The National Association of Securities Dealers is preparing a notice for members on participation in life settlement transactions.
NASD Vice Chairman Mary Schapiro, who is in line to become chairman of the group in December, talked about life settlements, equity indexed annuities and retirement plan rollovers in Hollywood, Fla., at a conference organized by the compliance and legal division of the Securities Industry Association, Washington.
Life settlement deals give holders of life insurance policies the ability to sell the policies to investors.
“We realize that the ability to sell these assets can be of vital importance to their owners and that in many, if not all cases, the price of the secondary market transaction exceeds the redemption price that would be paid by the contract’s issuer,” Schapiro said, according to a written version of her remarks. “But we believe there are other considerations worth noting, such as alternative sources for income or alternative premium payment sources that might be considered before recommending such a sale.”
Taking a careful approach to life settlements is important because the seller is often in a position of economic distress and feels forced to sell what may be an asset of substantial value below its true discounted value price, Schapiro said.
NASD is hoping its life settlement notice “will offer balanced guidance on how to participate in such transactions from a member perspective,” Schapiro said.
Schapiro also touched on efforts to “harmonize” regulation of equity indexed annuities and variable annuities.