The Securities and Exchange Commission Monday said that it had charged a retirement planning firm and its principals who host a financial radio show with falsely telling investors that interests in life settlements they offered and sold were “guaranteed,” “safe as CDs” and “federally insured.”
A month ago, the SEC charged Los Angeles-based Pacific West Capital Group Inc. and its owner with fraud in the sale of life settlement investments.
In its Monday filing in the U.S. District Court for the Northern District of Texas against Novers Financial and its principals Christopher A. Novinger and Brady J. Speers, who live in Mansfield, Texas, and host a weekly radio show called the “Retirement Experts Radio Show,” the SEC alleges that from 2012 to 2014, they sold approximately $4.3 million in life settlement interests to 26 investors.
Novinger sold close to $1.1 million in life settlement interests to nine investors and received about $122,400 in commissions, while Speers sold roughly $3.3 million in life settlement interests to 17 investors and received some $392,500 in commissions, the SEC said.
The complaint states that while Novinger and Speers marketed themselves as “The Low Risk, Safe Money Guys,” they “possess little to no training relating to securities and non-insurance related financial products, including life settlements,” and that they “have repeatedly been sanctioned by regulatory authorities,” including the Oklahoma Department of Securities.
The SEC also alleges that they used a bogus “net worth calculator” that improperly qualified some prospective investors for purchases by including income that investors hadn’t received, such as future pension and Social Security benefits.
“We allege that Novinger and Speers described speculative investments as safe and secure and were willing to manipulate investors’ financial information to make a sale,” said David Peavler, associate director of the SEC’s Fort Worth Regional Office. “No matter what a salesperson tells you, interests in life settlements are never guaranteed, risk-free or federally insured.”
As the agency explains, interests in life settlements are investments based on potential payouts on insurance policies held by others. Typically they can only be sold to investors who meet certain income or net-worth levels.
The SEC alleges that, to get around those limits, Novinger and Speers provided prospective investors with a net-worth calculator that factored in future income to artificially inflate client assets. For example, according to the SEC complaint, one couple’s non-homestead assets falsely “ballooned” from $263,000 to nearly $1.5 million when the calculator improperly included 20 years’ worth of Social Security and retirement payments the couple anticipates receiving in the future.
In addition to the charges against Novers Financial and the two principals, the SEC charged ICAN Investment Group LLC and Speers Financial Group LLC for acting as unregistered broker-dealers. The SEC seeks injunctive relief, return of allegedly ill-gotten gains with interest, and financial penalties.
— Check out SEC Charges Pacific West Capital With Life Settlement Fraud on ThinkAdvisor.