Investors Who Invested in Life Partners Life Settlements Recommended By Brokerage Firms May Recover Investment Losses

Life Partners Holdings Life Settlements

Life Partners Holdings entered the life settlement market in 1991, and since then has originated, underwritten and processed for closing approximately $2.9 billion in life insurance policy face amounts as life settlements comprised of over 6,400 policies purchased by over 28,000 high net worth investors that total over 131,000 transactions. Life Partners Holdings became a publicly traded company (NASDAQ: LPHI) in January 2000.

Distribution through Network of Financial Advisors

According to Life Partners Holdings SEC filings, most financial advisors who refer investors to purchase unwanted life insurance policies are compensated with commissions by Life Partners Holdings based on the amount of funds used to purchase life settlement insurance policies. In addition to cash compensation, in some instances, the financial advisor may receive stock options in Life Partners Holdings based on volume of policy purchases.

The investor enters into an agency agreement with Life Partners Holdings which limits their authority to purchase life insurance policies issued by life insurance companies with an AM Best Rating of A- or better, to policies beyond the two-year contestable period and to policies with insureds with actuarially or medically determined life expectancies of no more than minimum specified periods.

According to Life Partners Holdings, the investment decision process for the investor with their financial advisor includes advice concerning which policies to purchase and what percentage of the individual policy face amounts to help diversify the invested funds across multiple life expectancies. In most instances, investors are solicited to invest in life settlements with projected investment returns which range between 60-75% for holding periods of less than five years. In a typical life settlement, the life insurance purchase price will include policy premiums to pay premiums for the insured’s projected life expectancy.

Life Partners Holdings subject of class action lawsuit and SEC Investigation

On February 3, 2011, class action lawsuit (Case No. 11 CV 00027) was file against Life Partners Holdings, Inc.in the United States District Court, Western District of Texas - Waco Division, for the class period starting May 29, 2007 and ending January 19, 2011. The class action filed alleges, “Had the Company used accurate and appropriate estimated life spans, LPHI would not have been able to charge the same transaction fees for the insurance policies and would not have reaped the same level of financial results as it reported during the Class Period.” On January 20, 2011, Life Partners Holdings reported in a SEC Form 8-K filing, that the SEC “is conducting an investigation into the business of its operating subsidiary, Life Partners, Inc.”

On May 9, 2011, Life Partners Holdings announced the company received a “Wells Notice” from the Securities Exchange Commission (SEC) which stated their staff recommended that the regulator bring a civil injunctive action against Life Partners Holdings and two directors and executive officers, Brian D. Pardo and R. Scott Peden for possible violations of securities laws. The primary basis for the proposed civil action related to corporate knowledge and disclosure concerning the accuracy of the estimated life expectancies for the policy insureds of the life settlements.

In light of these developments, TGN urges investors who invested in life settlements and securities issued by Life Partners Holdings through the advice of brokerage firms and their financial advisors to consider what recourse is available to recover their investment losses. The Financial Industry Regulatory Authority, (FINRA) is a self regulating organization with sales practice rules and regulations that govern the securities industry’s conduct and safeguard the investing public. For investors who invested in life settlements and securities issued by Life Partners Holdings, the recent developments represent a significant loss of investment.

Many investors were advised by their financial advisor that investments in life settlements with Life Partner Holdings were stable safe investments with predictable investment returns. These investments included life settlements originated, underwritten and processed by Life Partners, Inc., and securities issued directly by Life Partners Holdings. Life Partners Holdings investors should consider what recourse is available to recover their investment losses for shares held with a full-service brokerage firm.