Conclusions THE PARTIES resolved all disputed issues and executed a Settlement Agreement. The parties are directed to comply with the terms of the attached settlement agreement. Based on the foregoing, this file is CLOSED. DONE and ORDERED on this the /' f day of - --,-,,+----' 2009, m Tallahassee, Florida. HOllYBENSON,SECRlTARY Agency for Health Care Administration 1 Filed July 7, 2009 1:08 PM Division of Administrative Hearings. A PARTY WHO IS ADVERSELY AFFECTED BY THIS FINAL ORDER IS ENTITLED TO A JUDICIAL REVIEW WHICH SHALL BE INSTITUTED BY FILING ONE COPY OF A NOTICE OF APPEAL WITH THE AGENCY CLERK OF AHCA, AND A SECOND COPY ALONG WITH FILING FEE AS PRESCRIBED BYLAW, WITH THE DISTRICT COURT OF APPEAL IN THE APPELLATE DISTRICT WHERE THE AGENCY MAINTAINS ITS HEADQUARTERS OR WHERE A PARTY RESIDES. REVIEW PROCEEDINGS SHALL BE CONDUCTED IN ACCORDANCE WITH THE FLORIDA APPELLATE RULES. THE NOTICE OF APPEAL MUST BE FILED WITHIN 30 DAYS OF RENDITION OF THE ORDER TO BE REVIEWED. Copies furnished to: L. William Porter II, Esquire Agency for Health Care Administration (Laserfiche) William M. Furlow, Esquire Metzger, Grossman, Furlow & Bayo, LLC 1408 N. Piedmont Way Tallahassee, Florida 32308 (U.S. Mail) Eleanor Hunter Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 Ken Yon, Bureau Chief, Medicaid Program Integrity Teva Anderson, Medicaid Program Integrity Finance and Accounting CERTIFICATE OF SERVICE I HEREBY CERTIFY that a true and correct copy of the foregoing has been furnished to the above named addressees by U.S. Mail on this the ay of_-...,.:_:_ :_::: , 2009. Richard Shoop, Esquire Agency Clerk State of Florida Agency for Health Care Administration 2727 Mahan Drive, Building #3 Tallahassee, Florida 32308-5403 (850) 922-5873 STATE OF FLORIDA,
The Issue Should discipline be imposed by Petitioner against Respondent's license as a life including variable annuity agent (2-14), life agent (2-16), and health agent (2-40), held pursuant to Chapter 626, Florida Statutes?
Findings Of Fact Respondent's Licenses and Background Pursuant to Chapter 626, Florida Statutes, Respondent is currently licensed in this states as a resident life including variable annuity agent (2-14), life agent (2-16), and health agent (2-40). At all times pertinent to the dates and occurrences referred to herein, Respondent was licensed in this state as a resident life including variable annuity agent (2-14), life agent (2-16) and health agent (2-40). Pursuant to Chapter 626, Florida Statutes, the Florida Department of Financial Services has jurisdiction over Respondent's insurance licenses and appointments. Respondent's formal education includes a bachelors in business management and a masters in science and health service administration. Over time Respondent has worked in the financial services industry. At present Respondent is a supervisor or principal of Capitol City Bank Investments. Securities Registration Respondent also has registration by the Office of Financial Regulation pursuant to Chapter 517, Florida Statutes, the "Florida Securities and Investor Protection Act." His registration is CRD No. 2016997, current as of January 9, 2008. He served as an "associated person" of a "dealer" as early as November 14, 2002. He acted in that capacity for Now Trade, Corp., from the date in November through March 22, 2004. Mutual Benefits Corporation (MBC) The State of Florida, the Department of Insurance (now the Office of Insurance Regulation of the Financial Services Commission, "the Office") licensed MBC as a viatical settlement provider on May 13, 1997, in accordance with Chapter 626, Part X, Florida Statutes, the "Viatical Settlement Act." The Office took action against MBC in Case No. 77358- 04-CO, in accordance with Chapter 626, Part X, Florida Statutes. On March 29, 2005, a Consent Order was entered by the Office. In an agreement between the Office and MBC by and through a court appointed receiver for MBC, the Office revoked MBC's license as a "viatical settlement provider" pursuant to the terms and conditions within the Consent Order. The Consent Order in Case No: 77358-04-CO, before the State of Florida, Department of Financial Services, Office of Insurance Regulation, in the matter of: Mutual Benefits Corporation in pertinent part stated: THIS CAUSE came on for consideration as the result of an agreement between MUTUAL BENEFITS CORPORATION (hereinafter referred to as 'MBC'), by and through its duly court- appointed Receiver, Roberto Martinez ('Receiver'), and the OFFICE OF INSURANCE REGULATION (hereinafter referred as the ('OFFICE'). . . . the OFFICE hereby finds as follows: The OFFICE has jurisdiction over the subject matter of, and parties to, this proceeding. MBC was granted a license by the Department of Insurance (now the Office of Insurance Regulation) on May 13, 1997, to act as a viatical settlement provider pursuant to the provisions of Chapter 626, Part X, Florida Statutes. The OFFICE conducted an examination of the business and affairs of MBC and thereafter issued, on May 3, 2004, an Emergency Cease and Desist Order suspending the license of MBC, effective immediately upon service of the order upon MBC. The Securities Exchange Commission of the United States has instituted an action in United States District Court for the Southern District of Florida, City Action Number 04-60573 (hereinafter 'the SEC Action'), and secured, on an ex parte basis, an Order Appointing Receiver dated May 4, 2004, which order granted the Receiver full and exclusive power, duty, and authority to administer and manage the business affairs, funds, assets, choses in action and any other property of MBC and several entities alleged to be related to it and to take whatever actions are necessary for the protection of investors. The United States District Court for the Southern District of Florida (hereinafter 'the Court'), has held further hearings, including an evidentiary hearing on the application of the SEC to enter a preliminary injunction against MBC. On November 10, 2004, Magistrate Garber recommended that the Motion for Preliminary Injunction be granted. On February 14, 2005, the Court adopted that recommendation. Therefore, the OFFICE and MBC hereby agree and consent to the following terms and conditions: * * * (b) MBC and the OFFICE agree that MBC's viatical provider license shall be revoked by issuance of this Consent Order. * * * (d) In the event that the Receivership in the SEC Action is dissolved and any restraining order issued by the U.S. District Court of the Southern District of Florida is modified to allow MBC to conduct its viatical settlement business or upon the Court issuing any other order allowing MBC to conduct its viatical settlement business, MBC would be free to apply for a license from the state of Florida. * * * The receiver is now responsible for activities involving viatical settlement purchase agreements or contracts, to include those associated with the viatical settlement purchasers in this case, not concluded by the agreement(s) to return on the investment(s) described in the viatical settlement purchase agreements or contract(s). MBC and Respondent Prior to the entry of the Consent Order involving MBC, Respondent, as an employee of First Liberty Group LLC (First Liberty), had sold interests in life insurance policies offered by viators, under terms set forth in a "viatical settlement purchase agreement" offered by MBC as the viatical settlement provider, all within the purview of Chapter 626, Part X, Florida Statutes, the "Viatical Settlement Act." (In addition, Respondent as an employee of First Liberty offered for sell financial products, e.g. annuities and certificates of deposit (CDs).) The relevant time period in relation to employment with First Liberty was the years 2002 and 2003, as more specifically explained in findings of fact that follow. Viatical Settlement Purchase Agreement and Other Information Pertinent features within all viatical settlement purchase agreements entered into between purchasers in this case and MBC, as presented by Respondent in his capacity as agent are as follows: VIATICAL SETTLEMENT PURCHASE AGREEMENT No modifications to this Contract may be made without the written consent of Mutual Benefits Corp. . . . the Viatical Settlement Purchaser (is), hereinafter referred to as 'Purchaser', upon the following terms and conditions. This Agreement covers the purchase of an interest in the death benefit of a life insurance policy or policies insuring the life of persons who are either terminally ill or have an estimated life expectancy of 72 months or less. * * * . . . the Purchaser acknowledges that the economic benefit derived from the transaction(s) contemplated by this Agreement will result solely from the maturity of the life insurance policy(ies) upon the death of the insured(s), and will not be derived from the efforts of any person or entity employed by or associated with Mutual Benefits Corp. , * * * The Purchaser hereby agrees to deposit the sum of $ with American Express Tax and Business Services, Inc., the Escrow Agent, for the purpose of acquiring the death benefit of a life insurance policy(ies) which will be allocated as set forth herein. The only benefit the Purchaser will receive pursuant to this Agreement will be payment of the agreed portion of the death benefit upon the maturity of the life insurance policy(ies). Policies are priced at a discount of the death benefit which depends on the projected life expectancy of each insured. Mutual Benefits Corp. makes no representation or warranty as to the specific date when a policy will mature. The return realized by the Purchaser does not represent an annual return. An annual return cannot be determined until the policy(ies) in which the Purchaser obtains an interest matures. Mutual Benefits Corp. shall assist Purchaser in the purchase of the death benefit of life insurance policies of individuals which comply with the following criteria: * * * All life expectancies of insureds will be determined by either an independent reviewing physician or a medical review company taking into account the insured's age, current medical history, and, where applicable, insurance industry actuarial guidelines. Prior to closing, Purchases will receive from Mutual Benefits Corp. information regarding specific policy(ies) that may be purchased in accordance with the terms of this Agreement to assist the Purchaser in evaluating whether the policy satisfies his/her requirements. * * * 9) . . . and also acknowledges that once the policy closes the funds committed are not liquid and the funds are not available until the policy matures. Purchaser hereby also acknowledges that the life expectancy(ies) provided by the reviewing physicians are only estimates. Mutual Benefits Corp. does not make any warranties regarding the accuracy of these estimates. Purchaser further acknowledges that the policy may mature before or after the projected life expectancy. Purchaser also represents that he/she is able to bear the risk of the purchase of a policy(ies) for an indeterminate period and will only commit himself/herself to a purchase which bears a reasonable relationship to his/her net worth. * * * . . . Viatical Services, Inc.'s agreement to pay any unpaid premiums limited to the exhaustion of the funds in its premium reserve account. * * * f) This Agreement is voidable by the Purchaser at any time within (3) days after the disclosers mandated by Florida Statutes § 626.99236 are received by the Purchaser. * * * 25) Type of Death Benefit(s) to be Purchased Life Estimated Life Dollar Amount Fixed Return on Dollar Expectancy of Purchase Amount of Purchase 12 Months 12% fixed return on purchase price 18 Months 21% fixed return on purchase price 24 Months 28% fixed return on purchase price 36 Months 42% fixed return on purchase price 48 Months 50% fixed return on purchase price 60 Months 72 Months Other Total amount $ 60% fixed return on purchase price 72% fixed return on purchase price 60% fixed return on purchase price to be allocated amongst the above estimated expectancies. * * * X. DISCLOSURE TO VIATICAL SETTLEMENT PURCHASERS Any person considering purchasing any portion of the death benefit of one or more insurance policies should be aware of the following: The returns available on viatical settlement contracts facilitated by Mutual Benefits Corp. directly tied to the projected life expectancy of the insured. The fixed return that a Purchaser may receive under the Viatical Settlement depends upon the price paid for the policy as a discount from its death benefits fixed return is determined by the projected life expectancy of the insured as set forth below. Projected Life Fixed Return on Dollar Expectancy Amount of Purchase 12 Months 12% fixed return on purchase price 18 Months 21% fixed return on purchase price 24 Months 28% fixed return on purchase price 36 Months 42% fixed return on purchase price 48 Months 50% fixed return on purchase price 60 Months 60% fixed return on purchase price 72 Months 72% fixed return on purchase price The above returns are fixed and not annualized returns. * * * . . . Viatical Services, Inc.'s agreement to pay any unpaid premiums limited to the exhaustion of the funds in its premium reserve account. In the event the trust and Viatical Services, Inc.'s respective premium reserve accounts are exhausted, the Purchaser may be responsible for a payment of his/her pro rata share of any unpaid premium. In the event the Purchaser is required to pay premiums, such payments will reduce the fixed refund referenced above. * * * The life expectancy on any particular insured and the rate of return on a viatical settlement contract are only estimates and cannot be guaranteed. The purchase of the death benefit of one or more life insurance policies should not be considered a liquid purchase. While every attempt is made to determine the insured's life expectancy at the time of purchase, it is impossible to predict the exact time of the insured's demise. As a result, the Purchaser's funds will not be available until after the death of the insured. It is entirely possible that the insured could outlive his/her life expectancy, which would delay payment of the death benefits under the Viatical Settlement Purchase Agreement. In the transactions in dispute, in the time MBC received funds from the purchaser for purposes of acquiring the death benefit of the life insurance policy or policies, it would acknowledge receipt of those funds. In writings MBC would send information to the purchaser, described as the client, concerning a specific life insurance policy matching the request made in the purchase agreement. The viator was identified by a number. The estimated life expectancy of the viator was identified. The amount of funds provided toward the purchase was identified. The amount to be paid in relation to the death benefits was identified. Other information was included referred to as "policy detail." That policy detail provided investor information such as the original policy face value, number of investors involved with the policy, the policy number of the insurance policy, the insurance company name, the nature of the plan of the insurance and whether there was a current premium payment obligation, together with an estimated date upon which the investor premium payment obligation, referring to the purchaser's obligation to meet the payments would begin. Some information about the insured was provided concerning HIV status and the last date of contact with the viator/insured. The contact letter concerning the commitment to purchase the interest in a life settlement or viatical settlement, so described by MBC, also set out a opportunity to decline to participate in the purchase where it said: The policy described in the attached disclosure form satisfies the selection criteria that you provided to us. We will deem you to accept this placement UNLESS we receive signed, written notice of your disapproval within five (5) business days after you receive this letter. Beyond the date upon which the purchaser received an MBC letter reference "commitment to purchase an interest in a life settlement or viatical settlement," MBC would send the purchaser additional correspondence referring to the viator number as an insured case file restating the amount of purchase, and enclosing an executed assignment of ownership from the life insurance company over to a new owner and designating a beneficiary in accordance with the purchase agreement. This letter would enclose a certificate of insurance and the review medical and physician's report related to the policy with specific information about the insured being redacted as to patient name, date of birth and social security number. Petitioner's Exhibit numbered 20 is an example of a receipt for funds. Petitioner's Exhibit numbered 24 includes a letter of "commitment to purchase an interest in a Life settlement or viatical settlement," together with a policy detail sheet and the follow-up letter, indicating assignment of ownership of the insurance policy, a certificate of insurance and the review medical and physician's report, among other matters. During 2002 and 2003 none of the MBC viatical settlement purchase agreements (contracts) or agreements in this case were registered as securities in accordance with Chapter 517, Florida Statutes. Respondent's Sales Practices First Liberty was an entity separate and apart from MBC. First Liberty employed Respondent at its offices in Summerfield, Florida. In promoting its investment products, First Liberty advertised CDs; it did not advertise viatical sales products. The sale of viatical settlement purchase agreements constituted roughly 30 percent of the business conducted by Respondent as a First Liberty employee. Annuities were sold at First Liberty as an additional investment product. Contract documents associated with MBC viatical sale purchase agreements were prepared by MBC to be utilized by Respondent. When meeting with the customers, Respondent utilized a graph that was designed to portray the experience in investment returns from the MBC viaticals based upon First Liberty's experience with the product. First Liberty had an in-house attorney whom Respondent relied upon in conducting business. That individual did not indicate that MBC viaticals should not be sold or that the viaticals were securities requiring registration. Respondent's impression of MBC was that MBC provided good service and acted promptly in dealing with its purchasers. Respondent proceeded with a personal belief that the viaticals were insurance products to be regulated as insurance products with the "Florida Department of Insurance." In his belief, this was borne out by an approval affixed from the Florida Department of Insurance to a viatical settlement purchase agreement that Respondent entered into with MBC in the amount of $9,707.00. Respondent's Exhibit numbered 6. Respondent also sold an MBC viatical settlement purchase agreement to his father Fredrick M. Smith in the amount of $20,000.00. Respondent's Exhibit numbered 7. The purchases made by Respondent and his father are now controlled in the receivership associated with MBC. Concerning the MBC contracts entered into by Respondent and his father controlled by the MBC receiver, the receiver is responsible for paying premiums for the viator over a finite period during the viator's life expectancy established by the contract. At the expiration of that period, Respondent and his father would be responsible for paying premiums. This is a similar process when compared to other MBC viatical contracts subject to the receiver's control. The Murrays Douglas B. Murray was born on March 28, 1934. He retired from work in 1994 from a position as a heating and plumbing sales representative for Sears. He became acquainted with Respondent in late summer or early fall 2002. On August 29, 2002, in response to Mr. Murray's inquiry, Respondent wrote him to invite his business with First Liberty. Subsequently Mr. Murray went to Respondent's office in Summerfield with his wife, Veronica Murray. Ms. Murray was in her early 60s at the time. In 2002 she had retired from her job as a secretary. Mr. Murray had lost money in the stock market. With the money he had left from that venture, he decided to reinvest to supplement his income with interest that might be available from $100,000 he held. At the time CDs were returning a low percentage, 2 1/2 to 3 percent. This amount of return was not satisfactory to Mr. Murray. In their discussions, Respondent mentioned other possible investments but explained that the return on the investments for other opportunities would not bring about 5 to 7 percent that Mr. Murray was accustomed to. Ultimately, this led to the viatical settlement purchases with returns in excess of 7 percent. After discussing other possibilities for investment, Respondent had mentioned viaticals as a possible investment. The investment strategy under consideration was the purchase of a short term annuity for a period of three years amounting to $30,000, with an additional $70,000 being placed in viaticals. The arrangement made by Respondent with the Murrays was to purchase the annuity which paid an income for its period pending the maturity of the viaticals, which was dependent upon the viator's demise. The period contemplated for return on the viaticals purchased by Mr. Murray was three years. Respondent explained to the Murrays that the viaticals were in association with people who were very ill and who had to sell their rights to insurance policies to provide income to the insured to pay for medical expenses or to meet other needs. On September 17, 2002, Mr. Murray made application for an annuity through the Lafayette Life Insurance Company, paying $29,550 toward that purchase. In addition Mr. Murray through the Murray Family Trust entered into a viatical settlement purchase agreement. On September 17, 2002, the amount of the viatical purchase was $70,450 paid by check into an escrow account on September 19, 2002. This supported the purchase of five separate viatical transactions. One of the viaticals has paid off in the manner contemplated by the agreement. Four others have not paid. Mr. Murray is paying premiums on those policies. Mr. Murray will continue to meet the premium payments on the four viaticals until he exhausts approximately $19,000 available to meet those premium payments. The viatical that did pay returned approximately $19,750, which he is applying to meet the premium obligations for the four remaining viaticals. Mr. Murray did not expect to have to pay premiums. On this subject, Respondent provided examples where people had received the return on their investment in the viaticals. Mr. Murray acknowledges that the agreement contemplated that in the event that the viatical settlement purchase agreement premium reserve accounts were exhausted, that the Murrays might be responsible for meeting the costs of premiums. Mr. Murray did not read the viatical settlement purchase agreement entered into carefully, even though he was not familiar with this form of investment. He relied upon Respondent and trusted his judgment. The respective pages within the viatical settlement purchase agreement for the Murray Family Trust were initialed by the Murrays, husband and wife, and signed by those purchasers. As the pages were being initialed by the Murrays, Respondent made explanations of the points set forth on those pages. In the discussion Respondent mentioned that the Murrays could receive copies of physicians' reports concerning the health circumstance for the insured persons, the viators. Respondent told the Murrays that none of the policies under consideration related to HIV patients. The explanation was that the persons were elderly, approaching the end of life. Mr. Murray understood that he could rescind his choice to proceed with the viatical purchases but chose not to having confidence that the investment was sound. The Andrades George F. Andrade was born on June 21, 1940. His wife Elizabeth A. Andrade was born on July 8, 1942. Mr. Andrade had been employed as a commercial fisherman and commercial truck driver. He retired in 2002. Mr. Andrade purchased viatical settlements in his own name and a viatical settlement in both his name and his wife's name. Mrs. Andrade also purchased a viatical settlement. All purchases were from MBC with Respondent acting as agent. The Andrades were interested in supplementing their income. They saw an advertisement in the newspaper for CDs offered by First Liberty. They went to the office where Respondent was employed. The Andrades discussed the possible purchase of CDs with Respondent. Among other investment prospects discussed was a viatical settlement agreement. The Andrades had prior experience with viatical agreements but had declined to complete the transaction from another provider whom they dealt with before the meeting with Respondent. Notwithstanding their impression concerning the earlier viatical agreement, Respondent persuaded the Andrades that the viatical agreements he offered were a good investment. In this discussion, he told the Andrades that he had invested in viatical agreements. When Respondent mentioned that he had entered into a viatical settlement purchase agreement, he also mentioned that in his experience the viatical agreements paid off on time and indicated that the frequency of times in which the viatical agreements met the expected timeline for maturity was "pretty high." During their discussions Respondent suggested that the Andrades might wish to contact the Better Business Bureau concerning the practices of MBC. They did and found no cause for alarm. Ultimately, the Andrades purchased eight viatical agreements from Respondent offered by MBC. On March 18, 2003, George and Elizabeth Andrade entered into a viatical settlement purchase agreement for which they paid $33,500. On that date there were two separate viatical settlement purchase agreements entered into by Mr. Andrade alone in an amount of $21,214.66 and $15,696.11 respectively. On April 7, 2003, Mrs. Andrade entered into a viatical settlement purchase agreement in the amount of $21,172.87. Of the eight viatical agreements received pursuant to their purchases, none have provided a return on the investments. In response to six of those viatical agreements, the Andrades have forfeited their rights and lost the investment because they did not feel that they could afford to meet the premium payments due. When executing the viatical settlement purchase agreements, the Andrades did not read those documents. They simply initialed the pages placing their trust in Respondent's explanations concerning the agreements. In his discussion, Respondent reminded the Andrades that if the insured lived longer than the maturity date on the viatical agreement, that the Andrades would be responsible for paying the premiums. The Andrades also purchased an annuity from Respondent as a supplement to their monthly income needs. The annuity that was purchased was for $30,000. The Andrades staggered the due dates for the viatical agreement purchases over two years, three years and four years. The expectation in the investment planning was that the annuity and the viatical agreements be assembled in a manner that the Andrades would receive income over a period of time. They intended to travel with the money derived from the viatical purchase agreements. Respondent told the Andrades that they could accept or decline the viatical agreements based upon the medical history provided related to the insured. The Andrades did not review any of the medical information related to the insureds. They were aware that there was a rescission period associated with the viatical agreements that was supported by the medical information. The Andrades understood that the estimates on life expectancy for the insureds were not guarantees. The Colozzos Daniel Colozzo and Wanda Colozzo are husband and wife. Mr. Colozzo was born on August 11, 1940. Mrs. Colozzo was born on March 2, 1942. Mr. Colozzo had been a construction worker for about 38 years. Mr. Colozzo has been retired since 1996. Mrs. Colozzo had a retail fabric business before selling the business in 2003. Mr. Colozzo saw a written advertisement related to CDs associated with First Liberty. Based upon that information he went to Respondent's office to discuss investments. Once there he noticed an item, which Mr. Colozzo describes as a flag, explaining viaticals with a percentage return based upon the year that the viatical matured. Wanda Colozzo, Mr. Colozzo's wife was with him at the time. The Colozzos discussed the purchase of CDs. They did not find this desirable. Respondent mentioned the prospect of purchasing annuities. The annuities were also discussed. Mrs. Colozzo was interested in a return on investments of approximately $2,000 a month and the annuities did not fit their needs. As an alternative, in discussing viaticals, Respondent explained that they were life insurance policies that people had and the Colozzos would be buying a portion of the policy. In the beginning Mr. Colozzo was not interested because he did not wish to wait for someone to die to get a return on his investment. Respondent replied that the Colozzos would be helping someone because the persons who were insured could use the money to survive, to live on. At this meeting no decision was made to purchase viaticals. The Colozzos met several times with Respondent before deciding to buy viaticals. On June 9, 2003, Daniel and Wanda Colozzo entered into a viatical settlement purchase agreement with MBC in the amount of $60,000, with Respondent acting as the sales agent. The amount was paid by check written by Mrs. Colozzo to an escrow agent and a receipt was provided for the funds. When Mr. Colozzo asked Respondent whether the viatical purchase was a matter about which tax would be owed on the return of investment, Respondent replied that it could be or could not be. Respondent stated that it was not a security, so it was not registered. The nature of the viatical settlement purchase agreement included one viatical agreement for 36 months at $15,000; one viatical agreement for 48 months for $15,000; one viatical agreement at 60 months for $15,000 and one viatical agreement for 72 months at $15,000. On June 9, 2003, a fifth viatical was purchased in the amount of $10,000, as evidenced by a check written by Mrs. Colozzo to the escrow agent. The details of that viatical agreement are not known. On June 27, 2003, the Colozzos purchased a viatical for $15,000, terms unknown. Commencing on July 15, 2003, the Colozzos were provided assignment of ownership in the viaticals purchased on June 9, 2003, with medical information related to the life insurance policy holder, information concerning the estimated life-expectancy, the amount of funds made on the purchase and the statement of payment under the death benefit related to the viatical agreement. On September 9, 2003, the Colozzos returned to Respondent's office and purchased two three-year viaticals from Respondent at $75,000 each. Separate checks were written to the escrow agent for each of the $75,000 purchases made on September 9, 2003. As before, MBC made assignment of ownership in the life insurance policies related to the viatical agreements entered into on September 9, 2003. That notification included assignment, statement of amount to be paid upon under the death benefits, and medical information and was provided commencing with notification on November 6, 2003. All together the Colozzos purchased eight viaticals worth $235,000. On the occasions when the Colozzos met with Respondent and entered into the viatical settlement purchase agreements, the Colozzos looked them over and Respondent explained what was contained page-by-page. Each page was initialed by the Colozzos. The Colozzos did not carefully read those pages. When MBC provided information to the Colozzos concerning the viatical agreements, they were aware of their right to rescind the purchases and declined. Under the terms of the viatical settlement purchase agreements initially entered into, there was a clause allowing rescission. When Respondent explained the nature of the viatical settlement purchase agreements, he told the Colozzos that if the expected life expectancy was exceeded that MBC normally granted another year, which would have been a grace period, after which the Colozzos would be responsible for paying premiums. When describing the life insurance policies pertaining to viators, Respondent told the Colozzos that the life insurance policies were from major companies and were safe because they were life insurance policies. Mr. Colozzo had his accountant in New York review the viatical agreements. That individual indicated that he did not know much about viaticals but did not find anything wrong with them. The accountant in New York told the Colozzos that he had checked the MBC website and did not find anything of concern. Of the eight viaticals purchased two have matured and returned money on the investment. The ones that matured were $15,000 viatical agreements. The Colozzos have forfeited their rights in three viaticals totaling $165,000 and continue to hold the remaining viaticals. In their discussions Respondent told the Colozzos that he himself owned viaticals.
Recommendation Upon consideration of the findings of fact and the conclusions of law, it is RECOMMENDED: That a final order be entered finding Respondent in violation of Subsections 626.611(6) and 626.621(2), Florida Statutes (2002 and 2003), in Counts I through III, dismissing other alleged statutory violations within the Administrative Complaint, as amended, and suspending Respondent's insurance license for a period of six months. DONE AND ENTERED this 8th day of May, 2008, in Tallahassee, Leon County, Florida. S CHARLES C. ADAMS Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 SUNCOM 278-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 8th day of May, 2008. COPIES FURNISHED: Robert Allen Fox, Esquire Department of Financial Services Division of Legal Services 612 Larson Building 200 East Gaines Street Tallahassee, Florida 32399-0333 Richard Bisbee, Esquire H. Richard Bisbee, P.A. 1882 Capital Circle, Northeast, Suite 206 Tallahassee, Florida 32308 Honorable Alex Sink Chief Financial Officer Department of Financial Services The Capitol, Level 11 Tallahassee, Florida 32399-0300 Daniel Sumner, General Counsel Department of Financial Services The Capitol, Level 11 Tallahassee, Florida 32399-0307
Findings Of Fact 2. On April 16, 2008, the Department conducted an investigation and found Respondent conducting business at 1301 Seminole Blvd., Building C, Ste. 126, Largo, FL 33770. 3. At the time of the investigation Sal Cannatella was the general manager of the Respondent responsible for the operations at the foregoing business location. 4. Sixteen of Respondent’s employees at the above location made commercial telephone solicitations on behalf of Respondent. 5. At the time of the investigation Respondent was not registered with the Department. Respondent also was not licensed by the Office of Financial Regulation under Chapters 516 or 520, Part II, Florida Statutes, nor was Respondent a consumer finance lender supervised by any other governmental entity. 1 Filed May 29, 2009 1:42 PM Division of Administrative Hearings. 6. During the investigation Respondent produced a consumer finance license (#510102) and a retail installment seller license (#510522), both in the name of Interface Management, Inc. (“Interface”), and claimed to be an affiliate of Interface. Both licenses were issued by the Office of Financial Regulation. Respondent also produced a purported contract with an entity known as “Beginning Again, Inc.” 7. Respondent was a not a subsidiary of nor controlled Interface or Beginning Again. Conclusions of Law 8. The Department has authority to enforce Chapter 501, Part IV, Florida Statutes, the Florida Telemarketing Act (“Act”) and to enter this Settlement Agreement. §§120.57(4) and 501.612, Fla. Stat. (2007). 9. Respondent claimed it was exempt from the Act under §501.604(7), Florida Statutes, which states: 501.604 Exemptions.--The provisions of this part, except ss. 501.608 and 501.616(6) and (7), do not apply to: (7) Any supervised financial institution or parent, subsidiary, or affiliate thereof. As used in this section, "supervised financial institution” means any commercial bank, trust company, savings and loan association, mutual savings bank, credit union, industrial loan company, consumer finance lender, commercial finance lender, or insurer, provided that the institution is subject to supervision by an official or agency of this state, of any state, or of the United States. For the purposes of this exemption, "affiliate’ means a person who directly, or indirectly through one or more intermediaries, controls or is controlled by, or is under common control with, a supervised financial institution. 10. Chapter 516, Florida Statutes, states in pertinent part: 516.02 Loans; lines of credit; rate of interest; license.-- (1) A person must not engage in the business of making consumer finance loans unless she or he is authorized to do so under this chapter or other statutes and unless the person first obtains a license from the office. $16.05 License.— (3) Only one place of business for the purpose of making loans under this chapter may be maintained under one license, but the office may issue additional licenses to a licensee upon compliance with all the provisions of this chapter governing issuance of a single license. 11. Chapter 520, Part II, Florida Statutes, states in pertinent part: §20.32 Licenses,-- (1) A person may not engage in or transact the business of a retail seller engaging in retail installment transactions as defined in this part or operate a branch of such business without a license, except that a license is not required for a retail seller whose retail installment transactions are limited to the honoring of credit cards issued by dealers in oil and petroleum products licensed to do business in this state. 12. | Whether Respondent claimed to be a “supervised financial institution” or an affiliate of Interface or Beginning Again, Respondent was required to have a separate license for its business location under Chapters 516 or 520, Part II, Florida Statutes. By failing to do so, Respondent was not exempt from the Act and was required to be licensed. §§501.604(7), 501.605(1), Fla. Stat. (2007). Settlement Terms 13. To resolve these matters without further legal proceedings, the Department and Respondent expressly agree as follows: a. Respondent shall pay a total of Two Thousand Five Hundred and No/100 Dollars ($2,500.00). Payment is due upon Respondent’s execution and return of this Settlement Agreement. b. Respondent shall not engage in commercial telephone solicitation without first being properly exempt or licensed under the Act. c. If Respondent is found engaging in commercial telephone solicitation without being properly licensed or exempt under the Act, Respondent admits such conduct constitutes an immediate threat to the safety and welfare of Florida consumers and consents to the immediate entry and service of an order by the Department requiring Respondent to cease and desist all activities in violation of the Act. Respondent waives all contested issues of material fact under §120.57(1), Florida Statutes, and consents to proceedings only under §120.57(2), Florida Statutes. In such proceedings, if Respondent is found in violation of the Act, Respondent consents to the entry of a final order imposing administrative fines of $10,000.00 per violation. 14. This Settlement Agreement shall be construed in accordance with Florida law. 15. Each party shall bear their own costs and fees. 16. Venue for any action arising from this Settlement Agreement shall be in Leon County, Florida. 17. This Settlement Agreement constitutes the entire agreement between the Department and Respondent, including anyone acting for, associated with, or employed by either of them, concerning only the matters specified above and supersedes any prior discussions, agreements, or understandings; there are no promises, representatioris, or agreements between the parties other than as set forth herein. No modification or waiver of any provision shall be valid unless a written amendment to the Settlement Agreement is completed and properly executed by the parties. 18. This is an agreement of settlement and compromise, recognizing the parties may have different or incorrect, information, understandings, or contentions as to facts and law, with each party compromising and settling all such information, understandings, and contentions as to fact and law, so that no misunderstanding or misinformation shall be grounds for rescission of this Settlement Agreement. 19. Respondent expressly waives in this matter its rights to any hearing under Chapter 120, Florida Statutes, the making of findings of fact and conclusions of law by the Department, and all other proceedings, including appeals, to which Respondent may be entitled regarding any and all issues raised in this case. 20. This Settlement Agreement is and shall be deemed jointly drafted and written by all parties to it and shall not be construed or interpreted against any party. 21. To the extent any provision of this Settlement Agreement is prohibited by law for any reason such prohibition shall not affect any other provision of this Settlement Agreement. 22. — This Settlement Agreement shall inure to the benefit of and be binding on each party’s successors, assigns, heirs, administrators, representatives, and trustees. 23. All times stated herein are of the essence of this Settlement Agreement. 24. Approval Authority: This Settlement Agreement shall be valid and binding on the Department only upon acceptance and approval of its terms as shown through the execution below by the Department’s authorized representative. Florida Department of Agriculture and Consumer Services LW Il Eric H. Miller, Senior Attorney 2005 Apalachee Parkway Tallahassee, FL 32301 (850) 410-3775 (850) 410-3797 (facsimile) Date: [iw reeg National Consumer Services, Inc. SS _ La Print Name: SAL Te ANNATELLA Off Date: Yor © a
The Issue Whether Neuma, Inc. (Petitioner), should be granted licensure as a "viatical settlement provider" as defined by Section 626.9911(6), Florida Statutes.
Findings Of Fact Petitioner applied to Respondent for licensure as a viatical settlement provider on or about August 20, 2001. After denial of the first application, Petitioner submitted a second application on February 4, 2002, for licensure as a viatical settlement provider. On March 28, 2002, Respondent denied that application. At all times relevant to these proceedings, David Irwin Binter was the sole owner and President of Petitioner. Further, Binter was also the sole owner and President of AMG, Inc. (AMG), incorporated by Binter in the State of Delaware in December of 1996. In other states the direct affiliation of the two corporations has led to the acquisition by Petitioner of viatical settlements directly from insured individuals for Petitioner's own account with money raised by AMG from investors. Consequently, purchase of a viatical settlement from Petitioner by AMG cannot be considered an "arms length transaction" in view of the close relationship and common ownership of the two corporations. Petitioner not only has previously purchased interests in certain viators life insurance policies using investor monies solicited by AMG, but if licensed in Florida, Petitioner would raise investor money through AMG. Petitioner's representations in its "Viatical Settlement Disclosure Document," given to each AMG investor, and Petitioner's Florida application correspondence stating that if granted a Florida viatical settlement provider license, Petitioner intended to use AMG to solicit investors monies, also corroborate the finding that Petitioner would raise investor money through AMG, if licensed in Florida. In his initial application on behalf of Petitioner for licensure as a viatical settlement provider, Binter did not reveal his involvement with AMG. In response to Question 8 of the Biographical Statement and Affidavit portion of the application, requesting the listing of all current business activity, Binter responded with the notation "N/A." Binter did this although he was the owner of AMG, the entity otherwise represented in Petitioner's application correspondence as the affiliate through which Petitioner intends to sell to investors interests in life insurance policies purchased by Petitioner. Binter's answer to Question 8 of the Biographical Statement and Affidavit portion of the first application was false. Binter's answer to Question 20(b)9 of the Biographical Statement and Affidavit required that he reveal any entity with which he was associated, or had been associated within the previous 12 months, that had been enjoined temporarily or permanently by any judicial, administrative, regulatory or disciplinary action from violating any federal or state law regulating the business of insurance, securities, or banking. Binter answered "No" to the question despite the existence of such actions against AMG by the states of Kansas, Illinois, and Alabama within the stated time frame. Petitioner's website, open to the general public, made material misrepresentations relative to the existence of a contingency insurance program between AMG and Lloyd’s of London, stating that the program was in existence and would insure investors against the contingency of viators living past the death dates projected by physicians designated by Lloyds to render those projections. Those representations are untrue because Lloyds actually provided no such coverage at the time the website was open to the public, and has not actually provided any to this date. Petitioner's website contained terminology that was specifically prohibited by Florida law. An examination of the website shows that it uses the words, "A no-risk investment," and "insured safe shelter," both of which are prohibited by Section 626.99277(6), Florida Statutes, which specifically bans the use of the words "no-risk" and "safe" relative to investments in viatical settlement purchase agreements. Petitioner’s Admission 11 confirms the usage of those terms. Petitioner, at the time of its first application, had no viatical settlement provider application on file with the State of Connecticut, although Petitioner's application represented that it did. Petitioner's employee at the time, Denise Randall, testified that while she thought that she had filed such an application with Connecticut on behalf of Petitioner, she may have inadvertently mailed the Connecticut application to Mississippi and that when informed by Respondent's personnel that no Petitioner application was on file with Connecticut, she did not bother to check with Connecticut but merely sent Respondent's office a copy of the application she thought she had mailed to Connecticut and continued to represent that the same was on file with Connecticut. Petitioner/AMG made demands on their investors for monies in addition to the stated purchase price of their viatical interests in violation of express representations in the contracts between Petitioner/AMG and those investors that additional premiums, due to an underestimation of life span, would be paid out of the share of Petitioner/AMG. An examination of the contracts at issue fails to reveal any provision authorizing demands on investors. Despite Respondent's repeated requests for the same, Petitioner never produced a trust or escrow agreement between Petitioner and its purported trustee, Larry Silver. The presence and use of an independent third party trustee or escrow agent is expressly required for the completion of any viatical settlement transaction in the State of Florida. Section 626.9924(3), Florida Statutes. All that was done in response to Respondent's repeated requests was to re-submit the same unsigned, three-party contract form. No document establishing the actual existence of an independent third-party trustee or escrow agent required by Florida law for any viatical settlement transaction was ever produced by Petitioner. Randall exclusively prepared the first application submitted on Petitioner's behalf. Binter signed the application without reading any of it, even though his signature verified under oath and penalty of perjury that the had carefully examined each question in the biographical statement and affidavit and answered each truthfully. Randall’s prior employment was in office administration in banks and mortgage companies. She had never worked in the viatical industry before, had never worked for Binter before, and had no independent knowledge of his business affairs. Her primary job function with Petitioner was completing and filing viatical settlement provider applications with state regulators. Binter provided no advice, assistance, or guidance. All that Randall had for guidance was a 1996 biographical statement that she found among other office files. Binter did not provide her with any information updating that statement and he specifically did not tell her about the securities actions in Alabama, Kansas, and Illinois. Binter did not have the first application reviewed by his attorney, who had actual knowledge of the securities actions. The attorney, however, did review the second application submitted after the securities actions omissions were discovered and the first application withdrawn. Binter had actual knowledge of all three securities actions at the time of the first application. He did not share that knowledge with Randall nor did he seek his attorney's review of the application.
Recommendation In view of the foregoing, it is RECOMMENDED that a final order be entered by the Florida Department of Insurance denying Petitioner's application for licensure as a viatical settlement provider. DONE AND ENTERED this 13th day of November, 2002, in Tallahassee, Leon County, Florida. DON W. DAVIS Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 SUNCOM 278-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 13th day of November, 2002. COPIES FURNISHED: Michael H. Davidson, Esquire Department of Insurance 200 East Gaines Street 612 Larson Building Tallahassee, Florida 32399-0333 Jeffrey L. Frehn, Esquire Katz, Kutter, Haigler, Alderman, Bryant & Yon, P.A. 106 East College Avenue, Suite 1200 Post Office Box 1877 Tallahassee, Florida 32302-1877 Honorable Tom Gallagher State Treasurer/Insurance Commissioner Department of Insurance The Capitol, Plaza Level 02 Tallahassee, Florida 32399-0300 Mark Casteel, General Counsel Department of Insurance The Capitol, Lower Level 26 Tallahassee, Florida 32399-0307
The Issue The issue is whether the Petition to Determine the Invalidity of Agency Statements should be dismissed.
Findings Of Fact Petitioner is a licensed insurance agent, and was the subject of the Administrative Complaint filed by the Department that became DOAH Case No. 07-1218PL. The Administrative Complaint alleged that Petitioner violated Section 626.611(16), Florida Statutes, by selling unregistered viatical settlement contracts to four elderly individuals in 2003. Most pertinent to this case, the Administrative Complaint alleged: Viatical settlement contracts are investment contracts within the meaning of section 517.021(21)(q), Florida Statutes, and are therefore securities requiring registration pursuant to section 517.07, Florida Statutes. As to each of the transactions described below, the viatical settlement contracts sold by [Petitioner] . . . were unregistered securities.[3] The Administrative Complaint also alleged that Petitioner violated a number of other statutes (e.g., Sections 626.611(5), (7), and (9), and 626.621(9), Florida Statutes) based upon misrepresentations made by Petitioner in connection with the sales of the viatical settlement contracts. On October 9, 2007, Judge Canter issued a Recommended Order in DOAH Case No. 07-1218PL finding that Petitioner violated Sections 626.611(5), (7), (9), and (16) and 626.621(9), Florida Statutes, and recommending that the Department revoke Petitioner’s license.4 The Recommended Order included the following findings and conclusions pertinent to the issue framed by the petition: [Petitioner] misrepresented the risk character of viaticals in his discussions with the investors involved in this case. He had a motive to downplay the true risk character of the viaticals, because if he received a commission for every sale of a viatical. If [Petitioner] had informed the investors of the true risk character of viaticals, the investors might not have purchased the viaticals. The definition of "security" in Section 517.021, Florida Statutes, was amended in 2006 to specifically identify "viatical settlement investment" as a type of security. [Petitioner] does not dispute that a viatical is a security. There is no dispute that the viaticals sold by [Petitioner], which are the subject of this case, were not registered securities when [Petitioner] sold them in 2003. * * * [Petitioner] objects to being charged with selling unregistered securities, because viaticals were not specifically defined as securities until 2006. [The Department] claims that, although viaticals were not specifically defined as securities in Section 517.021, Florida Statutes, in 2003, the prior definition, which included "investment contracts," was sufficient to include viaticals. [The Department] further asserts that viaticals have all the elements of a security as established by the case law. [The Department] is correct that a viatical met the definition of a security under the law that existed in 2003. However, the Administrative Law Judge does not agree with [the Department]'s argument that this interpretation of the law was clear and settled in 2003. The regulation of viaticals under the insurance code was a cause of confusion. Under Florida Administrative Code Rule 69B-231.080, the penalty for each violation of Subsections 626.611(5) and (7), Florida Statutes, is a six-month suspension; the penalty for each violation of Subsection 626.611(9), Florida Statutes, is a nine month suspension; and the penalty for each violation of Subsection 626.611(16), Florida Statutes, is a 12-month suspension. * * * 56. [U]nder Florida Administrative Code Rule 69B-231.040(1)(a), the “penalty per count” cannot exceed the highest penalty for any violation under the count, which in this case is the 12-month suspension for sale of an unregistered security. Therefore, based on the four counts of the Administrative Complaint, the “total penalty” would be four years. * * * 58. A mitigating factor is the unsettled state of the law in 2003 regarding the legal status of viaticals as securities. However, even if the penalty for the sale of unlicensed securities were eliminated altogether and the penalty per count were reduced to a nine-month suspension, the total penalty would be suspension for 36 months. Subsection 626.641(1), Florida Statutes, does not permit Petitioner to suspend a license for more than two years. Therefore, the required penalty in this case is revocation of [Petitioner]’s license. Petitioner has filed exceptions to the Recommended Order, and the Department has not yet entered a Final Order.
The Issue The issue is whether Proposed Rule 69O-204.040 is an invalid exercise of delegated legislative authority.
Findings Of Fact The Viatical Settlement Act codified in Part X of Chapter 626, Florida Statutes, is one of several statutes that provide for the regulation of viatical settlements in Florida. A viatical settlement is the sale of a life insurance policy by its owner on the secondary market.3/ The parties involved in the transaction are the viator, the viatical settlement broker, the viatical settlement provider, and the investor who purchases the policy. The viator is the owner of the policy being sold. The viator is typically, but not always, the insured under the policy. The viatical settlement broker is the person who solicits bids and negotiates the sale of the policy on behalf of the viator. In order to perform the services of a viatical settlement broker in Florida, a person must be a licensed life insurance agent, self-appoint him/herself with the Department of Financial Services (DFS), and pay the applicable fees to DFS. The viatical settlement provider is the intermediary between the viatical settlement broker and the investor who purchases the policy. The viatical settlement provider presents the policy to potential investors; conveys the investors’ bids to the viatical settlement broker; and, after a bid is accepted by the viator, performs the administrative functions necessary to complete the transaction. Viatical settlement providers are licensed and regulated by OIR. Viatical settlement brokers are licensed and regulated by DFS, not OIR. Petitioner ILS-Florida is a Delaware limited liability company owned by NFP Life Services, LLC (45.5 percent), Genworth Institutional Life Services, Inc. (45.5 percent), and GS Re Holdings, Inc. (nine percent). NFP Life Services, LLC, is a wholly-owned subsidiary of National Financial Partners Corporation (NFP). NFP Brokerage Agency is also a wholly-owned subsidiary of NFP. NFP Brokerage Agency employs licensed viatical settlement brokers in a number of states, including Florida. The viatical settlement brokers working for NFP Brokerage Agency are considered to be “affiliated brokers” of ILS-Florida by virtue of NFP’s ownership interest in both companies. ILS-Florida was formed on September 8, 2008, “specifically for the purpose of doing business as a viatical settlement provider . . . in the State of Florida.” On or about October 29, 2008, ILS-Florida submitted to OIR an application for licensure as a viatical settlement provider. The application was still “pending” as of the date of the final hearing, but on March 20, 2009, OIR approved the application, and ILS-Florida is now a licensed viatical settlement provider, No. 09-800257957. ILS-Florida’s parent companies have another subsidiary -- ILS-Florida’s “sister company” -- that is currently licensed as a viatical settlement provider in a number of states. ILS-Florida intends to use a similar business plan in Florida that its sister company uses in the states where it is licensed. The business plan contemplates using only brokers working for NFP Brokerage Agency for at least the first year of operation, although it is possible that ILS-Florida may use both affiliated and non-affiliated brokers from the outset. ILS-Florida wants to be able to use brokers working for NFP Brokerage Agency because it considers them to be “higher-quality brokers” because they “have already agreed to a higher standard of compliance than is generally seen . . . in the industry.” Also, because NFP Brokerage Agency already has a number of brokers involved in the viatical settlement business in Florida, its brokers represent a significant source of potential business for ILS-Florida. The proposed rule will more likely than not preclude ILS-Florida from using affiliated brokers working for NFP Brokerage Agency because NFP has significant ownership interests in both companies. Petitioner David Matthew Janecek is a resident of Texas. He works for a brokerage in Texas that is owned by NFP Brokerage Agency. Mr. Janecek is licensed in Florida as a non-resident life insurance agent. His license, No. P161957, was issued on September 9, 2008. Mr. Janecek is not, and never has been, a licensed viatical settlement broker in any state. He has not self- appointed himself as a viatical settlement broker with DFS, and he has no present intention of acting as a viatical settlement broker in Florida.4/ Respondent Financial Services Commission (Commission) is the agency head responsible for the promulgation of the proposed rule. The Commission, which is comprised of the Governor and Cabinet, was created within DFS, but it is not subject to the control of DFS and it is effectively a separate agency from DFS. Respondent OIR is an office under the Commission. OIR developed the proposed rule and will be responsible for implementing the rule. Respondents published the proposed rule in the Florida Administrative Weekly (FAW) on September 26, 2008. A notice of change to the proposed rule was published in the FAW on December 24, 2008. The parties stipulated that Respondents met all applicable rulemaking publication and notice requirements, and that the petition challenging the proposed rule was timely filed. The proposed rule is titled “Prohibited Practices and Conflicts of Interest,” and states: With respect to any viatical settlement contract or insurance policy, no viatical settlement provider knowingly may enter into a viatical settlement contract with a viator, if, in connection with such viatical settlement contract, anything of value will be paid to a viatical settlement broker that is controlling, controlled by, or under common control with such viatical settlement provider, financing entity or related provider trust that is involved in such viatical settlement contract. The “specific authority” listed in the FAW notice for the proposed rule is Section 626.9925, Florida Statutes. That statute authorizes the Commission to: adopt rules to administer this act, including rules establishing standards for evaluating advertising by licensees; rules providing for the collection of data, for disclosures to viators, for the reporting of life expectancies, and for the registration of life expectancy providers; and rules defining terms used in this act and prescribing recordkeeping requirements relating to executed viatical settlement contracts. (Emphasis supplied). The only language in the statute that Respondents are relying on as authorization for the proposed rule is the underlined language. The FAW notice states that the “law implemented” by the proposed rule is Sections 626.9911(9), 626.9916(1), and 626.9916(5), Florida Statutes. Section 626.9911(9), Florida Statutes, defines “viatical settlement broker” for purposes of the Viatical Settlement Act. The definition includes the following language, which is also contained in Section 626.9916(5), Florida Statutes: Notwithstanding the manner in which the viatical settlement broker is compensated, a viatical settlement broker is deemed to represent only the viator and owes a fiduciary duty to the viator to act according to the viator's instructions and in the best interest of the viator. Section 626.9916(1), Florida Statutes, prohibits any person other than a licensed life agent from performing the functions of a viatical settlement broker. The text of the proposed rule was derived almost verbatim from Section 12.B. of the Viatical Settlements Model Act developed by the National Association of Insurance Commissioners (NAIC). The “model acts” developed by NAIC are intended to be used by state legislatures in drafting statutes. NAIC also develops “model regulations” that are intended to be used by state regulatory agencies in drafting rules to implement the statutes. The proposed rule prohibits a viatical settlement provider from entering into a viatical settlement contract involving a viatical settlement broker over which the provider has direct or indirect control. The determination as to whether the viatical settlement provider has control over a viatical settlement broker will be made on a case-by-case basis applying the definition of “control” contained in Proposed Rule 69O- 204.020(1). According to OIR, the proposed rule is intended to protect the viator by preventing the viatical settlement provider from using its control over the viatical settlement broker to induce or encourage the broker to breach his or her fiduciary duty to the viator. It is undisputed that Florida law does not currently prohibit the practice prescribed by the proposed rule so long as the broker satisfies his or her fiduciary duty to the viator. The proposed rule will prohibit transactions between affiliated viatical settlement providers and brokers, irrespective of whether the broker’s fiduciary duty to the viator has been breached. For example, if a broker recommends that a viator accept a bid for the policy from an affiliated provider that was not the highest bid, such action would constitute both a breach of the broker’s fiduciary duty and a violation of the proposed rule; however, if the bid from the affiliated broker was the highest bid for the policy, the broker’s recommendation to accept the bid would not constitute a violation of the broker’s fiduciary duty, but it would violate the proposed rule. During the rulemaking process, OIR staff considered adding language to the proposed rule that would have allowed affiliated providers and brokers to enter into viatical settlement contracts so long as certain disclosure requirements and other safeguards were met. The record does not reflect why this language was not included in the proposed rule published in the FAW, although it can be inferred from the e-mails received into evidence on this issue that OIR and/or the Commission did not feel compelled to add the language suggested by staff.
