(1) DEFINITIONS. In this section: (a) “Advertisement” means any written, electronic, or printed communication or any communication made by means of recorded telephone messages or transmitted on radio, television, the Internet, or similar communications media, including film strips, motion pictures, and videos, published, disseminated, circulated, or placed, directly or indirectly, before the public in this state for the purpose of creating an interest in or inducing a person to purchase or sell, assign, devise, bequeath, or transfer the death benefit or ownership of a policy or an interest in a policy pursuant to a life settlement contract. (b) “Broker” means a person who, on behalf of an owner and for a fee, commission, or other valuable consideration, offers or attempts to negotiate life settlement contracts between an owner and one or more providers, or one or more brokers. “Broker” does not include an attorney or certified public accountant who is retained to represent the owner and whose compensation is not paid directly or indirectly by the provider or purchaser. (c) “Business of life settlements” means an activity involved in the offering soliciting, negotiating, procuring, effectuating, purchasing, investing in, financing, monitoring, tracking, underwriting, selling, transferring, assigning, pledging, hypothicating, or in any other manner, acquiring an interest in a policy by means of a life settlement contract. (d) “Chronically ill” means any of the following: 1. Being unable to perform at least 2 activities of daily living, including eating, toileting, transferring, bathing, dressing, or continence. 2. Requiring substantial supervision to monitor the health and safety of the individual due to his or her severe cognitive impairment. 3. Having a level of disability similar to that described in subd. 1., as defined by the U.S. department of health and human services. (e) “Financing entity” means a person whose principal activity related to a life settlement is providing funds to effect the life settlement contract or purchase of one or more policies and who has an agreement in writing with one or more providers to finance the acquisition of life settlement contracts, including an underwriter, placement agent, lender, purchaser of securities, purchaser of a policy from a life settlement provider, credit enhancer, or any entity that has a direct ownership in a policy that is the subject of a life settlement contract. “Financing entity” does not include an investor that is not an accredited investor, as defined in 17 CFR 230.501 (a), or a purchaser. (f) “Financing transaction” means a transaction in which a licensed provider obtains financing from a financing entity including any secured or unsecured financing, any securitization transaction, or any securities offering which is either registered or exempt from registration under federal and state securities law. (g) “Fraudulent life settlement act” includes all of the following: 1. Acts or omissions that are committed by any person, or that a person permits its employees or its agents to engage in, for the purpose of pecuniary gain, including any of the following: a. Presenting, causing to be presented, or preparing with the knowledge or belief that it will be presented to or by a provider, broker, purchaser, financing entity, insurer, insurance producer, or any other person, false material information, or concealing material information, as part of, in support of, or concerning a fact material to an application for the issuance of a life settlement contract or a policy; the underwriting of a life settlement contract or a policy; a claim for payment or benefit under a life settlement contract or a policy; premiums paid on an insurance policy; payments and changes in ownership or beneficiary made in accordance with the terms of a life settlement contract or a policy; the reinstatement or conversion of a policy; the solicitation, offer, effectuation, or sale of a life settlement contract or a policy; the issuance of written evidence of a life settlement contract or a policy; or a financing transaction. b. Employing any plan, device, scheme, or artifice to defraud in the business of life settlements. c. Failing to disclose to an insurer, if the request for such disclosure has been made by the insurer, that the prospective owner has undergone a life expectancy evaluation by any person or entity other than the insurer or its authorized representatives in connection with the issuance of the policy. 2. Any of the following acts that any person does, or permits its employees or agents to do, in the furtherance of a fraud or to prevent the detection of a fraud: a. Removing, concealing, altering, destroying, or sequestering from the commissioner the assets or records of a licensee or other person engaged in the business of life settlements. b. Misrepresenting or concealing the financial condition of a licensee, financing entity, insurer, or other person. c. Transacting the business of life settlements in violation of laws requiring a license, certificate of authority, or other legal authority for the transaction of the business of life settlements. d. Filing with the commissioner or the chief insurance regulatory official of another jurisdiction a document containing false information or otherwise concealing information about a material fact from the commissioner or official. 3. Embezzlement, theft, misappropriation, or conversion of monies, funds, premiums, credits, or other property of a life settlement provider, insurer, insured, owner, or any other person engaged in the business of life settlements or insurance. 4. Recklessly entering into, negotiating, brokering, or otherwise dealing in a life settlement contract, the subject of which is a life insurance policy that was obtained by presenting false information concerning any fact material to the policy or by concealing for the purpose of misleading another information concerning any fact material to the policy, where the person or persons intended to defraud the policy’s issuer, the provider, or the owner. 5. Attempting to commit; assisting, aiding, or abetting in the commission of; or conspiring to commit the acts or omissions specified in this paragraph. 6. Misrepresenting the state of residence of an owner to be a state that does not have a law substantially similar to this section for the purpose of evading or avoiding the provisions of this section. 7. STOLI. (h) “Licensee” means a provider or broker that holds a license under sub. (2). (i) “Life expectancy” means the arithmetic mean, considering medical records and appropriate experiential data, of the number of months an insured under the policy to be settled can be expected to live. (j) 1. “Life settlement” means an agreement regarding the terms under which compensation or any thing of value will be paid, which compensation or thing of value is less than the expected death benefit of the policy but greater than the cash surrender value or accelerated death benefit available under the policy at the time of the application for the life settlement, in return for the owner’s present or future assignment, transfer, sale, devise, or bequest of the death benefit or any interest in a policy. “Life settlement” includes all of the following: a. The transfer for compensation or value of ownership or beneficial interest in a trust or other entity that owns a policy that insures the life of a person residing in this state, if the trust or other entity was formed or availed of for the principal purpose of acquiring one or more policies or certificates of insurance. b. A written agreement for a loan or other lending transaction, secured primarily by an individual or group policy. c. A premium finance loan made for a policy on, before, or after the date of issuance of the policy but only if the loan proceeds are not used solely to pay premiums for the policy and any costs or expenses incurred by the lender or the borrower in connection with the financing, or if the owner receives on the date of the premium finance loan a guarantee of the future life settlement value of the policy, or if the owner agrees on the date of the premium finance loan to sell the policy or any interest in its death benefit on any date following the issuance of the policy. 2. “Life settlement” does not include any of the following: a. A policy loan by a life insurance company pursuant to the terms of the policy or accelerated death provisions contained in the policy, whether issued with the original policy or as a rider. b. Except as provided in subd. 1. c., a premium finance loan or any loan made by a bank or other licensed financial institution, provided that neither default on such loan nor the transfer of the policy in connection with such default is pursuant to an agreement or understanding with any other person for the purpose of evading regulation under this section. c. A collateral assignment of a policy by an owner. d. A loan made by a lender that does not violate s. 138.12, if the loan is not described in subd. 1. c. and is not otherwise a life settlement contract. e. An agreement where all the parties are closely related to the insured by blood or law, or have a lawful substantial economic interest in the continued life, health, and bodily safety of the person insured, or are trusts or other entities established primarily for the benefit of such parties. f. Any designation, consent, or agreement by an insured who is an employee of an employer in connection with the purchase by the employer, or trust established by the employer, of life insurance on the life of the employee. g. A bona fide business succession planning arrangement between one or more shareholders in a corporation or between a corporation and one or more of its shareholders or one or more trusts established by or for the benefit of its shareholders; between one or more partners in a partnership or between a partnership and one or more of its partners or one or more trusts established by or for the benefit of its partners; or between one or more members in a limited liability company or between a limited liability company and one or more of its members or one or more trusts established by or for the benefit of its members. h. An agreement, contract, or transaction that the commissioner excludes by rule under sub. (20) (a) after determining that the agreement, contract, or transaction is not intended to be regulated by this section. (k) “Life settlement contract” means a written document providing for and establishing the terms of a life settlement. (L) “Owner” means the owner of a policy or a certificate holder under a group policy who resides in this state, unless the context requires otherwise, and enters or seeks to enter into a life settlement contract. “Owner” does not include any of the following: 1. A licensee under this section, including a producer acting as a broker under this section. 2. A qualified institutional buyer, as defined in 17 CFR 230.144A (a) (1). 3. A financing entity. 4. A special purpose entity. 5. A related provider trust. (m) “Policy” means an individual or group policy, certificate, contract, or arrangement of life insurance owned by a resident of this state, regardless of whether delivered or issued for delivery in this state. (n) “Premium finance loan” means a loan made primarily for the purpose of making premium payments on a policy that is secured by an interest in the policy. (o) “Producer” means any person licensed in this state as a resident or nonresident insurance intermediary or agent who has received qualification or authority for life insurance coverage or a life line of coverage pursuant to s. 628.04. (p) “Provider” means a person, other than an owner, that enters into or effectuates a life settlement contract with an owner. “Provider” does not include: 1. A bank, savings bank, savings and loan association, credit union, or other licensed lending institution that takes an assignment of a policy solely as collateral for a loan. 2. A premium finance company making premium finance loans and exempted by the commissioner from the licensing requirement under the premium finance law under s. 138.12 that takes an assignment of a policy solely as collateral for a loan. 3. The issuer of a policy. 4. An authorized or eligible insurer that provides stop loss coverage or financial guaranty insurance to a provider, purchaser, financing entity, special purpose entity, or related provider trust. 5. Any natural person who enters into or effectuates no more than one agreement in a calendar year for the transfer of a policy for any value less than the expected death benefit. 6. A special purpose entity. 7. A related provider trust. 8. A purchaser. 9. A person that the commissioner excludes by rule under sub. (20) (a) after determining that the definition is not intended to cover the person. (q) “Purchase agreement” means a contract or agreement entered into by a purchaser, to which the owner is not a party, to purchase a settled policy or an interest in a settled policy for the purpose of deriving an economic benefit. (r) “Purchaser” means a person who provides a sum of money as consideration for a policy or an interest in the death benefits of a policy, or a person who owns or acquires or is entitled to a beneficial interest in a trust that owns a life settlement contract or is the beneficiary of a policy that has been or will be the subject of a life settlement contract, for the purpose of deriving an economic benefit. “Purchaser” does not include any of the following: 1. A licensee. 2. An accredited investor, as defined in 17 CFR 230.501 (a), or qualified institutional buyer, as defined in 17 CFR 230.114A (a) (1). 3. A financing entity. 4. A special purpose entity. 5. A related provider trust. (s) “Recklessly” means in conscious and clearly unjustifiable disregard of a substantial likelihood of the existence of the relevant facts or risks, the disregard involving a gross deviation from acceptable standards of conduct. (t) “Related provider trust” means a trust that is established by a licensed provider or a financing entity for the sole purpose of holding the ownership or beneficial interest in purchased policies in connection with a financing transaction and that has a written agreement with the licensed provider under which the licensed provider is responsible for ensuring compliance with all statutory and regulatory requirements and under which the trust agrees to make all records and files relating to life settlement transactions available to the commissioner as if those records were maintained directly by the licensed provider. (u) “Settled” means, with respect to a policy, acquired by a provider under a life settlement contract. (v) “Special purpose entity” means a corporation, partnership, trust, limited liability company, or other similar entity formed solely to provide either direct or indirect access to institutional capital markets either for a financing entity or provider or in connection with a transaction in which the securities in the special purpose entity are either acquired by the owner or by a qualified institutional buyer, as defined in 17 CFR 230.114A (a) (1) or pay a fixed rate of return commensurate with established asset-backed institutional capital markets. (w) “Stranger-originated life insurance” or “STOLI” means an act, practice, plan, or arrangement, individually or in concert with others, to initiate a life insurance policy for the benefit of a 3rd-party investor who, at the time of policy origination, has no insurable interest in the insured. STOLI includes cases in which life insurance is purchased with resources or guarantees from or through a person or entity who, at the time of policy inception, could not lawfully initiate the policy by the person or entity, and in which, at the time of inception, there is an arrangement or agreement, whether verbal or written, to directly or indirectly transfer the ownership of the policy or the policy benefits to a 3rd party. Trusts that are created to give the appearance of insurable interest, and are used to initiate policies for investors, violate insurable interest laws under s. 631.07 and the common law prohibition against wagering on life. STOLI does not include a loan, agreement, assignment, arrangement, or transaction set forth in sub. (1) (j) 2. (x) “Terminally ill” means having an illness or sickness that can reasonably be expected to result in death in 24 months or less. (2) LICENSING REQUIREMENTS. (a) 1. No person may act as a provider or broker for an owner, without holding a license from the commissioner. 2. A licensed attorney or a certified public accountant who is retained to represent the owner and whose compensation is not paid directly or indirectly by the provider or purchaser may negotiate life settlement contracts on behalf of the owner without having to obtain a license as a broker. (b) An applicant shall make an application for a license to the commissioner on a form prescribed by the commissioner. For a broker’s license, the applicant shall submit the fee specified in s. 601.31 (1) (mr) , subject to s. 601.31 (2m). For a provider’s license, the applicant shall submit the fee specified in s. 601.31 (1) (mm), subject to s. 601.31 (2m). (c) The commissioner may not issue a license under this subsection unless the applicant provides his or her social security number or its federal employer identification number or, if the applicant does not have a social security number, a statement made or subscribed under oath or affirmation that the applicant does not have a social security number. An applicant who is providing a statement that he or she does not have a social security number, shall provide that statement along with the application for a license on a form prescribed by the department of children and families. A licensee shall provide to the commissioner the licensee’s social security number, statement the licensee does not have the social security number, or federal employment identification number of the licensee at the time that the annual license renewal fee is paid, if not previously provided. The commissioner shall disclose a social security number obtained from an applicant or licensee to the department of children and families in the administration of s. 49.22, as provided in a memorandum of understanding entered into under s. 49.857. The commissioner may disclose the social security number or federal employment identification number of an applicant or licensee to the department of revenue for the purpose of requesting certifications under s. 73.0301 and to the department of workforce development for the purpose of requesting certifications under s. 108.227. (d) 1. The commissioner shall refuse to issue or renew a license under this subsection if the person is delinquent in court-ordered payments of child or family support, maintenance, birth expenses, medical expenses, or other expenses related to the support of a child or former spouse, or if the person fails to comply, after appropriate notice, with a subpoena or warrant issued by the department of children and families or a county child support agency under s. 59.53 (5) and related to paternity or child support proceedings, as provided in a memorandum of understanding entered into under s. 49.857. 2. The commissioner shall refuse to issue or renew a license under this subsection if the department of revenue certifies under s. 73.0301 that the applicant for the license or renewal of the license is liable for delinquent taxes or if the department of workforce development certifies under s. 108.227 that the applicant for the license or renewal of the license is liable for delinquent unemployment insurance contributions. (e) The applicant shall provide information that the commissioner may require on forms prepared by the commissioner. The commissioner may require the applicant, at any time, to fully disclose the identity of its partners, officers, employees, and stockholders, except stockholders owning fewer than 10 percent of the shares of an applicant whose shares are publicly traded. The commissioner may refuse to issue a license if not satisfied that any officer, employee, stockholder, or partner who may materially influence the applicant’s conduct meets the standards of this section. (f) A license issued to a partnership, corporation, or other entity authorizes all members, officers, and designated employees to act as a licensee under the license, if those persons are named in the application or any supplements to the application. (g) Upon the filing of an application and the payment of the license fee, the commissioner shall make an investigation of each applicant and shall issue a license if the commissioner finds that the applicant satisfies all of the following: 1. If applying for a provider license, has provided a detailed plan of operation. 2. Is competent and trustworthy and intends to transact its business in good faith. 3. Has a good business reputation and has either the experience, training, or education so as to be qualified in the business for which the license is applicable. 4. a. If applying for a provider license, has demonstrated evidence of financial responsibility in a format prescribed by the commissioner through either a surety bond executed and issued by an insurer authorized to issue surety bonds in this state or a deposit of cash, certificates of deposit, or securities or any combination of those in the amount of $250,000. Any surety bond issued under this subd. 4. a. shall be in the favor of this state and shall specifically authorize recovery by the commissioner on behalf of any person in this state who sustains damages as the result of erroneous acts, failure to act, conviction of fraud, or conviction of unfair practices by the provider. The commissioner shall accept as evidence of financial responsibility proof that financial instruments in accordance with the requirements in this subd. 4. a. have been filed in one state where the applicant is licensed as a provider. b. If applying for a broker license, has provided proof of the acquisition of a policy of professional liability insurance in an amount that is satisfactory to the commissioner. 5. If the applicant is a legal entity, is formed or organized under the laws of this state or is a foreign legal entity authorized to transact business in this state, or provides a certificate of good standing from the state of its domicile. 6. Has provided to the commissioner an antifraud plan that meets the requirements of sub. (15) (i). 7. Has completed the initial training course under sub. (3) (e). (h) The commissioner may request evidence of financial responsibility under par. (g) 4. from an applicant at any time the commissioner deems necessary. (i) The commissioner shall not issue any license to any nonresident applicant, unless a written designation of an agent for service of process is filed and maintained with the commissioner or unless the applicant has filed with the commissioner the applicant’s irrevocable consent that any action against the applicant may be commenced against the applicant by service of process on the commissioner in accordance with the procedures set forth in ss. 601.72 and 601.73. (j) Licenses may be renewed annually on July 1 upon payment of the fee specified in s. 601.31 (1) (ms) by a broker, or the fee specified in s. 601.31 (1) (mp) by a provider. Failure to pay the fee by the renewal date shall result in the automatic revocation of the license. (k) Each licensee shall file with the commissioner on or before the first day of March of each year an annual statement containing the information required under sub. (6) (a) and any information the commissioner requires by rule. (L) A provider may not use any person to perform the functions of a broker unless the person holds a current, valid license as a broker. (m) A broker may not use any person to perform the functions of a provider unless the person holds a current, valid license as a provider. (n) A provider or broker shall provide to the commissioner new or revised information about officers, partners, directors, members, designated employees, or stockholders, except stockholders owning fewer than 10 percent of the shares of a provider or broker whose shares are publicly traded, within 30 days of the change. (o) The insurer that issued the policy that is the subject of a life settlement contract may not be held responsible for any act or omission of a broker or provider arising out of or in connection with the life settlement, unless the insurer receives compensation for the placement of a life settlement contract from the broker or provider or from a purchaser in connection with the life settlement contract. (3) TRAINING. (a) An individual applicant for a license under sub. (2) or a licensee who engages in the business of life settle- ments in this state shall receive training to ensure all of the following: 1. The individual understands the relation of life settlement transactions to the integrity of a comprehensive financial plan of an owner. 2. The individual has adequate knowledge to competently discuss the material aspects of life settlements with an owner. 3. The individual complies with the laws of this state relating to life settlements. (b) Training required under this subsection must be approved by the commissioner and provided by an education provider that is approved by the commissioner. The commissioner may approve the training required under this subsection for continuing education under s. 628.04 (3). Training required under this subsection shall not increase the credit hours of continuing education required by statute or rule. Certification and reporting of completion of the required training shall comply with the requirements of s. Ins 28.07, Wis. Adm. Code. Any person failing to meet the requirements of this subsection shall be subject to the penalties imposed by the commissioner. (c) The satisfaction of the training requirements of another state that are substantially similar to the requirements set forth in this subsection, and are approved by the commissioner, satisfy the requirements of this subsection. (d) Training provided under this subsection shall include all of the following topics, at a minimum: 1. Legal structuring of life settlements. 2. Legal relationships among the parties to a life settlement. 3. Required disclosures and privacy requirements. 4. Ethical considerations in selling, soliciting, and negotiating life settlements. 5. Contract requirements. 6. Advertising. 7. Remedies. 8. Licensing requirements. 9. Additional matters as determined by the commissioner. (e) An individual applicant for a license under sub. (2) shall complete an initial training course of not less than 8 hours. An electronic confirmation of completion of initial training shall accompany the application for initial licensure. A licensee shall complete training of not less than 4 hours every 24 months after the initial training course. A person who holds a license under s. 632.68, 2007 stats., on November 1, 2010, shall complete initial training within 6 months after November 1, 2010. (4) LICENSE SUSPENSION, REVOCATION, OR REFUSAL TO RENEW. (a) The commissioner may suspend, revoke, or refuse to renew the license of any licensee if, after a hearing, the commissioner finds any of the following: 1. Any material misrepresentation in the application for the license. 2. That the licensee or any officer, partner, member, or director of the licensee is guilty of fraudulent or dishonest practices, is subject to a final administrative action, or is otherwise shown to be untrustworthy or incompetent to act as a licensee. 3. If the licensee is a provider, that the licensee demonstrates a pattern of unreasonably withholding payments to owners. 4. That the licensee no longer meets the requirements for licensure. 5. That the licensee or any officer, partner, member, or director of the licensee has been convicted of a felony or of any misdemeanor of which criminal fraud is an element or has pleaded other than not guilty with respect to any felony or any misdemeanor of which criminal fraud or moral turpitude is an element, regardless whether a judgment of conviction has been entered by the court. 6. If the licensee is a provider, that the licensee has entered into any life settlement contract the form of which has not been approved by the commissioner under this section. 7. If the licensee is a provider, that the licensee has failed to honor obligations set out in a life settlement contract. 8. If the licensee is a provider, that the licensee has assigned, transferred, or pledged a settled policy to a person other than a provider licensed in this state, a purchaser, an accredited investor as defined in 17 CFR 230.501 (a) or a qualified institutional buyer as defined in 17 CFR 230.144A (a) (1), a financing entity, a special purpose entity, or a related provider trust. 9. That the licensee or any officer, partner, member, or key management personnel has violated any of the provisions of this section. (b) Nothing in this subsection limits the authority of the commissioner to summarily suspend a license under s. 227.51 (3). (c) The commissioner shall suspend a license if the licensee is delinquent in court-ordered payments of child or family support, maintenance, birth expenses, medical expenses, or other expenses related to the support of a child or former spouse or if the licensee fails to comply, after appropriate notice, with a subpoena or warrant issued by the department of children and families or a county child support agency under s. 59.53 (5) that is related to paternity or child support proceedings, as provided in a memorandum of understanding entered into under s. 49.857. (d) The commissioner shall revoke the license of a licensee if the department of revenue certifies under s. 73.0301 that the licensee is liable for delinquent taxes or if the department of workforce development certifies under s. 108.227 that the licensee is liable for delinquent unemployment insurance contributions. (5) CONTRACT REQUIREMENTS. (a) No person may use a life settlement contract form or provide to an owner a disclosure statement form in this state unless first filed with and approved by the commissioner. The form is approved if the commissioner does not disapprove of the form within 30 days after filing or within a 30-day extension of that period ordered by the commissioner before the expiration of the first 30 days. To disapprove a form, the commissioner shall state in writing the reasons for disapproval sufficiently explicitly that the licensee is provided reasonable guidance in reformulating its forms. The commissioner shall disapprove a life settlement contract form or disclosure statement form if the commissioner determines the form or provisions contained in the form fail to meet the requirements of this section, are unreasonable, are contrary to the interests of the public, or are otherwise misleading or unfair to the owner. (b) No insurer may, as a condition of responding to a request for verification of coverage or in connection with the transfer of a policy under a life settlement contract, require that the owner, insured, provider, or broker sign any form, disclosure, consent, waiver, or acknowledgment that has not been expressly approved by the commissioner for use in connection with life settlement contracts in this state. (6) REPORTING REQUIREMENTS AND PRIVACY. (a) 1. In addition to any other requirements, the annual statement that is filed with the commissioner shall specify the total number, aggregate face amount, and life settlement proceeds of policies settled during the immediately preceding calendar year, together with a breakdown of the information by policy issue year. The annual statement shall also include the names of the insurance companies whose policies have been settled and the brokers that were involved in settling the policies. Each provider shall provide in the annual statement any information about any policy settled within 5 years of policy issuance that the commissioner may prescribe by rule. 2. Information provided in the annual statement shall be limited to those transactions in which the owner is a resident of this state and shall not include individual transaction data regarding the business of life settlements or information that there is a reasonable basis to believe could be used to identify the owner or the insured. 3. Every provider that willfully fails to file an annual statement as required in this section, or willfully fails to reply within 30 days to a written inquiry by the commissioner regarding the annual statement, shall be subject to a forfeiture under s. 601.64 (3) (c) and to license suspension, revocation, or nonrenewal. (b) A provider, broker, insurance company, producer, information bureau, rating agency or company, or any other person with actual knowledge of an insured’s identity, shall not disclose the identity of an insured or information that there is a reasonable basis to believe could be used to identify the insured or the insured’s financial or medical information to any other person unless one of the following applies: 1. The disclosure is necessary to effect a life settlement contract between the owner and a provider, and the owner and insured have provided prior written consent to the disclosure. 2. The disclosure is necessary to effectuate a sale of life settlement contracts, or interests in life settlement contracts, as investments, if the sale is conducted in accordance with applicable state and federal securities law and if the owner and the insured have both provided prior written consent to the disclosure. 3. The disclosure is provided in response to an investigation or examination by the commissioner or any other governmental officer or agency or pursuant to the requirements of sub. (15). 4. The disclosure is a term or condition of the transfer of a policy by one provider to another provider. In such cases, the receiving provider shall be required to comply with the confidentiality requirements of this subsection. 5. The disclosure is necessary to allow the provider or broker or their authorized representatives to make contacts for the purpose of determining health status. For the purposes of this subdivision, “authorized representative” does not include any person who has or may have any financial interest in the life settlement contract other than a provider, broker, financing entity, related provider trust, or special purpose entity. A provider or broker shall require its authorized representative to agree in writing to adhere to the privacy provisions of this subsection. 6. The disclosure is required to purchase stop loss coverage. (c) Nonpublic personal information solicited or obtained in connection with a proposed or actual life settlement contract shall be subject to all applicable laws of this state relating to confidentiality of nonpublic personal information. (7) EXAMINATIONS AND ALTERNATIVES. (a) The commissioner may, whenever the commissioner determines it is necessary in order to be informed about any matter related to the enforcement of this section, examine the business and affairs of any licensee or applicant for a license, under the provisions of ss. 601.43 to 601.45. (b) The commissioner shall consider names and individual identification data for all owners, purchasers, and insureds private and confidential information and shall not disclose names or identification data unless the disclosure is to another regulator or is required by law. (c) 1. A person required to be licensed by this section shall for 5 years retain, and make available to the commissioner for inspection at all reasonable times in accordance with s. 601.42, copies of all of the following: a. Proposed, offered, or executed life settlement contracts, purchase agreements, underwriting documents, policy forms, and applications from the date of the proposal, offer, or execution of a life settlement contract or purchase agreement, whichever is later. b. All checks, drafts, or other evidence and documentation related to the payment, transfer, deposit, or release of funds from the date of the financing transaction, life settlement, or purchase agreement. c. All other records and documents related to the requirements of this section. 2. Records required to be retained under subd. 1. must be legible and complete and may be retained in paper, photograph, microprocess, magnetic, mechanical or electronic media, or by any process that accurately reproduces or forms a durable medium for reproduction of a record. (8) DISCLOSURES TO OWNER; DISCLOSURE TO INSURED. (a) 1. With each application for a life settlement, a provider or broker shall disclose to the owner, in a separate document that is signed by the owner and the provider or broker, at least all of the following information no later than the time the application for the life settlement is signed by all parties: a. That there are possible alternatives to life settlement contracts, including any accelerated death benefits or policy loans offered under the owner’s policy. b. That the broker represents exclusively the owner, and not the insurer or the provider, and owes a fiduciary duty to the owner, including the duty to act according to the owner’s instructions and in the best interest of the owner. c. That some or all of the proceeds of the life settlement may be taxable under federal income tax and state franchise and income tax laws, and the owner should seek assistance from a professional tax advisor. d. That proceeds from a life settlement may be subject to the claims of creditors. e. That receipt of proceeds from a life settlement may adversely affect the owner’s eligibility for Medical Assistance or other government benefits or entitlements, and the owner should seek advice from the appropriate government agencies. f. That the owner has a right to rescind a life settlement contract before the earlier of 30 calendar days after the date upon which the life settlement contract is executed by all parties or 15 calendar days after the life settlement proceeds have been paid to the owner, as provided in sub. (11) (d). Rescission, if exercised by the owner, is effective only if both notice of the rescission is given and the owner repays all proceeds and any premiums, loans, and loan interest paid on account of the life settlement within the rescission period. If the insured dies during the rescission period, the life settlement contract is rescinded, subject to repayment by the owner or the owner’s estate to the provider or purchaser of all life settlement proceeds, and any premiums, loans, and loan interest that have been paid by the provider or purchaser, which shall be repaid within 60 calendar days of the death of the insured. g. That funds will be sent to the owner within 3 business days after the provider has received the insurer’s or group administrator’s written acknowledgement that ownership of the policy or interest in the certificate has been transferred and the beneficiary has been designated. h. That entering into a life settlement contract may cause other rights or benefits, including conversion rights and waiver of premium benefits that may exist under the policy, to be forfeited by the owner, and the owner should seek assistance from a professional financial advisor. i. The language: “All medical, financial, or personal information solicited or obtained by a provider or broker about an in- sured, including the insured’s identity or the identity of family members, a spouse, or a significant other, may be disclosed as necessary to effect the life settlement between the owner and provider. If you are asked to provide this information, you will be asked to consent to the disclosure. The information may be provided to someone who buys the policy or provides funds for the purchase. You may be asked to renew your permission to share information every 2 years.” j. That, following execution of a life settlement contract, the insured may be contacted for the purpose of determining the insured’s health status and to confirm the insured’s residential or business street address and telephone number, or as otherwise allowed in this section. This contact shall be limited to once every 3 months if the insured has a life expectancy of more than one year and no more than once per month if the insured has a life expectancy of one year or less. All such contacts with the insured shall be made only by a provider licensed in the state in which the owner resided at the time of the life settlement, or by an authorized representative of the provider. 2. At the time the disclosures in subd. 1. are provided, the broker or provider shall provide to the owner a brochure describing the process of life settlements that is approved by the commissioner. (b) A provider shall disclose to the owner, either conspicuously displayed in the life settlement contract or in a separate document signed by the owner, at least all of the following information no later than the date the life settlement contract is signed by all parties: 1. The affiliation, if any, between the provider and the issuer of the policy to be settled. 2. The name, business address, and telephone number of the provider. 3. Any affiliation or contractual arrangements between the provider and the purchaser. 4. If a policy to be settled has been issued as a joint policy or involves family riders or any coverage of a life other than that of the insured under the policy to be settled, the possible loss of coverage on the other lives under the policy, together with a statement advising the owner to consult with the insurer issuing the policy for advice concerning the proposed life settlement. 5. The dollar amount of the current death benefit that will be payable to the provider under the policy. If known, the provider shall also disclose the availability of any additional guaranteed insurance benefits, the dollar amount of any accidental death and dismemberment benefits under the policy, and the extent to which the owner’s interest in those benefits will be transferred as a result of the life settlement contract. 6. That the funds will be escrowed with an independent 3rd party during the transfer process; the name, business address, and telephone number of the independent 3rd party escrow agent; and that the owner may inspect or receive copies of the relevant escrow or trust agreements or documents. (c) A broker shall disclose to the owner, either conspicuously displayed in the life settlement contract or in a separate document signed by the owner, at least all of the following information no later than the date the life settlement contract is signed by all parties: 1. The name, business address, and telephone number of the broker. 2. A full, complete, and accurate description of all offers, counteroffers, acceptances, and rejections related to the proposed life settlement contract. 3. A written statement of any affiliation or contractual arrangement between the broker and any person making an offer in connection with the proposed life settlement contract. 4. The amount of the broker’s compensation, including anything of value paid or given to the broker for the placement of the policy. 5. If any portion of the broker’s compensation is taken from a proposed life settlement, the total amount of the life settlement offer and the percentage of the life settlement comprised by the broker’s compensation. (d) If the provider transfers ownership or changes the beneficiary of the policy, the provider shall communicate in writing the change in ownership or beneficiary to the insured within 20 days after the change. (9) DISCLOSURES TO PURCHASER. (a) 1. A provider shall disclose to a purchaser, conspicuously displayed in the purchase agreement or in a separate document signed by the purchaser and provider, at least all of the following information prior to the date the purchase agreement is signed by all parties: a. That the purchaser will receive no returns, including dividends and interest, until the insured dies and a death claim payment is made. b. That the actual rate of return on a life settlement contract is dependent upon an accurate projection of the insured’s life expectancy and the actual date of the insured’s death and that an annual guaranteed rate of return is not determinable. c. That the settled policy should not be considered a liquid purchase since it is impossible to predict the exact timing of its maturity and the funds are not available until the death of the insured and that there is no established secondary market for resale of a settled policy by the purchaser. d. That the purchaser may lose all benefits or may receive substantially reduced benefits if the insurer goes out of business during the contract term of the life settlement investment. e. That the purchaser is responsible for payment of the insurance premiums or other costs related to the policy, if required by the terms of the purchase agreement, even if the insured returns to health, and that the payments may reduce the purchaser’s return. If a party other than the purchaser is responsible for the payment, the name and address of the party responsible for payment shall be disclosed. f. The amount of the premiums, if applicable. g. The name, business address, and telephone number of the independent 3rd party providing escrow services and any relationship to the broker. h. The amount of any trust fees or expenses to be charged the purchaser. i. Whether the purchaser is entitled to a refund of all or part of the purchaser’s investment under the purchase agreement if the policy is later determined to be null and void. j. That group policies may contain limitations or caps in the conversion rights, that additional premiums may have to be paid if the policy is converted, the name of the party responsible for payment of any additional premiums, and that if a group policy is terminated and replaced by another group policy, there may be no right to convert the original coverage. k. The risks associated with policy contestability, including the risk that the purchaser will have no claim or only a partial claim to death benefits should the insurer rescind the policy within the contestability period. L. Whether the purchaser will be the owner of the policy in addition to being the beneficiary, and if the purchaser is the beneficiary only and not also the owner, the special risks associated with that status, including the risk that the beneficiary may be changed or the premium may not be paid. m. The experience and qualifications of the person who determines the life expectancy of the insured, including in-house staff, independent physicians, and specialty firms that weigh medical and actuarial data, the information the projection is based on, and the relationship of the projection maker to the provider, if any. 2. At the time the disclosures in subd. 1. are provided, the provider shall provide to the purchaser a brochure approved by the commissioner describing the process of the purchase of a settled policy. (b) A provider shall disclose to a purchaser, in a document signed by the purchaser and provider, at least all of the following no later than at the time of the assignment, transfer, or sale of all of or an interest in a policy: 1. All the life expectancy certifications obtained by the provider in the process of determining the price to be paid to the owner. 2. Whether the premium payments or other costs related to the policy have been escrowed and, if so, the date upon which the escrowed funds will be depleted, whether the purchaser will be responsible for payment of premiums after the depletion of escrowed funds, and the amount of the premium if the purchaser is responsible for payment. 3. Whether the premiums or other costs related to the policy have been waived and, if so, whether the purchaser will be responsible for payment of the premiums if the insurer that issued the policy terminates the waiver after purchase and, if so, the amount of the premiums. 4. Whether the type of policy offered or sold is whole life, term life, universal life, a group policy, or another type of policy, any additional benefits contained in the policy, and the current status of the policy. 5. If the policy is term insurance, the special risks associated with term insurance including the purchaser’s responsibility for additional premiums if the owner continues the term policy at the end of the current term. 6. Whether the policy is contestable. 7. Whether the insurer that issued the policy has any additional rights that could negatively affect or extinguish the purchaser’s rights under the purchase agreement and, if so, what those rights are and under what conditions those rights are activated. 8. The name and address of the person responsible for monitoring the insured’s condition, how often the monitoring is done, how the date of death is determined, and how and when the information will be transmitted to the purchaser. (10) DISCLOSURE TO INSURER. Before initiating a plan, transaction, or series of transactions, a broker or provider shall fully disclose to the insurer a plan, transaction, or series of transactions to which the broker or provider is a party to originate, renew, continue, or finance a policy with the insurer for the purpose of engaging in the business of life settlements at any time prior to, or during the first 5 years after, issuance of the policy. (11) GENERAL REQUIREMENTS. (a) 1. Before entering into a life settlement contract, a provider shall obtain all of the following: a. If the owner is the insured, a written statement from a licensed attending physician that the owner is of sound mind and under no constraint or undue influence to enter into a life settlement contract. b. A document in which the insured consents to the release of his or her medical records to a licensed provider, licensed broker, and the insurer that issued the policy covering the life of the insured. 2. Within 20 days after an owner executes documents necessary to transfer any rights under a policy or within 20 days after the owner enters any agreement, option, promise, or any other form of understanding, express or implied, to settle the policy, the provider shall give written notice to the insurer that issued the policy that the policy has or will become a settled policy. 3. The provider shall deliver a copy of the medical release required under subd. 1. b., a copy of the owner’s application for the life settlement contract, the notice required under subd. 2., and a request for verification of coverage to the insurer that issued the policy that is the subject of the life settlement. The provider shall use a form created by the National Association of Insurance Commissioners for verification of coverage unless the commissioner develops and approves another form. 4. The insurer shall respond to a request for verification of coverage that is submitted on an approved form by a provider or broker within 30 calendar days after the date the request is received and shall indicate whether, based on the medical evidence and documents provided, the insurer intends to pursue an investigation regarding the validity of the insurance contract or possible fraud. The insurer shall accept a request for verification of coverage made on a form created by the National Association of Insurance Commissioners or any other form approved by the commissioner, and shall accept an original, facsimile, or electronic copy of the request and any accompanying signed authorization. 5. Before or at the time of execution of the life settlement contract, the provider shall obtain a witnessed document in which the owner does all of the following: a. Consents to the life settlement contract. b. Represents that he or she has a complete understanding of the life settlement contract. c. Represents that he or she has a complete understanding of the benefits of the policy. d. Acknowledges that he or she is entering into the life settlement contract freely and voluntarily. e. If applicable, acknowledges that the insured has a terminal or chronic illness and that the terminal or chronic illness or condition was diagnosed after the policy was issued. 6. If a broker performs any of the activities required in subd. 1., 2., 3., or 5., the provider shall be considered to have performed that activity. (b) All medical information solicited or obtained by any licensee shall be subject to the applicable provisions of state law relating to confidentiality of medical information, including s. 610.70. (c) All life settlement contracts entered into in this state shall provide the owner with an absolute right to rescind the contract before the earlier of 30 calendar days after the date on which the life settlement contract is executed by all parties or 15 calendar days after the life settlement proceeds have been sent to the owner as provided in par. (d). Rescission by the owner may be conditioned upon the owner both giving notice and repaying to the provider, within the rescission period, all proceeds of the settlement and any premiums, loans, and loan interest paid by or on behalf of the provider in connection with or as a consequence of the life settlement. If the insured dies during the rescission period, the life settlement contract is rescinded, subject to repayment, within 60 calendar days after the death of the insured, by the owner or the owner’s estate to the provider or purchaser of all life settlement proceeds and any premiums, loans, and loan interest that have been paid by the provider or purchaser. If a life settlement contract is rescinded under this paragraph, ownership of the policy shall revert to the owner or the owner’s estate if the owner is deceased, irrespective of any transfer of ownership of the policy by the owner, provider, or any other person. In the event of any rescission, if the provider has paid commissions or other compensation to a broker in connection with the rescinded life settlement contract, the broker shall refund the commissions and compensation to the provider within 5 business days following receipt of written demand from the provider, which demand shall be accompanied by the applicable document initiating the rescission within the rescission period, either the owner’s notice of rescission or the notice of death of the insured. (d) The provider shall instruct the owner to send the executed documents required to effect the change in ownership, assignment, or change in beneficiary directly to the independent escrow agent. Within 3 business days after the date the independent escrow agent receives the documents, or after the date the provider receives the documents if the owner erroneously provides the documents directly to the provider, the provider shall pay or transfer the proceeds of the life settlement into an escrow or trust account that is maintained in a state or federally chartered financial institution whose deposits are insured by the Federal Deposit Insurance Corporation and managed by an independent trustee or escrow agent. Upon payment of the life settlement proceeds into the escrow account, the independent escrow agent shall deliver the original change in ownership, assignment, or change in beneficiary form to the provider or related provider trust or other designated representative of the provider. Upon the escrow agent’s receipt of acknowledgement of the properly completed transfer of ownership, assignment, or designation of beneficiary from the insurer, the independent escrow agent shall pay the life settlement proceeds to the owner. (e) Failure to tender the life settlement proceeds to the owner within the time set forth in the disclosure under sub. (8) (a) 1. g., renders the life settlement contract voidable by the owner for lack of consideration until the time the proceeds are tendered to and accepted by the owner. Funds are sent by a provider to an owner as of the date that the escrow agent either releases funds for wire transfer to the owner or places a check for delivery to the owner via the U.S. postal service or other nationally recognized delivery service. (f) For the purpose of determining the health status of the insured after the life settlement has occurred, only the provider or broker licensed in this state or a person it authorizes may contact the insured. Contact with the insured shall be limited to once every 3 months for an insured with a life expectancy of more than one year, and to no more than once per month for an insured with a life expectancy or one year or less. The provider or broker shall explain the procedure for the contacts to the owner at the time the life settlement contract is entered into. The limitations in this paragraph do not apply to any contacts with an insured for reasons other than determining the insured’s health status. Providers and brokers shall be responsible for the actions of a person they authorize to make the contact. (12) PROHIBITED CONTRACTS; REQUIRED FORM; ACKNOWLEDGEMENT; FIDUCIARY DUTY. (a) No person may enter into a life settlement contract at any time before the application or issuance of a policy that is the subject of a life settlement contract or within a 5-year period commencing with the date of issuance of the policy unless any of the following conditions have been met: 1. The owner certifies to the provider that, within the 5-year period, the policy was issued upon the owner’s exercise of conversion rights arising out of a group or individual policy, provided the total of the time covered under the conversion policy plus the time covered under the prior policy is at least 60 months. The time covered under the group policy shall be calculated without regard to any change in insurance carriers, if the coverage has been continuous and under the same group sponsorship. 2. The owner submits independent evidence to the provider that any of the following conditions have been met within the 5year period: a. The owner or insured is terminally or chronically ill. b. The owner’s spouse or child dies. c. The owner divorces his or her spouse. d. The owner retires from full-time employment. e. The owner becomes physically or mentally disabled and a physician determines that the disability prevents the owner from maintaining full-time employment. f. A final order, judgment, or decree is entered by a court of competent jurisdiction, on the application of a creditor of the owner, adjudicating the owner bankrupt or insolvent, approving a petition seeking reorganization of the owner, or appointing a receiver, trustee, or liquidator to all or a substantial part of the owner’s assets. g. The sole beneficiary of the policy is a family member of the owner and the beneficiary dies. h. The owner is a charitable organization with an insurable interest that has received from the federal Internal Revenue Service a determination letter that is currently in effect stating that the charitable organization is described in section 501 (c) (3) of the Internal Revenue Code and is exempt from federal income taxation under section 501 (a) of the Internal Revenue Code. i. The owner or insured disposes of ownership interests in a closely held corporation pursuant to the terms of a buyout or other similar agreement in effect at the time the policy was initially issued. j. Other circumstances exist that are established as eligible exemptions by the commissioner by rule, including substantial adverse financial circumstances or other factors substantially affecting the owner. 3. The owner certifies to the provider that the owner i
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