The SEC may file a civil action against Life Partners Holdings, Inc. for
allegedly misleading public shareholders and investors about the accuracy
of the firm's life-expectancy estimates ("Life Partners Could
Face SEC Action,"
Wall Street Journal, May 14, 2011). The firm, which has sold billions of dollars in life settlements
(financial transactions in which a policy holder sells a no longer wanted
or needed life insurance policy to an investor, and the investor receives
the benefits upon the insured's death) markets a return of 10 to 15
percent on the policies.
According to the
WSJ article, Life Partners bases the promoted returns on a life-expectancy
calculation that is rarely accurate. Research by the Journal showed that
the vast majority of people insured by the policies brokered by Life Partners
lived beyond what the calculation predicted. Unfortunately for investors
- who use the company's life-expectancy estimates to predict returns
before they purchase a particular policy - this could mean a substantially
smaller return than expected.
Numerous lawsuits have been filed against Life Partners since the errors
in the calculation were brought to light in an
articlepublished by the
WSJ last December. SEC staff is expected to recommend that the Commission
file an "injunctive" action against the company and its two