Texas 2015 - 84th Regular

Texas House Bill HB3723 Compare Versions

Only one version of the bill is available at this time.

Old	New	Differences
1	1	84R6810 PMO-D
2	2	By: Workman H.B. No. 3723
3	3
4	4
5	5	A BILL TO BE ENTITLED
6	6	AN ACT
7	7	relating to the regulation of secondary market transactions related
8	8	to the business of life settlements; providing penalties;
9	9	authorizing fees.
10	10	BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
11	11	SECTION 1. Section 1111A.002, Insurance Code, is amended by
12	12	amending Subdivisions (1), (2), (3), (7), (8), (9), (13), (18), and
13	13	(20) and adding Subdivisions (1-A), (8-A), (25), (26), and (27) to
14	14	read as follows:
15	15	(1) "Accredited investor" has the meaning assigned by
16	16	17 C.F.R. Section 230.501.
17	17	(1-A) "Advertisement" means a written, electronic, or
18	18	printed communication or a communication by means of a recorded
19	19	telephone message or transmitted on radio, television, the
20	20	Internet, or similar communications media, including film strips,
21	21	motion pictures, and videos, published, disseminated, circulated,
22	22	or placed directly before the public for the purpose of creating an
23	23	interest in or inducing a person to:
24	24	(A) purchase or sell, assign, devise, bequest, or
25	25	transfer the death benefit or ownership of a life insurance policy
26	26	or an interest in a life insurance policy under a life settlement
27	27	contract; or
28	28	(B) enter into a secondary market transaction.
29	29	(2) "Broker" means a person who, on behalf of an owner
30	30	and for a fee, commission, or other valuable consideration, offers
31	31	or attempts to negotiate a life settlement contract between an
32	32	owner and a provider or estimates life expectancies on behalf of an
33	33	owner for a life settlement contract. A broker who offers or
34	34	attempts to negotiate a life settlement contract represents only
35	35	the owner and owes a fiduciary duty to the owner to act according to
36	36	the owner's instructions, and in the best interest of the owner,
37	37	notwithstanding the manner in which the broker is compensated. A
38	38	broker does not include an attorney, certified public accountant,
39	39	or financial planner retained in the type of practice customarily
40	40	performed in a professional capacity to represent the owner whose
41	41	compensation is not paid directly or indirectly by the provider or
42	42	any other person, except the owner.
43	43	(3) "Business of life settlements" means an activity
44	44	involved in, but not limited to, offering to enter into,
45	45	soliciting, negotiating, procuring, effectuating, monitoring, or
46	46	tracking, of:
47	47	(A) life settlement contracts; or
48	48	(B) secondary market transactions.
49	49	(7) "Fraudulent life settlement act" includes:
50	50	(A) an act or omission committed by a person who,
51	51	knowingly and with intent to defraud, for the purpose of depriving
52	52	another of property or for pecuniary gain, commits, or permits an
53	53	employee or an agent to engage in, acts including:
54	54	(i) presenting, causing to be presented, or
55	55	preparing with knowledge and belief that it will be presented to or
56	56	by a provider, premium finance lender, broker, insurer, insurance
57	57	agent, secondary provider, investor, or any other person, false
58	58	material information, or concealing material information, as part
59	59	of, in support of, or concerning a fact material to one or more of
60	60	the following:
61	61	(a) an application for the issuance of
62	62	a life settlement contract or an insurance policy;
63	63	(b) the underwriting of a life
64	64	settlement contract or an insurance policy;
65	65	(c) a claim for payment or benefit
66	66	pursuant to a life settlement contract or an insurance policy;
67	67	(d) premium paid on an insurance
68	68	policy;
69	69	(e) payment for and changes in
70	70	ownership or beneficiary made in accordance with the terms of a life
71	71	settlement contract or an insurance policy;
72	72	(f) the reinstatement or conversion
73	73	of an insurance policy;
74	74	(g) in the solicitation, offer to
75	75	enter into, or effectuation of a life settlement contract, [or] an
76	76	insurance policy, or a secondary market transaction;
77	77	(h) the issuance of written evidence
78	78	of an insurance policy, a life settlement contract, [contracts] or
79	79	a secondary market transaction [insurance]; or
80	80	(i) an application for or the
81	81	existence of or any payment related to a loan secured directly or
82	82	indirectly by an interest in a life insurance policy;
83	83	(ii) failing to disclose to the insurer, if
84	84	the insurer has requested the disclosure, that the prospective
85	85	insured has undergone a life expectancy evaluation by any person or
86	86	entity other than the insurer or its authorized representatives in
87	87	connection with the issuance of the policy; or
88	88	(iii) employing a device, scheme, or
89	89	artifice to defraud in the business of life settlements; and
90	90	(B) acts or omissions in the furtherance of a
91	91	fraud or to prevent the detection of a fraud, or acts or omissions
92	92	that permit an employee or an agent to:
93	93	(i) remove, conceal, alter, destroy, or
94	94	sequester from the commissioner the assets or records of a license
95	95	holder or another person engaged in the business of life
96	96	settlements;
97	97	(ii) misrepresent or conceal the financial
98	98	condition of a license holder, financing entity, insurer, investor,
99	99	or other person;
100	100	(iii) transact the business of life
101	101	settlements in violation of laws requiring a license, certificate
102	102	of authority, or other legal authority for the transaction of the
103	103	business of life settlements;
104	104	(iv) file with the commissioner or the
105	105	chief insurance regulatory official of another jurisdiction a
106	106	document containing false information or concealing information
107	107	about a material fact;
108	108	(v) engage in embezzlement, theft,
109	109	misappropriation, or conversion of monies, funds, premiums,
110	110	credits, or other property of a provider, insurer, insured, owner,
111	111	insurance policy owner, secondary provider, investor, or any other
112	112	person engaged in the business of life settlements or insurance;
113	113	(vi) knowingly and with intent to defraud,
114	114	enter into, broker, or otherwise deal in a life settlement
115	115	contract, the subject of which is a life insurance policy, or in a
116	116	secondary market transaction related to a life insurance policy, if
117	117	the policy [that] was obtained by presenting false information
118	118	concerning any fact material to the policy or by concealing that
119	119	fact, for the purpose of misleading another, or providing
120	120	information concerning any fact material to the policy, if the
121	121	owner or the owner's agent intended to defraud the policy's issuer;
122	122	(vii) attempt to commit, assist, aid or
123	123	abet in the commission of, or engage in conspiracy to commit the
124	124	acts or omissions specified in this paragraph; or
125	125	(viii) misrepresent the state of residence
126	126	of an owner, secondary provider, or investor to be a state or
127	127	jurisdiction that does not have a law substantially similar to this
128	128	chapter with respect to the interest of the owner, secondary
129	129	provider, or investor, as applicable, for the purpose of evading or
130	130	avoiding the provisions of this chapter.
131	131	(8) "Insured" means a person covered under the policy
132	132	being considered for sale in a life settlement contract or related
133	133	to a secondary market transaction.
134	134	(8-A) "Investor" means, except to the extent otherwise
135	135	clear from context, a person who is offered or obtains an interest
136	136	in a life settlement contract from a secondary provider in a
137	137	secondary market transaction.
138	138	(9) "Life expectancy" means the arithmetic mean of the
139	139	number of months the insured under the life insurance policy to be
140	140	settled or related to a secondary market transaction can be
141	141	expected to live [as determined by a life expectancy company or
142	142	provider] considering medical records and appropriate experiential
143	143	data.
144	144	(13) "Owner" means the owner of a life insurance
145	145	policy or a certificate holder under a group policy, with or without
146	146	a terminal illness, who enters or seeks to enter into a life
147	147	settlement contract. In this chapter, the term "owner" is not
148	148	limited to an owner of a life insurance policy or a certificate
149	149	holder under a group policy that insures the life of an individual
150	150	with a terminal or chronic illness or condition except as
151	151	specifically provided. The term does not include:
152	152	(A) a provider or other license holder under this
153	153	chapter;
154	154	(B) a qualified institutional buyer as defined by
155	155	17 C.F.R. Section 230.144A, as amended;
156	156	(C) a financing entity;
157	157	(D) a special purpose entity; [or]
158	158	(E) a related provider trust; or
159	159	(F) any person who holds an interest in a life
160	160	settlement contract as a result of a secondary market transaction.
161	161	(18) "Provider" means a person, other than an owner,
162	162	who enters into or effectuates a life settlement contract with an
163	163	owner. The term does not include:
164	164	(A) a bank, savings bank, savings and loan
165	165	association, or credit union;
166	166	(B) a licensed lending institution or creditor or
167	167	secured party pursuant to a premium finance loan agreement that
168	168	takes an assignment of a life insurance policy or certificate
169	169	issued pursuant to a group life insurance policy as collateral for a
170	170	loan;
171	171	(C) the insurer of a life insurance policy or
172	172	rider to the extent of providing accelerated death benefits or
173	173	riders under Subchapter B, Chapter 1111, or cash surrender value;
174	174	(D) an individual who enters into or effectuates
175	175	not more than one agreement in a calendar year for the transfer of a
176	176	life insurance policy or certificate issued pursuant to a group
177	177	life insurance policy, for compensation or anything of value less
178	178	than the expected death benefit payable under the policy;
179	179	(E) a purchaser;
180	180	(F) any authorized or eligible insurer that
181	181	provides stop loss coverage to a provider, purchaser, financing
182	182	entity, special purpose entity, or related provider trust;
183	183	(G) a financing entity;
184	184	(H) a special purpose entity;
185	185	(I) a related provider trust;
186	186	(J) a broker; [or]
187	187	(K) an accredited investor or qualified
188	188	institutional buyer as those terms are defined by 17 C.F.R.
189	189	Sections 230.501 and 230.144A, respectively, as amended, who
190	190	purchases a life insurance [settlement] policy or a certificate
191	191	issued pursuant to a life insurance policy from a provider or a
192	192	secondary provider; or
193	193	(L) a secondary provider.
194	194	(20) "Purchaser" means a person who, in a transaction
195	195	other than a secondary market transaction, pays compensation or
196	196	anything of value as consideration for a beneficial interest in a
197	197	trust that is vested with, or for the assignment, transfer, or sale
198	198	of, an ownership or other interest in a life insurance policy or a
199	199	certificate issued pursuant to a group life insurance policy that
200	200	has been the subject of a life settlement contract.
201	201	(25) "Prospectus" means a written, electronic, or
202	202	printed communication or a communication by other means published,
203	203	disseminated, circulated, or placed before an investor for the
204	204	purpose of creating an interest in or inducing an investor to
205	205	purchase, sell, or assign an ownership interest in a life
206	206	settlement contract.
207	207	(26) "Secondary market transaction" means to offer to
208	208	sell an interest in a life settlement contract or to solicit,
209	209	negotiate, procure, effectuate, monitor, track the sale of, or sell
210	210	an interest in a life settlement contract.
211	211	(27) "Secondary provider" means a person, other than
212	212	an investor, offering to enter into a secondary market transaction
213	213	whether for a fee, commission, or other valuable consideration or
214	214	otherwise.
215	215	SECTION 2. Section 1111A.003, Insurance Code, is amended by
216	216	adding Subsections (a-1), (a-2), (a-3), (a-4), and (e-1) and
217	217	amending Subsections (b), (c), (g), (j), (m), (n), and (o) to read
218	218	as follows:
219	219	(a-1) A person, wherever located, may not act as a secondary
220	220	provider in a transaction involving an investor who is a resident of
221	221	this state unless the person holds a license from the department
222	222	under this chapter.
223	223	(a-2) A person may not act as a secondary provider in this
224	224	state unless the person holds a license from the department under
225	225	this chapter.
226	226	(a-3) Except as provided by Subsection (a-4), a person may
227	227	not provide a life expectancy estimate in connection with a life
228	228	settlement or secondary market transaction in which a party is a
229	229	resident of this state unless the person holds a license as a life
230	230	expectancy estimator from the department under this chapter.
231	231	(a-4) Subsection (a-3) does not require additional
232	232	licensing of a licensed broker acting as a life expectancy
233	233	estimator only on behalf of an owner.
234	234	(b) An application for a provider, [or] broker, secondary
235	235	provider, or life expectancy estimator license must be made to the
236	236	department by the applicant on a form prescribed by the
237	237	commissioner. The application must be accompanied by a fee in an
238	238	amount established by the commissioner by rule. The license and
239	239	renewal fees for a provider, secondary provider, or life expectancy
240	240	estimator license must be reasonable and the license and renewal
241	241	fees for a broker license may not exceed those established for an
242	242	insurance agent, as otherwise provided by this chapter.
243	243	(c) A person who has been licensed as a life insurance agent
244	244	in this state or the person's home state for at least one year and is
245	245	licensed as a nonresident agent in this state meets the licensing
246	246	requirements of this section and may operate as a broker, but may
247	247	not act as a provider or secondary provider without holding a
248	248	license under this chapter.
249	249	(e-1) An insurer that issued a policy related to a secondary
250	250	market transaction is not responsible for any act or omission of a
251	251	secondary provider arising out of or in connection with the
252	252	transaction, unless the insurer receives compensation from the
253	253	secondary provider in connection with the transaction.
254	254	(g) A license expires on the second anniversary of the date
255	255	of issuance. A license holder may renew the license on payment of a
256	256	renewal fee. As specified by Subsection (b), the renewal fee for a
257	257	provider, secondary provider, or life expectancy estimator license
258	258	may not exceed a reasonable fee.
259	259	(j) After the filing of an application and the payment of
260	260	the license fee, the commissioner shall investigate each applicant
261	261	and may issue a license if the commissioner finds that the
262	262	applicant:
263	263	(1) if a provider or secondary provider, has provided
264	264	a detailed plan of operation;
265	265	(2) is competent and trustworthy and intends to
266	266	transact business in good faith;
267	267	(3) has a good business reputation and has had
268	268	experience, training, or education to qualify in the business for
269	269	which the license is applied;
270	270	(4) if the applicant is a legal entity, is formed or
271	271	organized under the laws of this state or is a foreign legal entity
272	272	authorized to transact business in this state, or provides a
273	273	certificate of good standing from the state of its domicile; and
274	274	(5) if a broker, provider, or secondary provider, has
275	275	provided to the commissioner an antifraud plan that meets the
276	276	requirements of Section 1111A.022 and includes:
277	277	(A) a description of the procedures for detecting
278	278	and investigating possible fraudulent acts and procedures for
279	279	resolving material inconsistencies between medical records and
280	280	insurance applications or information provided by a provider,
281	281	secondary provider, life expectancy estimator, or other person in
282	282	connection with a secondary market transaction;
283	283	(B) a description of the procedures for reporting
284	284	fraudulent insurance or life settlement acts to the commissioner;
285	285	(C) a description of the plan for antifraud
286	286	education and training of its underwriters and other personnel; and
287	287	(D) a written description or chart outlining the
288	288	arrangement of the antifraud personnel who are responsible for the
289	289	investigation and reporting of possible fraudulent insurance or
290	290	life settlement acts and the investigation of unresolved material
291	291	inconsistencies between medical records and insurance applications
292	292	or information provided by a provider, secondary provider, life
293	293	expectancy estimator, or other person in connection with a
294	294	secondary market transaction.
295	295	(m) A provider or secondary provider may not allow any other
296	296	person to perform the functions of a broker, secondary provider, or
297	297	life expectancy estimator unless the person holds a current, valid
298	298	license as a broker, secondary provider, or life expectancy
299	299	estimator, as applicable, and as provided in this section.
300	300	(n) A broker may not allow any person to perform the
301	301	functions of a provider, secondary provider, or life expectancy
302	302	estimator unless the person holds a current, valid license as a
303	303	provider, secondary provider, or life expectancy estimator, as
304	304	applicable, and as provided in this section.
305	305	(o) A provider, [or] broker, secondary provider, or life
306	306	expectancy estimator shall provide to the commissioner new or
307	307	revised information about officers, stockholders described by
308	308	Subsection (h), partners, directors, members, or designated
309	309	employees within 30 days of the change.
310	310	SECTION 3. Section 1111A.004(a), Insurance Code, is amended
311	311	to read as follows:
312	312	(a) The commissioner may suspend, revoke, or refuse to renew
313	313	the license of a license holder if the commissioner finds that:
314	314	(1) there was a material misrepresentation in the
315	315	application for the license;
316	316	(2) the license holder or an officer, partner, member,
317	317	or director of the license holder has been guilty of fraudulent or
318	318	dishonest practices, is subject to a final administrative action,
319	319	or is otherwise shown to be untrustworthy or incompetent to act as a
320	320	license holder;
321	321	(3) the license holder is a provider or secondary
322	322	provider and demonstrates a pattern of unreasonably withholding
323	323	payments to policy owners or investors, as applicable;
324	324	(4) the license holder no longer meets the
325	325	requirements for initial licensure;
326	326	(5) the license holder or any officer, partner,
327	327	member, or director of the license holder has been convicted of a
328	328	felony, or of any misdemeanor with respect to which criminal fraud
329	329	is an element, or has pleaded guilty or nolo contendere with respect
330	330	to a felony or a misdemeanor with respect to which criminal fraud or
331	331	moral turpitude is an element, regardless of whether a judgment of
332	332	conviction has been entered by the court;
333	333	(6) the license holder is a provider and has entered
334	334	into a life settlement contract using a form that has not been
335	335	approved under this chapter;
336	336	(7) the license holder is a secondary provider and has
337	337	entered into a secondary market transaction using a form or
338	338	prospectus that has not been approved under this chapter;
339	339	(8) the license holder is a provider and has failed to
340	340	honor contractual obligations in a life settlement contract;
341	341	(9) [(8)] the license holder is a provider and has
342	342	assigned, transferred, or pledged a settled policy to a person
343	343	other than a provider or secondary provider licensed in this state,
344	344	a purchaser, an accredited investor or qualified institutional
345	345	buyer as defined respectively in 17 C.F.R. Sections 230.501 and
346	346	[Section] 230.144A, as amended, a financing entity, a special
347	347	purpose entity, or a related provider trust; [or]
348	348	(10) [(9)] the license holder or any officer, partner,
349	349	member, or key management personnel of the license holder has
350	350	violated this chapter; or
351	351	(11) the license holder is a secondary provider and
352	352	has entered into a secondary market transaction with a person who is
353	353	not an accredited investor.
354	354	SECTION 4. The heading to Section 1111A.005, Insurance
355	355	Code, is amended to read as follows:
356	356	Sec. 1111A.005. REQUIREMENTS FOR CONTRACT FORMS,
357	357	DISCLOSURE AND PROSPECTUS FORMS, AND ADVERTISEMENTS.
358	358	SECTION 5. Section 1111A.005, Insurance Code, is amended by
359	359	amending Subsection (b) and adding Subsection (e) to read as
360	360	follows:
361	361	(b) An insurer may not, as a condition of responding to a
362	362	request for verification of coverage or in connection with the
363	363	transfer of a policy pursuant to a life settlement contract or
364	364	secondary market transaction, require that the owner, insured,
365	365	provider, [or] broker, secondary provider, or investor sign any
366	366	form, disclosure, consent, waiver, or acknowledgment that has not
367	367	been expressly approved by the commissioner for use in connection
368	368	with life settlement contracts or secondary market transactions, as
369	369	applicable.
370	370	(e) A person may not use a prospectus or any other form in
371	371	connection with a secondary market transaction before the 31st day
372	372	after the date the form is filed with the commissioner. The
373	373	commissioner shall disapprove a form filed under this subsection
374	374	if, in the commissioner's opinion, the form fails to meet the
375	375	applicable requirements of Sections 1111A.011, 1111A.012,
376	376	1111A.014, and 1111A.023(d) or is unreasonable, contrary to the
377	377	interests of the public, or otherwise misleading or unfair. A form
378	378	filed under this subsection that is not affirmatively approved or
379	379	disapproved in a written order of the commissioner on or before the
380	380	30th day the form is filed is considered approved.
381	381	SECTION 6. Section 1111A.006, Insurance Code, is amended by
382	382	adding Subsections (a-1), (a-2), and (b-1) and amending Subsections
383	383	(c), (d), and (e) to read as follows:
384	384	(a-1) Each secondary provider shall file with the
385	385	commissioner not later than March 1 of each year an annual statement
386	386	containing the information that the commissioner prescribes by
387	387	rule. In addition to any other requirements, the annual statement
388	388	must specify for life settlement contracts involved in secondary
389	389	market transactions occurring during the preceding calendar year:
390	390	(1) the total number of related purchased policies;
391	391	(2) the aggregate face amount of the policies;
392	392	(3) the aggregate premium amount of the policies;
393	393	(4) the premium payment periods for the policies; and
394	394	(5) the aggregate life proceeds paid to the secondary
395	395	provider.
396	396	(a-2) An annual statement under Subsection (a-1) must also
397	397	include the names of each life expectancy estimator and escrow
398	398	agent, if any, employed by the secondary provider with respect to a
399	399	secondary market transaction.
400	400	(b-1) The information required under Subsections (a-1) and
401	401	(a-2) is limited to only those secondary market transactions in
402	402	which the secondary provider or the investor is a resident of this
403	403	state and may not include individual transaction data regarding the
404	404	business of life settlements or information if there is a
405	405	reasonable basis to find that the information could be used to
406	406	identify the owner or the insured.
407	407	(c) A provider or secondary provider that wilfully fails to
408	408	file an annual statement as required in this section, or wilfully
409	409	fails to reply not later than the 30th day after the date the
410	410	provider or secondary provider receives a written inquiry from the
411	411	department about the filing of the annual statement, shall, in
412	412	addition to other penalties provided by this chapter, after notice
413	413	and opportunity for hearing be subject to a penalty of up to $250
414	414	for each day of delay, not to exceed $25,000 in the aggregate, for
415	415	the failure to file or respond.
416	416	(d) Except as otherwise allowed or required by law, a
417	417	provider, broker, insurance company, insurance agent, information
418	418	bureau, rating agency or company, secondary provider, investor, or
419	419	any other person with actual knowledge of an insured's identity,
420	420	may not disclose the identity of an insured or information that
421	421	there is a reasonable basis to believe could be used to identify the
422	422	insured or the insured's financial or medical information to any
423	423	other person unless the disclosure is:
424	424	(1) necessary to effect a life settlement contract
425	425	between the owner and a provider or a secondary market transaction
426	426	and the owner and insured have provided prior written consent to the
427	427	disclosure;
428	428	(2) necessary to effectuate the sale of a life
429	429	settlement contract, or interests in the contract, including a
430	430	secondary market transaction, as an investment, provided the sale
431	431	is conducted in accordance with this chapter and applicable state
432	432	and federal securities law and provided further that the owner and
433	433	the insured have both provided prior written consent to the
434	434	disclosure;
435	435	(3) provided in response to an investigation or
436	436	examination by the commissioner or another governmental officer or
437	437	agency or under Section 1111A.018;
438	438	(4) a term or condition of the transfer of a policy by
439	439	one provider to another licensed provider, in which case the
440	440	receiving provider shall comply with the confidentiality
441	441	requirements of this subsection;
442	442	(5) necessary to allow the provider, [or] broker, or
443	443	secondary provider or the provider's, [or] broker's, or secondary
444	444	provider's authorized representative to make contact for the
445	445	purpose of determining health status provided that in this
446	446	subdivision, authorized representative does not include a person
447	447	who has or may have a financial interest in the settlement contract
448	448	or secondary market transaction other than a provider, secondary
449	449	provider, licensed broker, financing entity, related provider
450	450	trust, or special purpose entity and that the provider, [or]
451	451	broker, or secondary provider requires the authorized
452	452	representative to agree in writing to adhere to the privacy
453	453	provisions of this chapter; or
454	454	(6) required to purchase stop loss coverage.
455	455	(e) Nonpublic personal information solicited or obtained in
456	456	connection with a proposed or actual life settlement contract or
457	457	secondary market transaction is subject to the provisions
458	458	applicable to financial institutions under the federal
459	459	Gramm-Leach-Bliley Act (Pub. L. No. 106-102), and any other state
460	460	and federal laws relating to confidentiality of nonpublic personal
461	461	information.
462	462	SECTION 7. The heading to Section 1111A.011, Insurance
463	463	Code, is amended to read as follows:
464	464	Sec. 1111A.011. ADVERTISING AND PROSPECTUSES.
465	465	SECTION 8. Section 1111A.011, Insurance Code, is amended by
466	466	adding Subsection (a-1) and amending Subsection (b) to read as
467	467	follows:
468	468	(a-1) A secondary provider licensed under this chapter may
469	469	conduct or participate in an advertisement or deliver a prospectus
470	470	in this state. The advertisement or prospectus must comply with
471	471	all advertising and marketing laws under Chapter 541 and rules
472	472	adopted by the commissioner that are applicable to life insurers or
473	473	to license holders under this chapter.
474	474	(b) Advertisements and prospectuses shall be accurate,
475	475	truthful, and not misleading in fact or by implication.
476	476	SECTION 9. Section 1111A.012(a), Insurance Code, is amended
477	477	to read as follows:
478	478	(a) The broker, or the provider if no broker is involved in
479	479	the application, shall provide in writing, in a separate document
480	480	that is signed by the owner, the following information to the owner
481	481	not later than the date of application for a life settlement
482	482	contract:
483	483	(1) the fact that possible alternatives to life
484	484	settlement contracts exist, including accelerated benefits offered
485	485	by the issuer of the life insurance policy;
486	486	(2) the fact that some or all of the proceeds of a life
487	487	settlement contract may be taxable and that assistance should be
488	488	sought from a professional tax advisor;
489	489	(3) the fact that the proceeds from a life settlement
490	490	contract could be subject to the claims of creditors;
491	491	(4) the fact that receipt of proceeds from a life
492	492	settlement contract may adversely affect the recipients'
493	493	eligibility for public assistance or other government benefits or
494	494	entitlements and that advice should be obtained from the
495	495	appropriate agency;
496	496	(5) the fact that the owner has a right to terminate a
497	497	life settlement contract within 15 days of the date the contract is
498	498	executed by all parties and the owner has received the disclosures
499	499	described in this section, that rescission, if exercised by the
500	500	owner, is effective only if both notice of the rescission is given
501	501	and the owner repays all proceeds and any premiums, loans, and loan
502	502	interest paid on account of the provider during the rescission
503	503	period, and that if the insured dies during the rescission period,
504	504	the contract is considered rescinded subject to repayment by the
505	505	owner or the owner's estate of all proceeds and any premiums, loans,
506	506	and loan interest to the provider;
507	507	(6) the fact that proceeds will be sent to the owner
508	508	within three business days after the provider has received the
509	509	insurer or group administrator's acknowledgement that ownership of
510	510	the policy or interest in the certificate has been transferred and
511	511	the beneficiary has been designated in accordance with the terms of
512	512	the life settlement contract;
513	513	(7) the fact that entering into a life settlement
514	514	contract may cause the owner to forfeit other rights or benefits,
515	515	including conversion rights and waiver of premium benefits that may
516	516	exist under the policy or certificate of a group policy, and that
517	517	assistance should be sought from a professional financial advisor;
518	518	(8) the amount and method of calculating the
519	519	compensation, including anything of value, paid or given, or to be
520	520	paid or given, to the broker, or any other person acting for the
521	521	owner in connection with the transaction;
522	522	(9) the date by which the funds will be available to
523	523	the owner and the identity of the transmitter of the funds;
524	524	(10) the fact that the commissioner requires delivery
525	525	of a buyer's guide or a similar consumer advisory package in the
526	526	form prescribed by the commissioner to owners during the
527	527	solicitation process;
528	528	(11) the following language: "All medical,
529	529	financial, or personal information solicited or obtained by a
530	530	provider or broker about an insured, including the insured's
531	531	identity or the identity of family members or a spouse or a
532	532	significant other, may be disclosed as necessary to effect the life
533	533	settlement contract between the owner and provider. If you are
534	534	asked to provide this information, you will be asked to consent to
535	535	the disclosure. The information may be provided to someone who
536	536	buys the policy or provides funds for the purchase. You may be
537	537	asked to renew your permission to share information every two
538	538	years.";
539	539	(12) the fact that the commissioner requires providers
540	540	and brokers to print separate signed fraud warnings on the
541	541	applications and on the life settlement contracts as follows: "Any
542	542	person who knowingly presents false information in an application
543	543	for insurance or a life settlement contract is guilty of a crime and
544	544	may be subject to fines and confinement in prison.";
545	545	(13) the fact that the insured may be contacted by
546	546	either the provider or broker or an authorized representative of
547	547	the provider or broker for the purpose of determining the insured's
548	548	health status or to verify the insured's address and that this
549	549	contact is limited to once every three months if the insured has a
550	550	life expectancy of more than one year, and not more than once per
551	551	month if the insured has a life expectancy of one year or less;
552	552	(14) the affiliation, if any, between the provider and
553	553	the issuer of the insurance policy to be settled;
554	554	(15) that a broker represents exclusively the owner,
555	555	and not the insurer or the provider or any other person, and owes a
556	556	fiduciary duty to the owner, including a duty to act according to
557	557	the owner's instructions and in the best interest of the owner;
558	558	(16) the name, address, and telephone number of the
559	559	provider;
560	560	(17) the name, business address, and telephone number
561	561	of the independent third party escrow agent, and the fact that the
562	562	owner may inspect or receive copies of the relevant escrow or trust
563	563	agreements or documents; [and]
564	564	(18) the fact that a change of ownership could in the
565	565	future limit the insured's ability to purchase future insurance on
566	566	the insured's life because there is a limit to how much coverage
567	567	insurers will issue on one life; and
568	568	(19) the fact that the purchased policy or life
569	569	settlement contract may be the subject of a secondary market
570	570	transaction.
571	571	SECTION 10. Chapter 1111A, Insurance Code, is amended by
572	572	adding Sections 1111A.0135 and 1111A.0136 to read as follows:
573	573	Sec. 1111A.0135. DISCLOSURES TO INVESTORS. (a) A
574	574	secondary provider shall provide to investors, in a separate
575	575	document that is signed by the investors, written disclosures as
576	576	required by rule adopted by the commissioner.
577	577	(b) The disclosures described by Subsection (a) must be
578	578	provided to the investor not less than seven days before the date
579	579	the secondary market transaction closes.
580	580	(c) The failure to provide the written disclosures
581	581	described by Subsection (a) is an unfair method of competition or an
582	582	unfair or deceptive act or practice.
583	583	Sec. 1111A.0136. LIMITATION ON SECONDARY MARKET
584	584	TRANSACTIONS. A secondary provider may enter into a secondary
585	585	market transaction only with an accredited investor.
586	586	SECTION 11. Section 1111A.014, Insurance Code, is amended
587	587	by amending Subsections (a), (b), (c), and (d) and adding
588	588	Subsection (g-1) to read as follows:
589	589	(a) Before entering into a life settlement contract with an
590	590	owner of a policy with respect to which the insured is terminally or
591	591	chronically ill, the provider must obtain:
592	592	(1) if the owner is the insured, a written statement
593	593	from a licensed attending physician that the owner is of sound mind
594	594	and under no constraint or undue influence to enter into a
595	595	settlement contract; and
596	596	(2) a document in which the insured consents to the
597	597	release of medical records to a provider, settlement broker, [or]
598	598	insurance agent, secondary provider, or investor and, if the policy
599	599	was issued less than two years after the date of application for a
600	600	settlement contract, to the insurance company that issued the
601	601	policy.
602	602	(b) An insurer shall respond to a request for verification
603	603	of coverage submitted by a provider, settlement broker, [or] life
604	604	insurance agent, secondary provider, or investor not later than the
605	605	30th calendar day after the date the request is received. The
606	606	request for verification of coverage must be made on a form approved
607	607	by the commissioner. The insurer shall complete and issue the
608	608	verification of coverage or indicate in which respects the insurer
609	609	is unable to respond. In the response, the insurer shall indicate
610	610	whether at the time of the response, based on the medical evidence
611	611	and documents provided, the insurer intends to pursue an
612	612	investigation about the validity of the insurance contract.
613	613	(c) On or before the date of execution of the life
614	614	settlement contract, the provider shall obtain a witnessed document
615	615	in which the owner consents to the settlement contract, represents
616	616	that the owner has a full and complete understanding of the
617	617	settlement contract and of the benefits of the policy, acknowledges
618	618	that the owner is entering into the settlement contract freely and
619	619	voluntarily, acknowledges that the purchased policy or contract may
620	620	be the subject of a secondary market transaction, and, for persons
621	621	with a terminal or chronic illness or condition, acknowledges that
622	622	the insured has a terminal or chronic illness and that the terminal
623	623	or chronic illness or condition was diagnosed after the policy was
624	624	issued.
625	625	(d) The insurer may not unreasonably delay effecting change
626	626	of ownership or beneficiary with any life settlement contract or
627	627	secondary market transaction lawfully entered into in this state or
628	628	with a resident of this state.
629	629	(g-1) Not later than the 20th day after the date that a
630	630	secondary market transaction closes, the secondary provider shall
631	631	give written notice to the insurer that issued the purchased policy
632	632	that is subject to a life settlement contract that the contract has
633	633	become subject to a secondary market transaction. The notice shall
634	634	be accompanied by the documents required by Section 1111A.0135.
635	635	SECTION 12. Sections 1111A.015(a) and (b), Insurance Code,
636	636	are amended to read as follows:
637	637	(a) The commissioner may adopt rules implementing this
638	638	chapter and regulating the activities and relationships of
639	639	providers, brokers, insurers, secondary providers, investors, and
640	640	their authorized representatives.
641	641	(b) The commissioner may not adopt a rule establishing a
642	642	price or fee for the sale or purchase of a life settlement contract
643	643	or for a secondary market transaction. This subsection does not
644	644	prohibit the commissioner from adopting a rule relating to an
645	645	unjust price or fee for the sale or purchase of a life settlement
646	646	contract or for a secondary market transaction.
647	647	SECTION 13. Section 1111A.016, Insurance Code, is amended
648	648	by adding Subsection (d) to read as follows:
649	649	(d) A secondary provider licensed in this state who enters
650	650	into a secondary market transaction with an investor who is a
651	651	resident of another state that has enacted statutes or adopted
652	652	rules governing secondary market transactions is governed with
653	653	respect to that secondary market transaction by the statutes and
654	654	rules of the investor's state of residence. If the state in which
655	655	the investor is a resident has not enacted statutes or adopted rules
656	656	governing secondary market transactions, the secondary provider
657	657	shall give the investor notice that the secondary provider:
658	658	(1) is governed by the statutes and rules of this
659	659	state; and
660	660	(2) must maintain all records required by this
661	661	chapter.
662	662	SECTION 14. Section 1111A.017(a), Insurance Code, is
663	663	amended to read as follows:
664	664	(a) A person may not:
665	665	(1) enter into a life settlement contract or a
666	666	secondary market transaction if the person knows or reasonably
667	667	should have known that:
668	668	(A) the life insurance policy was obtained by
669	669	means of a false, deceptive, or misleading application for the life
670	670	insurance policy; or
671	671	(B) the purchased policy or life settlement
672	672	contract was obtained by means of a false, deceptive, or misleading
673	673	act or practice;
674	674	(2) engage in a transaction, practice, or course of
675	675	business if the person knows or reasonably should have known that
676	676	the intent of engaging in the transaction, practice, or course of
677	677	business is to avoid the notice requirements of this chapter;
678	678	(3) engage in a fraudulent act or practice in
679	679	connection with:
680	680	(A) a transaction relating to any settlement
681	681	involving an owner who is a resident of this state; or
682	682	(B) a secondary market transaction involving a
683	683	secondary provider or investor who is a resident of this state;
684	684	(4) issue, solicit, market, or otherwise promote the
685	685	purchase of an insurance policy for the purpose of, or with an
686	686	emphasis on, settling the policy;
687	687	(5) if providing premium financing, receive any
688	688	proceeds, fee, or other consideration from the policy or owner in
689	689	addition to the amounts required to pay principal, interest, and
690	690	any reasonable costs or expenses incurred by the lender or borrower
691	691	in connection with the premium finance agreement, except in event
692	692	of a default, unless either the default on the loan or transfer of
693	693	the policy occurs pursuant to an agreement or understanding with
694	694	any other person for the purpose of evading regulation under this
695	695	chapter;
696	696	(6) with respect to any settlement contract or
697	697	insurance policy and to a broker, knowingly solicit an offer from,
698	698	effectuate a life settlement contract with, or make a sale to any
699	699	provider, financing entity, or related provider trust that is
700	700	controlling, controlled by, or under common control with the broker
701	701	unless the relationship is fully disclosed to the owner;
702	702	(7) with respect to any life settlement contract or
703	703	insurance policy and a provider, knowingly enter into a life
704	704	settlement contract with an owner if, in connection with the life
705	705	settlement contract, anything of value will be paid to a broker that
706	706	is controlling, controlled by, or under common control with the
707	707	provider or the financing entity or related provider trust that is
708	708	involved in such settlement contract, unless the relationship is
709	709	fully disclosed to the owner;
710	710	(8) with respect to a provider, enter into a life
711	711	settlement contract unless the life settlement promotional,
712	712	advertising, and marketing materials, as may be prescribed by rule,
713	713	have been filed with the commissioner, provided that in no event may
714	714	any marketing materials expressly reference that the insurance is
715	715	free for any period of time; [or]
716	716	(9) with respect to any life insurance agent,
717	717	insurance company, broker, or provider, make any statement or
718	718	representation to the applicant or policyholder in connection with
719	719	the sale or financing of a life insurance policy to the effect that
720	720	the insurance is free or without cost to the policyholder for any
721	721	period of time unless provided in the policy; or
722	722	(10) with respect to a secondary provider:
723	723	(A) enter into a secondary market transaction
724	724	unless the prospectus and forms, as required by statute or may be
725	725	prescribed by rule, have been filed with or approved by the
726	726	commissioner, as applicable; or
727	727	(B) make any statement or representation to an
728	728	investor in connection with a secondary market transaction that is
729	729	false, misleading, or deceptive.
730	730	SECTION 15. Section 1111A.018(d), Insurance Code, is
731	731	amended to read as follows:
732	732	(d) A life settlement contract, [and] an application for a
733	733	life settlement contract, a purchased policy, a prospectus, and a
734	734	contract in a secondary market transaction, regardless of the form
735	735	of transmission, must contain the following, or a substantially
736	736	similar, statement: "Any person who knowingly presents false
737	737	information in an application for insurance, [or] a life settlement
738	738	contract, a purchased policy, a prospectus, or a contract in a
739	739	secondary market transaction is guilty of a crime and may be subject
740	740	to fines and confinement in prison."
741	741	SECTION 16. Section 1111A.021, Insurance Code, is amended
742	742	to read as follows:
743	743	Sec. 1111A.021. OTHER LAW ENFORCEMENT OR REGULATORY
744	744	AUTHORITY. (a) This chapter does not:
745	745	(1) except as provided by Subsection (b) preempt the
746	746	authority or relieve the duty of another law enforcement or
747	747	regulatory agency to investigate, examine, and prosecute a
748	748	suspected violation of law;
749	749	(2) except as provided by Subsection (b) preempt,
750	750	supersede, or limit any provision of any state securities law or any
751	751	rule, order, or notice issued under the law;
752	752	(3) prevent or prohibit a person from disclosing
753	753	voluntarily information concerning life settlement fraud or fraud
754	754	in a secondary market transaction to a law enforcement or
755	755	regulatory agency other than the department; or
756	756	(4) limit the powers granted by the laws of this state
757	757	to the commissioner or an insurance fraud unit to investigate and
758	758	examine a possible violation of law and to take appropriate action
759	759	against wrongdoers.
760	760	(b) A secondary market transaction deemed not to involve a
761	761	public offering under 17 C.F.R. Section 230.506 under the
762	762	Securities Act of 1933 (15 U.S.C. Section 77a et seq.) may not be
763	763	considered a security under The Securities Act (Article 581-1 et
764	764	seq., Vernon's Texas Civil Statutes).
765	765	SECTION 17. Section 1111A.022(a), Insurance Code, is
766	766	amended to read as follows:
767	767	(a) A provider, [or] broker, or secondary provider shall
768	768	implement antifraud initiatives reasonably calculated to detect,
769	769	prosecute, and prevent fraudulent life settlement acts. At the
770	770	discretion of the commissioner, the commissioner may order, or a
771	771	license holder may request and the commissioner may grant, a
772	772	modification of the following required initiatives as necessary to
773	773	ensure an effective antifraud program. A modification granted
774	774	under this section may be more or less restrictive than the required
775	775	initiatives so long as the modification may reasonably be expected
776	776	to accomplish the purpose of this section. Antifraud initiatives
777	777	must include:
778	778	(1) fraud investigators, who may be provider,
779	779	secondary provider, or broker employees or independent
780	780	contractors; and
781	781	(2) an antifraud plan, which must be submitted to the
782	782	commissioner and must include:
783	783	(A) a description of the procedures for detecting
784	784	and investigating possible fraudulent life settlement acts and
785	785	procedures for resolving material inconsistencies between medical
786	786	records and insurance applications or information provided by a
787	787	provider, secondary provider, life expectancy estimator, or other
788	788	person in connection with a secondary market transaction;
789	789	(B) a description of the procedures for reporting
790	790	possible fraudulent life settlement acts to the commissioner;
791	791	(C) a description of the plan for antifraud
792	792	education and training of underwriters and other personnel; and
793	793	(D) a description or chart outlining the
794	794	organizational arrangement of the antifraud personnel who are
795	795	responsible for the investigation and reporting of possible
796	796	fraudulent life settlement acts and investigating unresolved
797	797	material inconsistencies between medical records and insurance
798	798	applications.
799	799	SECTION 18. Section 1111A.023(d), Insurance Code, is
800	800	amended to read as follows:
801	801	(d) The provisions of this chapter may not be waived by
802	802	agreement. No choice of law provision may prevent the application
803	803	of this chapter to any life settlement or secondary market
804	804	transaction.
805	805	SECTION 19. Section 1111A.024(a), Insurance Code, is
806	806	amended to read as follows:
807	807	(a) It is a violation of this chapter for any person,
808	808	provider, broker, secondary provider, or any other party related to
809	809	the business of life settlements to commit a fraudulent life
810	810	settlement act.
811	811	SECTION 20. Section 1111A.026, Insurance Code, is amended
812	812	to read as follows:
813	813	Sec. 1111A.026. APPLICABILITY OF CERTAIN PROVISIONS TO
814	814	CERTAIN LIFE EXPECTANCY ESTIMATORS. (a) The following provisions
815	815	do not apply to a broker who acts solely as a life expectancy
816	816	estimator on behalf of an owner:
817	817	(1) Section 1111A.003(p);
818	818	(2) Section 1111A.012; and
819	819	(3) Sections 1111A.014(l) and (m).
820	820	(b) The commissioner may exempt a broker who acts only as a
821	821	life expectancy estimator on behalf of an owner from other
822	822	provisions of this chapter if the commissioner finds that the
823	823	application of those provisions to the broker is not necessary for
824	824	the public welfare.
825	825	SECTION 21. A secondary provider or life expectancy
826	826	estimator other than a broker lawfully transacting business in this
827	827	state before the effective date of this Act may continue to do so
828	828	pending approval or disapproval of the person's application for a
829	829	license as long as the application is filed with the commissioner of
830	830	insurance not later than the 30th day after the date of the
831	831	publication by the commissioner of an application form and
832	832	instructions for licensure of secondary providers and life
833	833	expectancy estimators. If the publication of the application form
834	834	and instructions is before the effective date of this Act, then the
835	835	application must be filed not later than the 30th day after the
836	836	effective date of this Act and the applicant may use in connection
837	837	with a secondary market transaction any form or prospectus that has
838	838	been filed with the commissioner pending approval or disapproval,
839	839	provided that the form and prospectus are otherwise in compliance
840	840	with the provisions of this Act. A person transacting business in
841	841	this state under this provision shall comply with all other
842	842	requirements of this Act.
843	843	SECTION 22. This Act takes effect September 1, 2015.