Securities and Exchange Commission v. Life Partners, Inc. case brief

Securities and Exchange Commission v. Life Partners, Inc. case brief summary
87 F.3d 536 (1996)

CASE SYNOPSIS

Defendant, a marketer of viatical settlements, appealed orders from the United States District Court for the District of Columbia that enjoined defendant from selling unregistered fractional interests in viatical settlements because such sales violated federal securities law and constituted securities fraud.

DISCUSSION

• The court vacated three injunctions that enjoined defendant from selling unregistered fractional interests in viatical settlements on the grounds that the sales violated federal securities laws. 
• The court rejected defendant's argument that its contracts were exempt as insurance contracts because the viatical settlements were not insurance policies and defendant was not in the business of selling insurance. 
• The court held that the contracts sold by defendant satisfied the first two parts of the test for determining if an investment contract is a security because investors purchased the contracts with an expectation of profits and their funds were pooled. 
• However, under the third part of the test, the court held that the pre- and post-purchase services provided by defendant or its agent did not have a predominant influence upon investors' profits. 
• The court therefore held that the viatical settlements marketed by defendant were not securities and it vacated the injunctions.

CONCLUSION
The court vacated three injunctions enjoining defendants from selling unregistered fractional interests in viatical settlements on the grounds that the viatical settlements were not securities because the pre- and post-purchase services provided by defendant did not have a predominant influence upon investors' profits.

Suggested Study Aids For Securities Regulation Law
Securities Regulation in a Nutshell, 10th (Nutshell Series)
Securities Regulation: Examples & Explanations, 5th Edition
Securities Regulations: The Essentials