ARS § 44-1850

44-1850 - Viatical or life settlement investment contracts 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.