44-1850

44-1850. Viatical or life settlement
investment contracts

A. Section 44-1841 does not apply to viatical or life settlement investment
contracts if either:

1. The person who assigns, transfers, sells, devises or bequests any portion of the
death benefit under or ownership of either an insurance policy or certificate of
insurance does not enter into more than three viatical or life settlement investment
contracts in any calendar year.

2. All of the following apply:

(a) At least ten days before the initial sale of a viatical or life settlement
investment contract within or from this state, and every twelve months after the initial
filing date if the issuer continues to offer securities within or from this state, the
issuer files with the commission all of the following:

(i) A notice of the issuer's intent to sell securities pursuant to this section
that includes the issuer's name, the issuer's type of organization, the state in which
the issuer is organized, the date the issuer intends to begin selling securities within
or from this state, the issuer's principal business and mailing address and a statement
that the issuer is not prohibited pursuant to subsection E of this section from claiming
an exemption pursuant to this subsection. An authorized officer of the issuer shall sign
the notice and the signature shall be notarized.

(ii) A consent to service of process.

(iii) An audit report of an independent certified public accountant together with a
balance sheet and related statements of income or operations, stockholders' equity or
retained earnings and cash flows that reflect the issuer's financial position, the
results of operations and cash flows as of a date within fifteen months before the date
of filing the notice prescribed in this subdivision. The financial statements listed in
this subdivision shall be prepared in conformity with generally accepted accounting
principles and shall be examined in accordance with generally accepted auditing
standards. If the date of the audit report is more than one hundred twenty days before
the date of filing the notice prescribed in this subdivision, the issuer shall provide
unaudited interim financial statements prepared in conformity with generally accepted
accounting principles.

(b) The issuer discloses to the offeree in writing all of the following:

(i) The purchaser's right to rescind or cancel the investment and receive a refund.

(ii) The name, address and telephone number of the issuing insurance company.

(iii) The total value of the policy and the percentage of the policy the purchaser
will own.

(iv) The policy number, issue date and type.

(v) If a group policy, the name, address and telephone number of the group and, if
applicable, the material terms and conditions of converting the policy to an individual
policy, including the amount of increased premiums.

(vi) If a term policy, the term and the name, address and telephone number of the
person who will be responsible for renewing the policy if necessary.

(vii) Whether the policy is contestable.

(viii) If a contestable policy, the risk that the insurance company may cancel the
policy or refuse to pay a claim made during the contestable period.

(ix) The policy premiums and terms of policy payments.

(x) The amount of the purchaser's monies that will be set aside to pay premiums.

(xi) The name, address and telephone number of the person who will be the policy
owner and the person who will be responsible for paying premiums.

(xii) The date on which the purchaser will be required to pay premiums if necessary
and the amount of the premium.

(xiii) The separate amounts of the purchaser's monies that will be used to pay the
seller's commission, purchase the policy and pay administrative expenses and other
transaction costs.

(xiv) Any other disclosure required by the commission.

B. At least ten days before use within this state, an issuer shall file with the
commission all advertising and sales materials that will be published, exhibited,
broadcast or otherwise used, directly or indirectly, in the offer or sale of a viatical
or life settlement investment contract.

C. A purchaser of a viatical or life settlement investment contract that was
purchased pursuant to this section may rescind or cancel the viatical or life settlement
investment contract pursuant to this section. The purchaser may rescind or cancel the
investment at any time before seven calendar days after the date the purchaser pays the
required consideration to the issuer or the issuer's agent or the date the purchaser
receives the written disclosures required under subsection A of this section, whichever
is later. The purchaser shall notify the issuer or the issuer's agent in writing of the
rescission or cancellation. No specific form is required for the rescission or
cancellation. The rescission or cancellation is effective when personally delivered,
deposited in the United States mail or deposited with a commercial courier or delivery
service. The issuer shall refund all the purchaser's money within seven calendar days
after receiving the notice of rescission or cancellation.

D. The commission may deny or revoke an exemption pursuant to subsection A of this
section. A denial or revocation of the exemption is effective on the date the commission
signs the notice of denial or revocation. The commission may deny or revoke the exemption
if the commission finds any of the following:

1. The notice filing, advertising materials, sales materials or disclosures made to
offerees are incomplete, inaccurate or misleading.

2. The sale of the securities operates or would operate as a fraud or deceit on
investors.

3. The issuer is insolvent or is in an unsound financial condition.

4. The issuer has refused to allow the commission to examine the issuer's affairs
or has failed or refused to provide information to the commission that is required by
this chapter or any rule or order of the commission.

5. The issuer has failed to reasonably supervise the issuer's salesmen.

6. The issuer has knowingly retained a salesman after notice that the salesman has
committed an offense under this chapter or has been convicted of an offense or is subject
to an order or judgment as described in subsection E of this section.

E. The securities of an issuer are not exempt pursuant to subsection A of this
section if the issuer or any of its affiliates, directors, officers, general partners or
beneficial owners of at least ten per cent of any class of its equity securities or
managing underwriter of the securities:

1. Has been convicted of a felony involving racketeering or a transaction in
securities or of which fraud is an essential element or of any offense listed in section
13-2301, subsection D, paragraph 4.

2. Has been convicted within the ten years before or at any time after the filing
of a notice of intent to sell securities pursuant to this section of a misdemeanor
involving racketeering or a transaction in securities or of which fraud or dishonesty is
an essential element.

3. Is subject to an order or judgment of a court of competent jurisdiction or any
state or federal administrative tribunal entered within ten years before or at any time
after the filing of a notice of intent to sell securities pursuant to this section and
that either:

(a) Enjoins or restrains that person from engaging in or continuing any conduct or
practice in connection with the sale or purchase of securities or the business of
insurance.

(b) Involves fraud, deceit, racketeering or consumer protection laws.

4. Is subject to the reporting requirements of the securities exchange act of 1934
and has not filed all required reports during the twelve calendar months before the
filing of a notice of intent to sell securities pursuant to this section.

5. Is subject to an order of an administrative tribunal, an SRO or the SEC denying,
suspending or revoking for at least six months a membership, registration or license to
do any of the following:

(a) Act as a broker, dealer or salesman of securities.

(b) Act as an investment adviser or investment adviser representative as defined in
section 44-3101.

F. The commission at its discretion may waive any disqualification caused by
subsection E of this section if the waiver would not be contrary to the public interest.
A disqualification under subsection E of this section ceases to exist if the basis for
the disqualification has been removed by the jurisdiction that created it.

G. Subsection E, paragraph 3, subdivision (a) of this section does not exclude
securities from the exemption provided in subsection A of this section, but may be a
basis for denial or revocation pursuant to subsection D of this section, if all of the
following apply:

1. The order of judgment is related to a viatical or life settlement investment
contract.

2. The issuer provides the commission with a copy of the order or judgment at the
time the initial notice is filed pursuant to subsection A, paragraph 2, subdivision (a)
of this section or within twenty business days after entry of the order or judgment,
whichever occurs last.

3. At the time the order or judgment is entered, the law of the issuing
jurisdiction does not include a specific statute, regulation, rule or controlling
judicial decision that requires the registration of a viatical or life settlement
investment contract or its equivalent as a security.

H. Attempted compliance with this section does not act as an exclusive election.