Download Zipped Amended WP 9 HB0004.ZIP
[Introduced][Status][Bill Documents][Fiscal Note][Bills Directory]

H.B. 4

             1     

VIATICAL SETTLEMENTS

             2     
2003 GENERAL SESSION

             3     
STATE OF UTAH

             4     
Sponsor: Brent D. Parker

             5      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
             10      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:
             13      AMENDS:
             14          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
             17          61-1-13, as last amended by Chapter 160, Laws of Utah 1997
             18      ENACTS:
             19          31A-23-221, Utah Code Annotated 1953
             20          31A-36-101, Utah Code Annotated 1953
             21          31A-36-102, Utah Code Annotated 1953
             22          31A-36-103, Utah Code Annotated 1953
             23          31A-36-104, Utah Code Annotated 1953
             24          31A-36-105, Utah Code Annotated 1953
             25          31A-36-106, Utah Code Annotated 1953
             26          31A-36-107, Utah Code Annotated 1953
             27          31A-36-108, Utah Code Annotated 1953



             28          31A-36-109, Utah Code Annotated 1953
             29          31A-36-110, Utah Code Annotated 1953
             30          31A-36-111, Utah Code Annotated 1953
             31          31A-36-112, Utah Code Annotated 1953
             32          31A-36-113, Utah Code Annotated 1953
             33          31A-36-114, Utah Code Annotated 1953
             34          31A-36-115, Utah Code Annotated 1953
             35          31A-36-116, Utah Code Annotated 1953
             36          31A-36-117, Utah Code Annotated 1953
             37          31A-36-118, Utah Code Annotated 1953
             38          31A-36-119, Utah Code Annotated 1953
             39      Be it enacted by the Legislature of the state of Utah:
             40          Section 1. Section 31A-21-104 is amended to read:
             41           31A-21-104. Insurable interest and consent.
             42          (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.
             44          (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
             48      violation of this Subsection (1) is subject to Subsection (5).
             49          (2) As used in this chapter:
             50          (a) (i) "Insurable interest" in a person means:
             51          (A) for persons closely related by blood or by law, a substantial interest engendered by
             52      love and affection; or
             53          (B) in the case of other persons, a lawful and substantial interest in having the life,
             54      health, and bodily safety of the person insured continue.
             55          (ii) Policyholders in group insurance contracts do not need an insurable interest if
             56      certificate holders or persons other than group policyholders who are specified by the
             57      certificate holders are the recipients of the proceeds of the policies.
             58          (iii) Each person has an unlimited insurable interest in the person's own life and health.



             59          (iv) A shareholder or partner has an insurable interest in the life of other shareholders
             60      or partners for purposes of insurance contracts that are an integral part of a legitimate buy-sell
             61      agreement respecting shares or a partnership interest in the business.
             62          (v) Subject to Subsection (9), an employer or an employer sponsored trust for the
             63      benefit of the employer's employees:
             64          (A) has an insurable interest in the lives of the employer's:
             65          (I) directors;
             66          (II) officers;
             67          (III) managers;
             68          (IV) nonmanagement employees; and
             69          (V) retired employees; and
             70          (B) may insure the lives listed in Subsection (2)(a)(v)(A):
             71          (I) on an individual or group basis; and
             72          (II) with the written consent of the insured.
             73          (b) "Insurable interest" in property or liability means any lawful and substantial
             74      economic interest in the nonoccurrence of the event insured against.
             75          (c) "Viatical settlement" [means a written contract:] is as defined in Section
             76      31A-36-102 .
             77          [(i) entered into by a person who is the policyholder of a life insurance policy insuring
             78      the life of a terminally ill person;]
             79          [(ii) under which the insured assigns, transfers ownership, irrevocably designates a
             80      specific person or otherwise alienates all control and right in the insurance policy to another
             81      person; and]
             82          [(iii) the proceeds or a part of the proceeds of the contract is paid to the policyholder of
             83      the insurance policy or the policyholder's designee prior to the death of the subject.]
             84          (3) (a) Except as provided in Subsection (4), an insurer may not knowingly issue an
             85      individual life or accident and health insurance policy to a person other than the one whose life
             86      or health is at risk unless that person, who is 18 years of age or older and not under
             87      guardianship under Title 75, Chapter 5, Protection of Persons Under Disability and Their
             88      Property, has given written consent to the issuance of the policy.
             89          (b) A person shall express consent:


             90          (i) by signing an application for the insurance with knowledge of the nature of the
             91      document; or
             92          (ii) in any other reasonable way.
             93          (c) Any insurance provided in violation of this Subsection (3) is subject to Subsection
             94      (5).
             95          (4) (a) A life or accident and health insurance policy may be taken out without consent
             96      in a circumstance described in this Subsection (4)(a).
             97          (i) A person may obtain insurance on a dependent who does not have legal capacity.
             98          (ii) A creditor may, at the creditor's expense, obtain insurance on the debtor in an
             99      amount reasonably related to the amount of the debt.
             100          (iii) A person may obtain life and accident and health insurance on an immediate
             101      family member who is living with or dependent on the person.
             102          (iv) A person may obtain an accident and health insurance policy on others that would
             103      merely indemnify the policyholder against expenses the person would be legally or morally
             104      obligated to pay.
             105          (v) The commissioner may adopt rules permitting issuance of insurance for a limited
             106      term on the life or health of a person serving outside the continental United States who is in the
             107      public service of the United States, if the policyholder is related within the second degree by
             108      blood or by marriage to the person whose life or health is insured.
             109          (b) Consent may be given by another in a circumstance described in this Subsection
             110      (4)(b).
             111          (i) A parent, a person having legal custody of a minor, or a guardian of a person under
             112      Title 75, Chapter 5, Protection of Persons Under Disability and Their Property, may consent to
             113      the issuance of a policy on a dependent child or on a person under guardianship under Title 75,
             114      Chapter 5, Protection of Persons Under Disability and Their Property.
             115          (ii) A grandparent may consent to the issuance of life or accident and health insurance
             116      on a grandchild.
             117          (iii) A court of general jurisdiction may give consent to the issuance of a life or
             118      accident and health insurance policy on an ex parte application showing facts the court
             119      considers sufficient to justify the issuance of that insurance.
             120          (5) (a) An insurance policy is not invalid because the policyholder lacks insurable


             121      interest or because consent has not been given.
             122          (b) Notwithstanding Subsection (5)(a), a court with appropriate jurisdiction may:
             123          (i) order the proceeds to be paid to some person who is equitably entitled to the
             124      proceeds, other than the one to whom the policy is designated to be payable; or
             125          (ii) create a constructive trust in the proceeds or a part of the proceeds on behalf of
             126      such a person, subject to all the valid terms and conditions of the policy other than those
             127      relating to insurable interest or consent.
             128          (6) This section does not prevent any organization described under 26 U.S.C. Sec.
             129      501(c)(3), (e), or (f), as amended, and the regulations made under this section, and which is
             130      regulated under Title 13, Chapter 22, Charitable Solicitations Act, from soliciting and
             131      procuring, by assignment or designation as beneficiary, a gift or assignment of an interest in
             132      life insurance on the life of the donor or assignor or from enforcing payment of proceeds from
             133      that interest.
             134          (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
             134b      ELSE IN THIS SECTION SHALL PREVENT s :
             135          (a) any policyholder of life insurance, whether or not the policyholder is also the
             136      subject of the insurance, from entering into a viatical settlement;
             137          (b) any person from soliciting a person to enter into a viatical settlement; [or]
             138          (c) a person from enforcing payment of proceeds from the interest obtained under a
             139      viatical settlement[.]; or
             140          (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
             142      with respect to the death benefit or ownership of any portion of a viaticated policy as provided
             143      for in Section 31A-36-109 :
             144          (i) an assignment;
             145          (ii) a sale;
             146          (iii) a transfer;
             147          (iv) a devise; or
             148          (v) a bequest.
             149          (8) Notwithstanding Subsection (1), an insurer authorized under this title to issue a
             150      workers' compensation policy may issue a workers' compensation policy to a sole
             151      proprietorship, corporation, or partnership that elects not to include any owner, corporate


             152      officer, or partner as an employee under the policy even if at the time the policy is issued the
             153      sole proprietorship, corporation, or partnership has no employees.
             154          (9) The extent of an employer's or employer sponsored trust's insurable interest for a
             155      nonmanagement and retired employee under Subsection (2)(a)(v) is limited to an amount
             156      commensurate with the employer's unfunded liabilities.
             157          Section 2. Section 31A-23-203 is amended to read:
             158           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
             160      consultant to any person who, as to the license classification applied for under Section
             161      31A-23-204 :
             162          (a) has satisfied the character requirements under Section 31A-23-205 ;
             163          (b) has satisfied any applicable continuing education requirements under Section
             164      31A-23-206 ;
             165          (c) has satisfied any applicable examination requirements under Section 31A-23-207 ;
             166          (d) has satisfied any applicable training period requirements under Section
             167      31A-23-208 ;
             168          (e) if a nonresident:
             169          (i) has complied with Section 31A-23-209 ; and
             170          (ii) holds an active similar license in that person's state of residence;
             171          (f) as to applicants for licenses to act as title insurance agents, has satisfied the
             172      requirements of Section 31A-23-211 ; [and]
             173          (g) as to applicants for licenses to act as providers or producers of viatical settlements,
             174      has satisfied the requirements of Section 31A-23-221 ; and
             175          [(g)] (h) has paid the applicable fees under Section 31A-3-103 .
             176          (2) (a) This Subsection (2) applies to the following persons:
             177          (i) an applicant for a pending producer's license; or
             178          (ii) a licensed producer.
             179          (b) A person described in Subsection (2)(a) shall report to the commissioner:
             180          (i) any administrative action taken against the person:
             181          (A) in another jurisdiction; or
             182          (B) by another regulatory agency in this state; and


             183          (ii) any criminal prosecution taken against the person in any jurisdiction.
             184          (c) The report required by Subsection (2)(b) shall:
             185          (i) be filed:
             186          (A) at the time the person files the application for a producer's license; or
             187          (B) within 30 days of the initiation of an action or prosecution described in Subsection
             188      (2)(b); and
             189          (ii) include a copy of the complaint or other relevant legal documents related to the
             190      action or prosecution described in Subsection (2)(b).
             191          (3) (a) The department may request:
             192          (i) criminal background information maintained pursuant to Title 53, Chapter 10, Part
             193      2, from the Bureau of Criminal Identification; and
             194          (ii) complete Federal Bureau of Investigation criminal background checks through the
             195      national criminal history system.
             196          (b) Information obtained by the department from the review of criminal history records
             197      received under Subsection (3)(a) shall be used by the department for the purposes of:
             198          (i) determining if a person satisfies the character requirements under Section
             199      31A-23-205 for issuance or renewal of a license;
             200          (ii) determining if a person has failed to maintain the character requirements under
             201      Section 31A-23-205 ; and
             202          (iii) preventing persons who violate the federal Violent Crime Control and Law
             203      Enforcement Act of 1994, 18 U.S.C. Secs. 1033 and 1034, from engaging in the business of
             204      insurance in the state.
             205          (c) If the department requests the criminal background information, the department
             206      shall:
             207          (i) pay to the Department of Public Safety the costs incurred by the Department of
             208      Public Safety in providing the department criminal background information under Subsection
             209      (3)(a)(i);
             210          (ii) pay to the Federal Bureau of Investigation the costs incurred by the Federal Bureau
             211      of Investigation in providing the department criminal background information under
             212      Subsection (3)(a)(ii); and
             213          (iii) charge the person applying for a license or for renewal of a license a fee equal to


             214      the aggregate of Subsections (3)(c)(i) and (ii).
             215          Section 3. Section 31A-23-204 is amended to read:
             216           31A-23-204. License classifications.
             217          A resident or nonresident license issued under this chapter shall be issued under the
             218      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
             220      required of license applicants under Sections 31A-23-206 through 31A-23-208 .
             221          (1) An agent and broker license classification includes:
             222          (a) life insurance, including nonvariable contracts;
             223          (b) variable contracts;
             224          (c) accident and health insurance, including contracts issued to policyholders under
             225      Chapter 7 or 8;
             226          (d) property/liability insurance, which includes:
             227          (i) property insurance;
             228          (ii) liability insurance;
             229          (iii) surety and other bonds; and
             230          (iv) policies containing any combination of these coverages;
             231          (e) title insurance under one of the following categories:
             232          (i) search, including authority to act as a title marketing representative;
             233          (ii) escrow, including authority to act as a title marketing representative;
             234          (iii) search and escrow, including authority to act as a title marketing representative;
             235      and
             236          (iv) title marketing representative only;
             237          (f) workers' compensation insurance; and
             238          (g) personal lines.
             239          (2) A limited license classification includes:
             240          (a) limited line credit insurance;
             241          (b) travel insurance;
             242          (c) motor club insurance;
             243          (d) car rental related insurance;
             244          (e) legal expense insurance;


             245          (f) bail bond agent; [and]
             246          (g) customer service representative[.]; and
             247          (h) viatical settlements.
             248          (3) A consultant license classification includes:
             249          (a) life insurance, including nonvariable contracts;
             250          (b) variable contracts;
             251          (c) accident and health insurance, including contracts issued to policyholders under
             252      Chapter 7 or 8;
             253          (d) property/liability insurance, which includes:
             254          (i) property insurance;
             255          (ii) liability insurance;
             256          (iii) surety and other bonds; and
             257          (iv) policies containing any combination of these coverages; and
             258          (e) workers' compensation insurance.
             259          (4) A holder of licenses under Subsections (1)(a) and (1)(c) has all qualifications
             260      necessary to act as a holder of a license under Subsection (2)(a).
             261          (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.
             263          (b) A license to act as a surplus lines broker gives the holder the authority to arrange
             264      insurance contracts with unauthorized insurers under Section 31A-15-103 , but only as to the
             265      types of insurance under Subsection (1) for which the broker holds a brokers license.
             266          (6) The commissioner may by rule recognize other agent, broker, limited license, or
             267      consultant license classifications as to kinds of insurance not listed under Subsections (1), (2),
             268      and (3).
             269          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.
             274          (2) Providers of viatical settlements shall:
             275          (a) provide a detailed plan of operation with their initial license application and with


             276      each renewal application;
             277          (b) if a legal entity, provide a certificate of good standing from the state of its domicile;
             278      and
             279          (c) provide an antifraud plan that meets the requirements of Section 31A-36-117 .
             280          (3) Providers and producers of viatical settlements shall provide with their initial
             281      license application information describing their viatical settlement experience, training, and
             282      education.
             283          (4) A provider or producer of viatical settlements shall provide to the commissioner,
             284      within 30 days after a change occurs, new or revised information concerning any of the
             285      following:
             286          (a) officers;
             287          (b) holders of more than 10% of its stock;
             288          (c) partners;
             289          (d) directors;
             290          (e) members; and
             291          (f) designated employees.
             292          Section 5. Section 31A-36-101 is enacted to read:
             293     
CHAPTER 36. VIATICAL SETTLEMENTS ACT

             294          31A-36-101. Title.
             295          This chapter is known as the "Viatical Settlements Act."
             296          Section 6. Section 31A-36-102 is enacted to read:
             297          31A-36-102. Definitions.
             298          As used in this chapter:
             299          (1) (a) "Advertising" means any communication placed before the public to:
             300          (i) create an interest in viatical settlements; or
             301          (ii) induce a person to sell a policy or an interest in a policy pursuant to a viatical
             302      settlement.
             303          (b) "Advertising" includes the following, if the requirements of Subsection (1)(a) are
             304      met:
             305          (i) any written, electronic, or printed communication;
             306          (ii) any communication by means of recorded telephone messages;


             307          (iii) any communication transmitted on radio, television, the Internet, or similar
             308      communications media; and
             309          (iv) film strips, motion pictures, and videos.
             310          (2) "Business of viatical settlements" includes the following:
             311          (a) offering a viatical settlement;
             312          (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:
             328          (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.


[Bill Documents][Bills Directory]