The Ohio Department of Commerce Division of Securities has determined that, in almost all cases, viatical settlements are securities as defined under Ohio law. The decision was made in response to numerous inquiries regarding the regulation of the relatively new practice of investing by fronting a terminally ill individual a portion of his or her's life insurance policy in exchange for the full payout upon death.

"In making a determination that viatical settlements are, in most cases, a security, the division is in no way judging the merits or social value of such transactions," said Ohio Securities Commissioner Thomas E. Geyer. "Our goal is to educate anyone investing in or selling viatical settlements that these transactions are subject to Ohio securities law."

A viatical settlement is a transaction in which an investor, or group of investors, pays a terminally ill patient a percentage of the total value of that patient's life insurance policy. In exchange, agreements are signed promising the investor(s) the full amount of the value of the life insurance policy upon the patient's death. Typically, the investment group also assumes the cost of maintaining the policy while the patient is still alive.

The decision, announced in the Third Quarter 1998 Edition of the Ohio Securities Bulletin, was based on a careful review of the Ohio Securities Act and current Ohio securities case law. It states that persons and/or viatical companies selling viatical settlements in Ohio must adhere to the same regulatory provisions as those selling more readily recognized securities like stocks and bonds. Specifically, a seller of viatical settlements should become familiar with the licensing, registration and anti-fraud provisions of the Ohio Securities Act. Violation of any regulatory provision of the Ohio Securities Act may result in administrative, civil and/or criminal penalties.

The complete Bulletin article is available at the Division's web address: www.securities.state.oh.us

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