KlaymanToskes announced today that it is investigating the sales practices of Financial Industry Regulatory Authority (“FINRA”) brokerage firms that sold life settlements issued by Life Partners Holdings (NasdaqGS: LPHI), as well as the due diligence performed by these firms before approving these products for sale to their customers. We believe that the sale of these products was unsuitable for investors, and the risks associated with life settlements were not fully disclosed. FINRA has specifically addressed the sale of life settlements in various Notices to its members. Specifically, FINRA has reminded brokerage firms that:
NASD Notice to Members 06-38 and FINRA Regulatory Notice 09-42 both specifically address the duties owed by brokerage firms in connection with life settlement transactions. KlaymanToskes believes that brokerage firms may have violated FINRA Rules in connection with the sale of life settlements issued by Life Partners Holdings. As such, KlaymanToskes is investigating potential claims on behalf of investors who purchased life settlements from FINRA broker-dealers. Investors should avail themselves of all remedies in attempting to recover their losses, including filing a securities arbitration claim against their brokerage firm.
In February 2011, a class action lawsuit, Case No. 11 CV 00027, was filed against Life Partners Holdings in the United States District Court, Western District of Texas. The Complaint alleges that “Life Partners Holdings failed to disclose to investors that it was shortening the estimated life expectancies of insured individuals. As a result, the Company was making the policies covering these individuals more attractive to potential investors, as the potential ‘payout’ from the policies maturing (when the insureds died) would occur in a shorter period of time.” It is also alleged that “had the Company used accurate and appropriate estimated life spans, Life Partners Holdings would not have been able to sell as many policies to investors and earn the additional and increased transaction fees for these insurance policies.”
Earlier this month, on May 9, 2011, Life Partners Holdings disclosed that it had received a “Wells Notice” from the SEC stating that its staff recommended that a civil injunctive action be brought against Life Partners Holdings, as well as two of the company’s directors and executive officers, for possible violations of securities laws. The primary basis for the proposed civil action relates to knowledge and disclosures about the accuracy of the estimated life expectancies for the policy insureds of the life settlements.