The SEC is still actively policing vendors of exotic securities and just shut down one of the best-publicized players in the life settlement space.
Christian Stanley marketed itself to both seniors looking to sell their death benefit and investors looking to buy it.
But as it turns out, the company wasn't actively buying policies at all, the SEC says. Instead, it was just taking $4.5 million in investors' money and spending it on, among other things, its own glitzy marketing campaign.
William Shatner pitched Christian Stanley life settlement products.
In a life settlement, the senior gets cash to spend while he or she is still alive.
And the policies are then packaged into larger vehicles and pitched as a way for institutions in particular to diversify their portfolios into a non-correlated asset class.
In theory, a well-underwritten life settlement can produce income no matter what interest rates or financial markets do.
However, our own Glenn Daily has publicly questioned the fairness of the pricing that seniors get.
At least Christian Brothers wasn't buying policies in the first place, so it didn't hurt anyone on that side.
But this is just more evidence that shady players will always come up with a new "alternative" asset class to tempt investors and skirt regulations.
Due diligence, once again, is key to protecting clients. You evidently can't be too careful.