If you use Google to search, you will find that there are many, many companies operating in the life settlement industry. However, a surprisingly large number of them are neither licensed nor registered with federal and state agencies — but they should be. Many of these unlicensed actors make all sorts of claims (and excuses) to explain why they are not licensed or registered, but whether they are a broker, provider, asset manager, or service provider (e.g., a life expectancy underwriter), most of these arguments simply don’t hold water.
Regulation in the Life Settlement Industry
The life settlement business is regulated in 45 states, but who and what is regulated varies from state to state. Individuals and companies that claim they either “don’t need” or “aren’t subject to” licensing or registration requirements have all sorts of things they point to as the basis for their being unlicensed. First and foremost, being unlicensed does NOT mean they are unregulated.
Again, the life settlement industry is a regulated business. Life settlement brokers, providers, and life expectancy underwriters (to a lesser degree) are predominantly regulated by the department of insurance, or a similarly situated agency, in each regulated state. Asset managers and those who accept, manage, and invest money are also regulated by federal agencies (e.g., the SEC and FINRA).
Why Not Get a License?
Those who claim that they aren’t licensed because they “don’t need to be,” regardless of the arguments they make as to why, raise a simple question: Why not get a license anyway? Even if there are loopholes, a lack of clarity in some areas of the law, or some other excuse, for those who interact with sellers in the marketplace (i.e., those who operate on the “sell side” of the business), getting a license as a broker simply isn’t that difficult.
Texas, for example, has hundreds of individuals and companies listed as licensed life settlement providers. There are exceptions in some states for attorneys and certain other professionals who, if they are compensated differently for their involvement in a life settlement, may not need a license. Regardless, the requirements for obtaining a license as a life settlement broker in most states just aren’t that onerous. So why do unlicensed life settlement brokers spend so much time and energy arguing that they don’t have to be licensed when being licensed isn’t that difficult — is it greed? Sloth? Or could it be that they wouldn’t qualify if they applied?
One possible answer is that they know if they are not licensed, they might be able to stay off the regulatory radar. Unlicensed drivers can be charged with motor vehicle infractions, but you cannot put points on a license that doesn’t exist. Unlicensed drivers can’t buy insurance either, but again, if they are unlicensed, there has to be a reason, and maybe it’s because there’s something in their background that they know, if revealed, would prevent them from qualifying. Staying unlicensed enables them to operate outside the law for a while longer.
Choosing a Life Settlement Company to Work With
What should you do? It’s simple. Choose to work only with registered and licensed parties when interacting with the life settlement marketplace. There is nothing an unlicensed vendor can do that a licensed company can’t do, provided it’s legal, and there’s no tangible benefit to working with unlicensed parties. When contacting life settlement companies, ask them if they are licensed or registered and find out where. Then check with the regulators to confirm. A few minutes of due diligence is worth it.
At ISC Services, we only work with life settlement brokers and operators who we trust in order to keep consumer data safe. If you’d like to learn more about how ISC Services partners with life settlement companies, contact us today.
