
31A-36-106
is enacted to read:
501
31A-36-106. Reporting requirements and privacy.
502
(1) Each licensee under this chapter shall file with the commissioner on or before
503
March 1 of each year an annual statement containing such information as the commissioner
504
prescribes under Section
31A-36-119
, provided, however, that the information shall be limited
505
to those transactions where the viator is a resident of Utah.
506
(2) Except as otherwise allowed or required by law, the following may not disclose the
507
identity, financial information, or medical information of an insured to any other person:
508
(a) a provider of viatical settlements;
509
(b) a producer of viatical settlements;
510
(c) a producer of insurance;
511
(d) an information bureau;
512
(e) a rating agency or company; or
513
(f) any other person knowing the identity of an insured.
514
(3) Notwithstanding Subsection (2), a person may disclose the identity of an insured if
515
the disclosure is:
516
(a) necessary to effect a viatical settlement between the viator and a provider of viatical
517
settlements and both the viator and the insured have given prior written consent to the
518
disclosure;
519
(b) furnished in response to an investigation or examination by the commissioner or
520
another governmental officer or agency;
521
(c) furnished pursuant to Section
31A-36-114
;
522
(d) a term of or condition to the transfer of a policy by one provider of viatical
523
settlements to another provider;
524
(e) necessary to permit a financing entity, related provider trust, or special purpose
525
entity to finance the purchase of a policy by a provider of viatical settlements and the insured
526
has given prior written consent to the disclosure;
527
(f) necessary to allow the provider or producer of viatical settlements or their
528
authorized representatives to make contacts to determine the health status of the viator; or
529
(g) required to purchase stop-loss coverage.
530
Section 11.
Section
31A-36-107
is enacted to read:
531
31A-36-107. Examinations and retention of records.
532
(1) The commissioner may conduct an examination of a licensee under this chapter in
533
accordance with Sections
31A-2-203
,
31A-2-203.5
,
31A-2-204
, and
31A-2-205
.
534
(2) A person required to be licensed under this chapter shall retain for five years copies
535
of all:
536
(a) the following records, whether proposed, offered, or executed, from the date of the
537
proposal, offer, or execution, whichever is later:
538
(i) contracts;
539
(ii) purchase agreements;
540
(iii) underwriting documents;
541
(iv) policy forms; and
542
(v) applications;
543
(b) checks, drafts, and other evidence or documentation relating to the payment,
544
transfer, or release of money, from the date of the transaction; and
545
(c) records and documents related to the requirements of this chapter.
546
(3) This section does not relieve a person of the obligation to produce a document
547
described in Subsection (1) to the commissioner after the expiration of the relevant period if
548
the person has retained the document.
549
(4) Records required by this section to be retained must be legible and complete. They
550
may be retained in any form or by any process that accurately reproduces or is a durable
551
medium for the reproduction of the record.
552
(5) An examiner may not be appointed by the commissioner if the examiner, either
553
directly or indirectly, has a conflict of interest or is affiliated with the management of or owns a
554
pecuniary interest in any person subject to examination under this chapter. This section does
555
not automatically preclude an examiner from being:
556
(a) a viator;
557
(b) an insured in a viaticated policy; or
558
(c) a beneficiary in a policy that is proposed to be viaticated.
559
(6) (a) Examinees under this section shall reimburse the cost of any examination to the
560
department consistent with Section
31A-2-205
.
561
(b) Notwithstanding Subsection (6)(a), individual producers of viatical settlements are
562
not subject to Section
31A-2-205
.
563
Section 12.
Section
31A-36-108
is enacted to read:
564
31A-36-108. Required disclosures.
565
(1) With each application for a viatical settlement, a provider or producer of viatical
566
settlements shall furnish to the viator any disclosures the commissioner may require under
567
Section
31A-36-119
, in a separate document signed by the viator and the provider or producer,
568
no later than the time the application for the viatical settlement is signed by all the parties.
569
(2) A provider of viatical settlements shall furnish to the viator any disclosures the
570
commissioner may require under Section
31A-36-119
, conspicuously displayed in the viatical
571
settlement or in a separate document signed by the viator and the provider of viatical
572
settlements, no later than the time the viatical settlement is signed by all parties.
573
Section 13.
Section
31A-36-109
is enacted to read:
574
31A-36-109. General requirements.
575
(1) If a provider of viatical settlements transfers ownership or changes the beneficiary
576
of a viaticated policy, the provider shall inform the insured of the transfer or change within 20
577
calendar days.
578
(2) A provider of viatical settlements that enters a viatical settlement shall first obtain:
579
(a) if the viator is the insured, a written statement from a licensed attending physician
580
that the viator is of sound mind and under no constraint or undue influence to enter a viatical
581
settlement;
582
(b) a witnessed document in which the viator represents that:
583
(i) the viator has a full and complete understanding of the viatical settlement and the
584
benefits of the policy;
585
(ii) the viator has entered the viatical settlement freely and voluntarily; and
586
(iii) if applicable, the insured is terminally ill or chronically ill and that the illness was
587
diagnosed after the policy was issued; and
588
(c) a document in which the insured consents to the release of the insured's medical
589
records to:
590
(i) a provider of viatical settlements;
591
(ii) a producer of viatical settlements; and
592
(iii) the insurer that issued the policy covering the insured.
593
(3) Within 20 calendar days after a viator executes documents necessary to transfer
594
rights under a policy, or enters into an agreement in any form, express or implied, to viaticate
595
the policy, the provider of viatical settlements shall give written notice to the issuer of the
596
policy that the policy has or will become viaticated. The notice must be accompanied by a
597
copy of the documents required by Subsection (4).
598
(4) The provider of viatical settlements shall deliver a copy of the following to the
599
insurer that issued the policy that is the subject of the viatical settlement:
600
(a) the medical release required under Subsection (2)(c);
601
(b) a copy of the viator's application for the viatical settlement; and
602
(c) the notice required under Subsection (3).
603
(5) The insurer shall complete and return a request for verification of coverage not later
604
than 30 calendar days after the date the request is received. In its response the insurer shall
605
indicate whether the insurer intends to pursue an investigation regarding the validity of the
606
insurance contract.
607
(6) All medical information solicited or obtained by a licensee under this chapter is
608
subject to:
609
(a) other laws of this state relating to the confidentiality of the information; and
610
(b) a rule relating to privacy of medical or personal information promulgated by the
611
commissioner under Title V, Section 505 of the Gramm-Leach-Bliley Act of 1999, 15 U.S.C.
612
Sec. 6805.
613
(7) A viatical settlement entered into in this state must reserve to the viator an
614
unconditional right to terminate the viatical settlement within 15 calendar days after the viator
615
receives the proceeds of the settlement. If the insured dies during that period, the settlement is
616
terminated and all proceeds, premiums, loans, and loan interest that have been paid by the
617
provider or purchaser of the viatical settlement must be repaid to the provider or purchaser of
618
the viatical settlement.
619
(8) (a) Contact with an insured to determine the health status of the insured after a
620
viatical settlement may be made only by a provider or producer of viatical settlements that is
621
licensed in this state, or its authorized representative, and no more than:
622
(i) once every three months if the insured has a life expectancy of one year or more; or
623
(ii) once every month if the insured has a life expectancy of less than one year.
624
(b) The provider or producer of viatical settlements shall explain the procedure for the
625
contacts allowed under this Subsection (8) to the viator when the application for the viatical
626
settlement is signed by all parties.
627
(c) The limitations of this Subsection (8) do not apply to contacts for purposes other
628
than determining health status.
629
(d) A provider or producer of viatical settlements is responsible for the acts of its
630
authorized representative in violation of this Subsection (8).
631
(9) The trustee of a related provider trust must agree in writing with the provider of
632
viatical settlements that:
633
(a) the provider is responsible for ensuring compliance with all statutory and regulatory
634
requirements; and
635
(b) the trustee will make all records and files related to viatical settlements available to
636
the commissioner as if those records and files were maintained directly by the provider.
637
(10) Regardless of the method of compensation, a producer of viatical settlements:
638
(a) represents only the viator; and
639
(b) owes a fiduciary duty to the viator to act according to the viator's instructions and in
640
the best interest of the viator.
641
Section 14.
Section
31A-36-110
is enacted to read:
642
31A-36-110. Payment and document requirements.
643
(1) A provider of viatical settlements shall instruct the viator to send the executed
644
documents required to effect the change in ownership or assignment or change of beneficiary
645
of the affected policy to a designated independent escrow agent. Within three business days
646
after the date the escrow agent receives the documents, or within three business days after the
647
provider of viatical settlements receives the documents if by mistake they are sent directly to
648
the provider of viatical settlements, the escrow agent shall deposit the proceeds of the
649
settlement into an escrow or trust account maintained in a regulated financial institution whose
650
deposits are insured by a federal deposit insurer.
651
(2) Upon completion of the requirements of Subsection (1), the escrow agent shall
652
deliver to the provider of viatical settlements the original documents executed by the viator.
653
Upon the provider's receipt from the insurer of an acknowledgment of the change in ownership
654
or assignment or change of beneficiary of the affected policy, the provider of viatical
655
settlements shall instruct the escrow agent to pay the proceeds of the settlement to the viator.
656
(3) Payment to the viator must be made within three business days after the date the
657
provider of viatical settlements received the acknowledgment from the insurer. Failure to
658
make the payment within that time makes the viatical settlement voidable by the viator for lack
659
of consideration until payment is tendered to and accepted by the viator.
660
Section 15.
Section
31A-36-111
is enacted to read:
661
31A-36-111. Prohibited acts.
662
(1) A viator may not enter into a viatical settlement within two years after the date of
663
issuance of the policy to which the settlement relates unless the viator certifies to the provider
664
of viatical settlements that one of the following is satisfied:
665
(a) the policy was issued upon the viator's exercise of conversion rights arising out of a
666
group or individual policy, provided:
667
(i) the total time covered under the conversion policy plus the time covered under the
668
prior policy is at least 24 months; and
669
(ii) the time covered under a group policy, calculated without regard to any change in
670
insurance carriers, has been continuous and under the same group sponsorship;
671
(b) the viator is a charitable organization exempt from taxation under 26 U.S.C. Sec.
672
501(c)(3);
673
(c) the viator is not a natural person; or
674
(d) the viator submits to the provider of viatical settlements independent evidence that
675
within the two-year period:
676
(i) the viator or insured is terminally ill;
677
(ii) the viator or insured is chronically ill;
678
(iii) the spouse of the viator has died;
679
(iv) the viator has divorced the viator's spouse;
680
(v) the viator has retired from full-time employment;
681
(vi) the viator has become physically or mentally disabled and a physician determines
682
that the disability precludes the viator from maintaining full-time employment;
683
(vii) (A) the viator was the employer of the insured when the policy or certificate was
684
issued; and
685
(B) the employment relationship has terminated;
686
(viii) a final judgment or order has been entered or issued by a court of competent
687
jurisdiction, on the application of a creditor of the viator:
688
(A) adjudging the viator bankrupt or insolvent;
689
(B) approving a petition for reorganization of the viator; or
690
(C) appointing a receiver, trustee, or liquidator for all or a substantial part of the
691
viator's assets;
692
(ix) the viator experiences a significant decrease in income that is unexpected and
693
impairs the viator's reasonable ability to pay the policy premium;
694
(x) the viator disposes of the viator's ownership in a closely held corporation; or
695
(xi) the insured disposes of the insured's ownership in a closely held corporation.
696
(2) When the provider of viatical settlements submits a request to the insurer to verify
697
coverage, the provider of viatical settlements shall submit to the insurer the following:
698
(a) copies of the independent evidence required under Subsection (1)(d); and
699
(b) documents required under Subsection
31A-36-109
(2).
700
(3) If a provider of viatical settlements submits to an insurer a copy of the owner's or
701
insured's certification that one of the events described in Subsection (1)(d) has occurred, the
702
certification conclusively establishes that the viatical settlement satisfies the requirements of
703
this section, and the insurer shall timely respond to the provider's request to effect a transfer of
704
the policy.
705
Section 16.
Section
31A-36-112
is enacted to read:
706
31A-36-112. Advertising regulations.
707
(1) (a) Each licensee under this chapter shall establish and continuously maintain a
708
system of control over the content, form, and method of dissemination of all advertisements of
709
its contracts and services.
710
(b) Each advertisement is the responsibility of the licensee as well as the person that
711
creates or presents it.
712
(c) A system of control must include at least annual notification to persons authorized
713
by the licensee that disseminate advertisements of the requirements and procedures for
714
approval before use of any advertisements not furnished by the licensee.
715
(2) An advertisement must be truthful and not misleading in fact or by implication, as
716
determined by the commissioner from the overall impression it may reasonably be expected to
717
create upon a person of average education or intelligence in the segment of the public to which
718
it is directed.
719
(3) False or misleading statements are not remedied by:
720
(a) making a viatical settlement available for inspection before it is consummated; or
721
(b) offering to refund payment if the viator is not satisfied within the period prescribed
722
in Subsection
31A-36-109
(7).
723
Section 17.
Section
31A-36-113
is enacted to read:
724
31A-36-113. Fraud.
725
(1) As used in this section:
726
(a) "Recklessly" means engaging in conduct:
727
(i) where a person knows or should have known of a substantial likelihood of the
728
existence of the relevant facts or risks; and
729
(ii) involving a significant deviation from acceptable standards of conduct.
730
(2) A person may not, knowingly or with intent to defraud, to deprive another of
731
property or for pecuniary gain, do or permit its employees or agents to engage in any of the
732
following acts:
733
(a) present, cause to be presented or prepare with knowledge or belief that it will be
734
presented, false information to or by a provider or producer of viatical settlements, a financing
735
entity, an insurer, a provider of insurance or any other person, or to conceal information, as part
736
of, in support of or concerning a fact material to:
737
(i) an application for the issuance of a policy or viatical settlement;
738
(ii) the underwriting of a policy or viatical settlement;
739
(iii) a claim for payment or other benefit under a policy or viatical settlement;
740
(iv) a premium paid on a policy;
741
(v) a payment or change of beneficiary or ownership pursuant to a policy or viatical
742
settlement;
743
(vi) the reinstatement or conversion of a policy;
744
(vii) the solicitation, offer, effectuation, or sale of a policy or viatical settlement;
745
(viii) the issuance of written evidence of a policy or viatical settlement; or
746
(ix) a financing transaction;
747
(b) in furtherance of a fraud or to prevent detection of a fraud:
748
(i) remove, conceal, alter, destroy, or sequester from the commissioner assets or
749
records of a licensee under this chapter or other person engaged in the business of viatical
750
settlements;
751
(ii) misrepresent or conceal the financial condition of a licensee, a financing entity, an
752
insurer, or other person;
753
(iii) transact the business of viatical settlements in violation of this chapter; or
754
(iv) file with the commissioner or analogous officer of another jurisdiction a document
755
containing false information or otherwise conceal information about a material fact from the
756
commissioner or analogous officer;
757
(c) embezzle, steal, misappropriate, or convert money, premiums, credits, or other
758
property of a provider of viatical settlements, a viator, an insurer, an insured, an owner of a
759
policy, or other person engaged in the business of viatical settlements or insurance;
760
(d) recklessly enter into, negotiate, or otherwise deal in a viatical settlement, the
761
subject of which is a policy obtained where the viator or the viator's agent intended to defraud
762
the policy's issuer by:
763
(i) presenting false information concerning any fact material to the policy; or
764
(ii) concealing, to mislead another, information concerning any fact material to the
765
policy;
766
(e) attempt to commit, assist, aid, abet, or conspire to commit an act or omission
767
described in this Subsection (2).
768
(3) A person may not knowingly or intentionally interfere with the enforcement of the
769
provisions of this chapter or an investigation of a possible violation of this chapter.
770
(4) A person engaged in the business of viatical settlements may not knowingly or
771
intentionally permit any person convicted of a felony involving dishonesty or breach of trust to
772
participate in the business of viatical settlements.
773
(5) An application or contract for a viatical settlement, however transmitted, shall
774
contain the following or a substantially similar statement: "A person that knowingly presents
775
false information in an application for insurance or a viatical settlement is guilty of a crime and
776
may be subject to fines and confinement in prison." The lack of such a statement is not a
777
defense in a prosecution for violation of this section.
778
Section 18.
Section
31A-36-114
is enacted to read:
779
31A-36-114. Reporting of fraud and immunity.
780
(1) A person engaged in the business of viatical settlements that knows or reasonably
781
believes that a violation of Section
31A-36-113
is being, has been, or will be committed shall
782
provide to the commissioner the information required by, and in a manner prescribed by, the
783
commissioner.
784
(2) Any other person that knows or reasonably believes that a violation of Section
785
31A-36-113
is being, has been, or will be committed may furnish to the commissioner the
786
information required by, and in a manner prescribed by, the commissioner.
787
(3) Except as provided in Subsection (4), a person furnishing information of the kind
788
described in this section is immune from liability and civil action if the information is
789
furnished to or received from:
790
(a) the commissioner or the commissioner's employees, agents, or representatives;
791
(b) federal, state, or local law enforcement or regulatory officials or their employees,
792
agents, or representatives;
793
(c) another person involved in the prevention or detection of violations of Section
794
31A-36-113
or that person's employees, agents, or representatives;
795
(d) the following organizations or their employees, agents, or representatives:
796
(i) the National Association of Insurance Commissioners;
797
(ii) the National Association of Securities Dealers;
798
(iii) the North American Securities Administrators Association; or
799
(iv) another regulatory body overseeing life insurance, viatical settlements, securities,
800
or investment fraud; or
801
(e) the insurer that issued the policy concerned in the information.
802
(4) The immunity provided in Subsection (3) does not extend to a statement made with
803
actual malice. In an action brought against a person for filing a report or furnishing other
804
information concerning a violation of this section, the plaintiff must plead specifically that the
805
defendant acted with actual malice.
806
(5) A person identified in Subsection (3) shall be entitled to an award of attorney's fees
807
and costs if:
808
(a) the person is the prevailing party in a civil cause of action for libel, slander, or any
809
other relevant tort arising out of activities in carrying out the provisions of this chapter; and
810
(b) the action did not have a reasonable basis in law or fact at the time it was initiated.
811
(6) This section does not supplant or modify any other privilege or immunity at
812
common law or under another statute.
813
Section 19.
Section
31A-36-115
is enacted to read:
814
31A-36-115. Confidentiality.
815
(1) The following shall be classified as protected records under Title 63, Chapter 2,
816
Government Records Access and Management Act:
817
(a) a document or information furnished pursuant to Section
31A-36-114
; and
818
(b) a document or information obtained by the commissioner in an investigation of a
819
violation of Section
31A-36-113
.
820
(2) Subsection (1) does not prohibit the commissioner from disclosing documents or
821
evidence so furnished or obtained:
822
(a) in an administrative or judicial proceeding to enforce laws administered by the
823
commissioner;
824
(b) to federal, state, or local law enforcement or regulatory agencies;
825
(c) to an organization established to detect and prevent fraudulent viatical settlement
826
acts;
827
(d) to the National Association of Insurance Commissioners; or
828
(e) to a person engaged in the business of viatical settlements that is aggrieved by the
829
violation.
830
(3) Disclosure of a document or evidence under Subsection (2) does not abrogate or
831
modify the privilege granted in Subsection (1).
832
Section 20.
Section
31A-36-116
is enacted to read:
833
31A-36-116. Other law enforcement or regulatory authority.
834
This chapter does not:
835
(1) preempt the authority or relieve the duty of other law enforcement or regulatory
836
agencies to investigate, examine, and prosecute suspected violations of law;
837
(2) prevent or prohibit a person from disclosing voluntarily information concerning
838
viatical settlement fraud to a law enforcement or regulatory agency other than the insurance
839
department; or
840
(3) limit the powers granted elsewhere by law to the commissioner or an insurance
841
fraud unit to investigate and examine possible violations of law and to take appropriate action.
842
Section 21.
Section
31A-36-117
is enacted to read:
843
31A-36-117. Antifraud initiatives.
844
(1) The following shall establish and maintain antifraud initiatives which are
845
reasonably calculated to prevent, detect, and assist in the prosecution of violations of Section
846
31A-36-113
:
847
(a) a provider of viatical settlements; and
848
(b) an agency that is a producer of viatical settlements.
849
(2) The commissioner may order, or a licensee may request and the commissioner may
850
approve, modifications of the measures otherwise required under this section, more or less
851
restrictive than those measures, as necessary to protect against fraud.
852
(3) Antifraud initiatives shall include:
853
(a) fraud investigators, that may be either:
854
(i) employees of a provider or producer of viatical settlements; or
855
(ii) independent contractors;
856
(b) an antifraud plan submitted to the commissioner, which shall include:
857
(i) a description of the procedures for:
858
(A) detecting and investigating possible violations of Section
31A-36-113
; and
859
(B) resolving material inconsistencies between medical records and applications for
860
insurance;
861
(ii) a description of the procedures for reporting possible violations to the
862
commissioner;
863
(iii) a description of the plan for educating and training underwriters and other
864
personnel against fraud; and
865
(iv) a description or chart of the organizational arrangement of the personnel
866
responsible for detecting and investigating possible violations of Section
31A-36-113
and for
867
resolving material inconsistencies between medical records and applications for insurance.
868
(4) A plan submitted to the commissioner shall be classified as a protected record
869
under Title 63, Chapter 2, Government Records Access and Management Act.
870
Section 22.
Section
31A-36-118
is enacted to read:
871
31A-36-118. Criminal penalties and restitution.
872
(1) Persons subject to this chapter are subject to:
873
(a) the enforcement penalties and procedures of Section
31A-2-308
for administrative
874
violations of this title;
875
(b) prosecution under Section
76-6-412
for criminal activities involving viatical
876
settlements; or
877
(c) prosecution under Section
31A-31-103
for insurance fraud involving viatical
878
settlements.
879
(2) A person found to be in violation of this chapter may:
880
(a) be ordered to pay restitution to persons aggrieved by the violation;
881
(b) be ordered to pay a forfeiture; or
882
(c) be imprisoned if found guilty of any criminal law by a court of competent
883
jurisdiction.
884
Section 23.
Section
31A-36-119
is enacted to read:
885
31A-36-119. Authority to promulgate rules.
886
The commissioner may adopt rules to:
887
(1) establish the requirements for the annual statement required under Section
888
31A-36-106
;
889
(2) establish standards for evaluating the reasonableness of payments under viatical
890
settlements to persons chronically ill or terminally ill, including the regulation of the rates of
891
discount used to determine the amount paid in exchange for an assignment, transfer, sale,
892
devise, or bequest of a benefit under a policy;
893
(3) establish appropriate licensing requirements, fees, and standards for continued
894
licensure for providers and producers of viatical settlements;
895
(4) require a bond or otherwise ensure financial accountability of providers and
896
producers of viatical settlements;
897
(5) govern the relationship of insurers with providers and producers of viatical
898
settlements during the viatication of a policy;
899
(6) determine the specific disclosures required under Section
31A-36-108
;
900
(7) determine whether advertising for viatical settlements violates Section
31A-36-112
;
901
and
902
(8) determine the information to be provided to the commissioner under Section
903
31A-36-114
and the manner of providing the information.
904
Section 24.
Section
61-1-13
is amended to read:
905
61-1-13. Definitions.
906
As used in this chapter:
907
(1) "Affiliate" means a person that, directly or indirectly, through one or more
908
intermediaries, controls or is controlled by, or is under common control with a person
909
specified.
910
(2) "Agent" means any individual other than a broker-dealer who represents a
911
broker-dealer or issuer in effecting or attempting to effect purchases or sales of securities.
912
"Agent" does not include an individual who represents:
913
(a) an issuer, who receives no commission or other remuneration, directly or indirectly,
914
for effecting or attempting to effect purchases or sales of securities in this state, and who:
915
(i) effects transactions in securities exempted by Subsection
61-1-14
(1)(a), (b), (c), (i),
916
or (j);
917
(ii) effects transactions exempted by Subsection
61-1-14
(2);
918
(iii) effects transactions in a covered security as described in Sections 18(b)(3) and
919
18(b)(4)(D) of the Securities Act of 1933; or
920
(iv) effects transactions with existing employees, partners, officers, or directors of the
921
issuer; or
922
(b) a broker-dealer in effecting transactions in this state limited to those transactions
923
described in Section 15(h)(2) of the Securities Exchange Act of 1934. A partner, officer, or
924
director of a broker-dealer or issuer, or a person occupying a similar status or performing
925
similar functions, is an agent only if he otherwise comes within this definition.
926
(3) "Broker-dealer" means any person engaged in the business of effecting transactions
927
in securities for the account of others or for his own account. "Broker-dealer" does not include:
928
(a) an agent;
929
(b) an issuer;
930
(c) a bank, savings institution, or trust company;
931
(d) a person who has no place of business in this state if:
932
(i) the person effects transactions in this state exclusively with or through:
933
(A) the issuers of the securities involved in the transactions;
934
(B) other broker-dealers; or
935
(C) banks, savings institutions, trust companies, insurance companies, investment
936
companies as defined in the Investment Company Act of 1940, pension or profit-sharing trusts,
937
or other financial institutions or institutional buyers, whether acting for themselves or as
938
trustees; or
939
(ii) during any period of 12 consecutive months the person does not direct more than
940
15 offers to sell or buy into this state in any manner to persons other than those specified in
941
Subsection (3)(d)(i), whether or not the offeror or any of the offerees is then present in this
942
state;
943
(e) a general partner who organizes and effects transactions in securities of three or
944
fewer limited partnerships, of which the person is the general partner, in any period of 12
945
consecutive months;
946
(f) a person whose participation in transactions in securities is confined to those
947
transactions made by or through a broker-dealer licensed in this state;
948
(g) a person who is a real estate broker licensed in this state and who effects
949
transactions in a bond or other evidence of indebtedness secured by a real or chattel mortgage
950
or deed of trust, or by an agreement for the sale of real estate or chattels, if the entire mortgage,
951
deed or trust, or agreement, together with all the bonds or other evidences of indebtedness
952
secured thereby, is offered and sold as a unit;
953
(h) a person effecting transactions in commodity contracts or commodity options; or
954
(i) other persons as the division, by rule or order, may designate, consistent with the
955
public interest and protection of investors, as not within the intent of this Subsection (3).
956
(4) "Buy" or "purchase" means every contract for purchase of, contract to buy, or
957
acquisition of a security or interest in a security for value.
958
(5) "Commodity" means, except as otherwise specified by the division by rule:
959
(a) any agricultural, grain, or livestock product or byproduct, except real property or
960
any timber, agricultural, or livestock product grown or raised on real property and offered or
961
sold by the owner or lessee of the real property;
962
(b) any metal or mineral, including a precious metal, except a numismatic coin whose
963
fair market value is at least 15% greater than the value of the metal it contains;
964
(c) any gem or gemstone, whether characterized as precious, semi-precious, or
965
otherwise;
966
(d) any fuel, whether liquid, gaseous, or otherwise;
967
(e) any foreign currency; and
968
(f) all other goods, articles, products, or items of any kind, except any work of art
969
offered or sold by art dealers, at public auction or offered or sold through a private sale by the
970
owner of the work.
971
(6) "Commodity contract" means any account, agreement, or contract for the purchase
972
or sale, primarily for speculation or investment purposes and not for use or consumption by the
973
offeree or purchaser, of one or more commodities, whether for immediate or subsequent
974
delivery or whether delivery is intended by the parties, and whether characterized as a cash
975
contract, deferred shipment or deferred delivery contract, forward contract, futures contract,
976
installment or margin contract, leverage contract, or otherwise.
977
(a) Any commodity contract offered or sold shall, in the absence of evidence to the
978
contrary, be presumed to be offered or sold for speculation or investment purposes.
979
(b) (i) A commodity contract shall not include any contract or agreement which
980
requires, and under which the purchaser receives, within 28 calendar days from the payment in
981
good funds any portion of the purchase price, physical delivery of the total amount of each
982
commodity to be purchased under the contract or agreement.
983
(ii) The purchaser is not considered to have received physical delivery of the total
984
amount of each commodity to be purchased under the contract or agreement when the
985
commodity or commodities are held as collateral for a loan or are subject to a lien of any
986
person when the loan or lien arises in connection with the purchase of each commodity or
987
commodities.
988
(7) (a) "Commodity option" means any account, agreement, or contract giving a party
989
to the option the right but not the obligation to purchase or sell one or more commodities or
990
one or more commodity contracts, or both whether characterized as an option, privilege,
991
indemnity, bid, offer, put, call, advance guaranty, decline guaranty, or otherwise.
992
(b) It does not include an option traded on a national securities exchange registered
993
with the United States Securities and Exchange Commission or on a board of trade designated
994
as a contract market by the Commodity Futures Trading Commission.
995
(8) "Director" means the director of the Division of Securities charged with the
996
administration and enforcement of this chapter.
997
(9) "Division" means the Division of Securities established by Section
61-1-18
.
998
(10) "Executive director" means the executive director of the Department of
999
Commerce.
1000
(11) "Federal covered adviser" means a person who is registered under Section 203 of
1001
the Investment Advisers Act of 1940 or is excluded from the definition of "investment adviser"
1002
under Section 202(a)(11) of the Investment Advisers Act of 1940.
1003
(12) "Federal covered security" means any security that is a covered security under
1004
Section 18(b) of the Securities Act of 1933 or rules or regulations promulgated thereunder.
1005
(13) "Fraud," "deceit," and "defraud" are not limited to their common-law meanings.
1006
(14) "Guaranteed" means guaranteed as to payment of principal or interest as to debt
1007
securities, or dividends as to equity securities.
1008
(15) (a) "Investment adviser" means any person who, for compensation, engages in the
1009
business of advising others, either directly or through publications or writings, as to the value
1010
of securities or as to the advisability of investing in, purchasing, or selling securities, or who,
1011
for compensation and as a part of a regular business, issues or promulgates analyses or reports
1012
concerning securities.
1013
(b) "Investment adviser" also includes financial planners and other persons who, as an
1014
integral component of other financially related services, provide the foregoing investment
1015
advisory services to others for compensation and as part of a business or who hold themselves
1016
out as providing the foregoing investment advisory services to others for compensation.
1017
(c) "Investment adviser" does not include:
1018
(i) an investment adviser representative;
1019
(ii) a bank, savings institution, or trust company;
1020
(iii) a lawyer, accountant, engineer, or teacher whose performance of these services is
1021
solely incidental to the practice of his profession;
1022
(iv) a broker-dealer or its agent whose performance of these services is solely
1023
incidental to the conduct of its business as a broker-dealer and who receives no special
1024
compensation for them;
1025
(v) a publisher of any bona fide newspaper, news column, news letter, news magazine,
1026
or business or financial publication or service, of general, regular, and paid circulation, whether
1027
communicated in hard copy form, or by electronic means, or otherwise, that does not consist of
1028
the rendering of advice on the basis of the specific investment situation of each client;
1029
(vi) any person who is a federal covered adviser; or
1030
(vii) such other persons not within the intent of this Subsection (15) as the division
1031
may by rule or order designate.
1032
(16) "Investment adviser representative" means any partner, officer, director of, or a
1033
person occupying a similar status or performing similar functions, or other individual, except
1034
clerical or ministerial personnel, who:
1035
(a) (i) is employed by or associated with an investment adviser who is licensed or
1036
required to be licensed under this chapter; or
1037
(ii) has a place of business located in this state and is employed by or associated with a
1038
federal covered adviser; and
1039
(b) does any of the following:
1040
(i) makes any recommendations or otherwise renders advice regarding securities;
1041
(ii) manages accounts or portfolios of clients;
1042
(iii) determines which recommendation or advice regarding securities should be given;
1043
(iv) solicits, offers, or negotiates for the sale of or sells investment advisory services; or
1044
(v) supervises employees who perform any of the foregoing.
1045
(17) (a) "Issuer" means any person who issues or proposes to issue any security or has
1046
outstanding a security that it has issued.
1047
(b) With respect to a preorganization certificate or subscription, "issuer" means the
1048
promoter or the promoters of the person to be organized.
1049
(c) With respect to:
1050
(i) interests in trusts, including but not limited to collateral trust certificates, voting
1051
trust certificates, and certificates of deposit for securities; or
1052
(ii) shares in an investment company without a board of directors, "issuer" means the
1053
person or persons performing the acts and assuming duties of a depositor or manager under the
1054
provisions of the trust or other agreement or instrument under which the security is issued.
1055
(d) With respect to an equipment trust certificate, a conditional sales contract, or
1056
similar securities serving the same purpose, "issuer" means the person by whom the equipment
1057
or property is to be used.
1058
(e) With respect to interests in partnerships, general or limited, "issuer" means the
1059
partnership itself and not the general partner or partners.
1060
(f) With respect to certificates of interest or participation in oil, gas, or mining titles or
1061
leases or in payment out of production under the titles or leases, "issuer" means the owner of
1062
the title or lease or right of production, whether whole or fractional, who creates fractional
1063
interests therein for the purpose of sale.
1064
(18) "Nonissuer" means not directly or indirectly for the benefit of the issuer.
1065
(19) "Person" means an individual, a corporation, a partnership, a limited liability
1066
company, an association, a joint-stock company, a joint venture, a trust where the interests of
1067
the beneficiaries are evidenced by a security, an unincorporated organization, a government, or
1068
a political subdivision of a government.
1069
(20) "Precious metal" means the following, whether in coin, bullion, or other form:
1070
(a) silver;
1071
(b) gold;
1072
(c) platinum;
1073
(d) palladium;
1074
(e) copper; and
1075
(f) such other substances as the division may specify by rule.
1076
(21) "Promoter" means any person who, acting alone or in concert with one or more
1077
persons, takes initiative in founding or organizing the business or enterprise of a person.
1078
(22) (a) "Sale" or "sell" includes every contract for sale of, contract to sell, or
1079
disposition of, a security or interest in a security for value.
1080
(b) "Offer" or "offer to sell" includes every attempt or offer to dispose of, or
1081
solicitation of an offer to buy, a security or interest in a security for value.
1082
(c) The following are examples of the definitions in Subsections (22)(a) and (b):
1083
(i) any security given or delivered with or as a bonus on account of any purchase of a
1084
security or any other thing, is part of the subject of the purchase, and has been offered and sold
1085
for value;
1086
(ii) a purported gift of assessable stock is an offer or sale as is each assessment levied
1087
on the stock;
1088
(iii) an offer or sale of a security that is convertible into, or entitles its holder to acquire
1089
or subscribe to another security of the same or another issuer is an offer or sale of that security,
1090
and also an offer of the other security, whether the right to convert or acquire is exercisable
1091
immediately or in the future;
1092
(iv) any conversion or exchange of one security for another shall constitute an offer or
1093
sale of the security received in a conversion or exchange, and the offer to buy or the purchase
1094
of the security converted or exchanged;
1095
(v) securities distributed as a dividend wherein the person receiving the dividend
1096
surrenders the right, or the alternative right, to receive a cash or property dividend is an offer or
1097
sale;
1098
(vi) a dividend of a security of another issuer is an offer or sale; or
1099
(vii) the issuance of a security under a merger, consolidation, reorganization,
1100
recapitalization, reclassification, or acquisition of assets shall constitute the offer or sale of the
1101
security issued as well as the offer to buy or the purchase of any security surrendered in
1102
connection therewith, unless the sole purpose of the transaction is to change the issuer's
1103
domicile.
1104
(d) The terms defined in Subsections (22)(a) and (b) do not include:
1105
(i) a good faith gift;
1106
(ii) a transfer by death;
1107
(iii) a transfer by termination of a trust or of a beneficial interest in a trust;
1108
(iv) a security dividend not within Subsection (22)(c)(v) or (vi);
1109
(v) a securities split or reverse split; or
1110
(vi) any act incident to a judicially approved reorganization in which a security is
1111
issued in exchange for one or more outstanding securities, claims, or property interests, or
1112
partly in such exchange and partly for cash.
1113
(23) "Securities Act of 1933," "Securities Exchange Act of 1934," "Public Utility
1114
Holding Company Act of 1935," and "Investment Company Act of 1940" mean the federal
1115
statutes of those names as amended before or after the effective date of this chapter.
1116
(24) (a) "Security" means any:
1117
(i) note;
1118
(ii) stock;
1119
(iii) treasury stock;
1120
(iv) bond;
1121
(v) debenture;
1122
(vi) evidence of indebtedness;
1123
(vii) certificate of interest or participation in any profit-sharing agreement;
1124
(viii) collateral-trust certificate;
1125
(ix) preorganization certificate or subscription;
1126
(x) transferable share;
1127
(xi) investment contract;
1128
(xii) burial certificate or burial contract;
1129
(xiii) voting-trust certificate;
1130
(xiv) certificate of deposit for a security;
1131
(xv) certificate of interest or participation in an oil, gas, or mining title or lease or in
1132
payments out of production under such a title or lease;
1133
(xvi) commodity contract or commodity option;
1134
(xvii) interest in a limited liability company; [or]
1135
(xviii) viatical settlement interest; or
1136
[(xviii)] (xix) in general, any interest or instrument commonly known as a "security,"
1137
or any certificate of interest or participation in, temporary or interim certificate for, receipt for,
1138
guarantee of, or warrant or right to subscribe to or purchase any of the foregoing.
1139
(b) "Security" does not include any:
1140
(i) insurance or endowment policy or annuity contract under which an insurance
1141
company promises to pay money in a lump sum or periodically for life or some other specified
1142
period; or
1143
(ii) interest in a limited liability company in which the limited liability company is
1144
formed as part of an estate plan where all of the members are related by blood or marriage,
1145
there are five or fewer members, or the person claiming this exception can prove that all of the
1146
members are actively engaged in the management of the limited liability company. Evidence
1147
that members vote or have the right to vote, or the right to information concerning the business
1148
and affairs of the limited liability company, or the right to participate in management, shall not
1149
establish, without more, that all members are actively engaged in the management of the
1150
limited liability company.
1151
(25) "State" means any state, territory, or possession of the United States, the District
1152
of Columbia, and Puerto Rico.
1153
(26) (a) "Viatical settlement interest" means the entire interest or any fractional interest
1154
in any of the following that is the subject of a viatical settlement:
1155
(i) a life insurance policy; or
1156
(ii) the death benefit under a life insurance policy.
1157
(b) "Viatical settlement interest" does not include the initial purchase from the viator
1158
by a provider of viatical settlements.
1159
[(26)] (27) "Working days" means 8 a.m. to 5 p.m., Monday through Friday, exclusive
1160
of legal holidays listed in Section
63-13-2
.
1161
[(27)] (28) A term not defined in Section
61-1-13
shall have the meaning as established
1162
by division rule. The meaning of a term neither defined in this section nor by rule of the
1163
division shall be the meaning commonly accepted in the business community.
Legislative Review Note
as of 8-26-02 10:13 AM
A limited legal review of this legislation raises no obvious constitutional or statutory concerns.
Office of Legislative Research and General Counsel
Interim Committee Note
as of 12-11-02 10:43 AM
The Business and Labor Interim Committee recommended this bill.
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