A receivership is a legal remedy that can be ordered by a court when a business is having difficulty meeting its financial obligations or cannot pay its creditors. In such circumstances, a court can place a company into receivership and appoint an independent, neutral party—a Receiver—to run the business and try to figure out how to help the business solve its problems.
Sometimes, a court directs a receiver to take specific action, such as selling property or collecting money from bank accounts and others who owe the company money. Receivers are often appointed to operate an ongoing business.
No. A receivership is not the same as a bankruptcy. A bankruptcy is a separate and distinct type of legal proceeding commenced by filing a bankruptcy petition in a United States Bankruptcy Court. Reliant has not filed for bankruptcy protection, and it has not been placed into bankruptcy.
In this case, the Superior Court of Los Angeles, California, appointed Christopher Conway as the Receiver for Reliant Life Shares, LLC (“Reliant”). Mr. Conway is a court-appointed officer who acts as a neutral party to manage a company’s business operations and assets. More information about Mr. Conway and his experience with life settlements can be found here: https://reliantreceivership.com/doc/about-the-receiver/
The primary responsibilities of the Receiver for Reliant are to collect, hold, preserve, and/or protect the assets of the company and to manage and administer a portfolio of life insurance policies that are currently held in the Reliant Life Shares Series Statutory Trust (“RLSSST”) and its related sub-trusts (i.e., the Series Trusts).
The Receiver acts for the benefit of all who may have an interest in the receivership property, including any creditors and fractional interest position holders (i.e., investors), and not for any particular party. (California Rules of Court, Rule 3.1179).
The Receiver is an agent of the court. He is supervised by and reports to the court.
A life settlement involves the sale of an unwanted or unneeded life insurance policy by its original owner to an investor, typically an institutional investment fund or other large financial institution. A life settlement transaction occurs when the seller receives a sum of money that is less than the net death benefit of the policy, and the buyer becomes the owner and beneficiary of the policy and assumes the obligation to pay premiums for the policy until the insured dies. Once a life insurance policy is sold for the first time, it is commonly described as a life settlement.
The first time a life insurance policy is sold in a life settlement transaction, the process is referred to as origination, and the first sale generally requires the involvement of a licensed life settlement “provider.” Providers originate policies in the secondary market, which is regulated in most states. However, any subsequent resales of the life settlement are considered to occur in the tertiary market, which is not typically regulated.
A Life Share is NOT a life settlement. It cannot be traded or sold, and it has no collateral or cash value. A life share is also NOT equity or a share of stock in Reliant (or any other company). Nor is this terminology regularly used in the life settlement industry. Instead, the phrase “Life Share” appears to be a marketing phrase used by Reliant to describe the product it sold to investors.
The Reliant Life Shares Series Statutory Trust (“RLSSST”) created a trust structure that established a separate “series” or sub-trust to hold, as the policy owner and beneficiary, a single life settlement. Investors purchased fractional interest positions as beneficiaries of these sub-trusts. This means investors hold one or more fractional interest positions as beneficiaries of a sub-trust of the RLSSST. In other words, each investor is a partial beneficiary of a sub-trust that owns a single policy.
In this case, a fractional interest position or “FIP” is a specific type of investment that is comprised of BOTH the right to receive a portion of the net death benefit of insurance proceeds collected from the insurance company that issued a life insurance policy owned by the related series or sub-trust, AND the obligation to pay pro-rata premiums, fees, and expenses until the insured dies and a valid claim is collected.
FIPs do not represent a proportional ownership interest in a life insurance policy held by a series trust. Likewise, investors do not own and are not the direct beneficiaries of any life settlement held by the RLSSST or any series trust.
All investments, including life settlements and fractional interest positions, involve risk. A fractional interest position as a beneficiary of a sub-trust of a master trust that owns a life settlement is neither guaranteed nor “secure.” If the policy, the series trust, the master trust, or any other element of the structure is not managed correctly, it is possible to lose money.
The Receiver has been able to preserve many of the policies held by the series trusts of the RLSSST. So long as premiums can continue to be paid until each insured covered by these policies dies, and assuming the respective insurance companies pay the claims that are ultimately made for net death benefits, then a significant chance of recovery for investors is possible. More investigation and analysis is necessary, but if the Receiver’s initial analysis is correct, then it may be possible to reapportion forfeited net death benefit to active investors affected by the lapse and sale of some policies with the court’s approval. However, no recovery is guaranteed, and at present, it is not possible to confirm that all investors will receive a recovery or that all of the principal invested can be returned.
There are some investors who have not paid their pro-rata portions of the premiums, fees, and expenses they were obligated to pay under their purchase agreements; other investors have defaulted and forfeited their positions. Other risks must be managed over time to pursue the greatest possible recovery for all involved, and the Receiver is working with his team to put a plan in place to present to the court for approval to address all of these factors. Additional information will be uploaded on the website once the plan is finalized.
No. FIPs cannot be sold, resold, pledged, borrowed against, gifted, transferred or otherwise conveyed to any other party.
FIPs are considered securities under the law, and sales or resales of securities are highly regulated. In addition, the purchase agreements signed by investors prohibit these FIPs from being resold or transferred without the company’s consent, and the Receiver is currently the only person with the authority to permit this activity.
No, not at this time.
The death benefit of a life settlement (a life insurance policy sold by its original owner to an unrelated third party) is payable only after the insured person covered by the policy dies and after a valid claim is filed and collected. Only the death of an insured and the collection of a valid claim, or the sale of the policy in the tertiary market for life settlements, yields cash that can be distributed to fractional interest position holders in the series trust that owned the policy.
Unfortunately, prior to the time the Receiver was appointed, a number of the policies held by the series trusts of the RLSSST and managed by Reliant had lapsed due to nonpayment of premiums. The failure to pay the premiums involved a number of factors, many of which did not involve the investors.
The Receiver is actively working with his legal advisors and staff to put a plan together that is intended to allow those individuals who wish to continue with their investment to either be moved to a similar available fractional interest position in another series trust that owns an active policy OR to re-allocate the investor’s position in a new pooled trust structure that would be presented to and approved by the Receivership Court.
The Receiver cannot guarantee any outcome, and those investors that owe past due amounts must pay any accrued arrearage to be eligible to continue, as well as all pro-rata premiums, fees, and expenses due and payable going forward for any positions held. Additional information will be forthcoming soon for those who are in this position.
Insurance companies will not accept less than the minimum premium due, and the premium due must be paid on time. Any investor who does not pay their pro-rata amount owed in full and on time exposes all other investors to the risk of loss. Therefore, failure to pay your pro-rata portion of the premiums due in full and on time will result in the forfeiture of your fractional interest position, along with all of the funds you paid in the past, including pro-rata premiums, fees, and expenses.
All investors are required to honor the obligations set forth in the purchase agreements they signed in exchange for the right to the benefits associated with their FIP, and the Receiver must treat all investors the same. Some investors are in arrears and have not made their pro-rata premium payments, which are now past due. These must be paid immediately, so that all investors who wish to remain invested are current with their accounts. Invoices will be issued for past due amounts, and any arrearages will be due in full within 30 days of the date of the invoice.
If you do not pay the amount past due for the fractional interest position you purchased, you will be considered to be in default, and your FIP in the related series trust will be forfeited. The Receiver believes that if amounts past due are not paid, there is no reason to expect that current amounts due will be paid. Therefore, amounts past due must be paid before any current invoices can be issued.
The Receiver intends to begin issuing invoices for past-due amounts in February. Once the invoices for amounts past due have been issued, the Receiver will begin issuing invoices for future premiums, fees, and expenses.
Each invoice issued to an investor will include specific instructions, including the amount to be paid, how to pay it, and when it is due. Partial payments, payments for FIPs held in IRAs or qualified plans with non-qualified funds, late payments, and any other deviations from the invoice and its instructions will be returned.
IRA and qualified plan custodians hold cash and other assets for beneficiaries of retirement plans. The money held in an IRA or qualified plan account (e.g., a 401k) is referred to as qualified funds, and the assets are referred to as qualified assets.
A fractional interest position held in an IRA or qualified plan account is a qualified asset, but that does not change the characteristics of the FIP itself. Instead, the FIP is simply registered in the name of your IRA or qualified plan (e.g., ABC Trust Company, Inc. FBO (as in “for the benefit of”) Jane Q. Public IRA #12345), which holds the investment for you. However, if you hold your FIP in an IRA or qualified plan, the pro rata premiums, fees, and expenses related to your FIP MUST be paid with qualified funds — that is, money held in either the same or a different IRA or qualified plan account.
The Receiver cannot give tax or financial advice, and you should contact a competent tax or financial advisor for advice concerning your specific situation.
IRA and qualified plan custodians are not affiliated with Reliant or with the Receiver. This means that neither the Receiver nor Reliant has any no control over, obligation to, or financial responsibility for these companies or their fees. Again, if you have questions, you should consult with a tax or financial advisor to obtain advice concerning your specific situation.
Yes, it is completely up to you if you want to speak with a sales agent. Independent representatives who sold FIPs are not employees, officers, or owners of Reliant, and they are not associated with the Receiver in any way. The sales agent cannot take any action related to your investment (e.g., close your account, withdraw any funds, etc.), and the sales agent cannot tell the Receiver what to do or speak for Reliant or the Receivership. Only the Receiver (and authorized members of the Receiver’s team) can speak for or on behalf of Reliant. In other words, any statements, comments, or information provided by these agents (or any other parties) will not constitute or represent the position(s) of the Receiver or Reliant.
No. There is no way to “withdraw” your original investment at this time. However, if you no longer wish to pay your pro rata share of the premiums, fees, and expenses in full and when due, you can voluntarily forfeit your position. If you decide to voluntarily forfeit your position, you must confirm your intention in writing to the Receiver. Please download a copy of the Voluntary Forfeiture Form, which can be found here: FORM COMING SOON. Complete, sign and fax the form to the Receiver at 609-450-7236. Incomplete or unsigned forms will not be accepted. You may also email a scanned (photographs will not be accepted) copy of the completed and signed form to receiver@reliantlifeshares.com, or you can mail the completed and signed form to the address on the Receivership website.
The Receiver and his team are tracking all of the insureds covered by the policies owned by the various series trusts of the RLSSST using industry-standard methods and means. When an insured dies, the court and investors will be notified, and a claim collection process will be initiated. At the present time, however, any distribution of the death benefits collected requires the court’s approval.