SB0505sam002 94TH GENERAL ASSEMBLY

Sen. John J. Cullerton

Filed: 4/11/2005

09400SB0505sam002 LRB094 10764 LJB 44784 a

AMENDMENT TO SENATE BILL 505

AMENDMENT NO. ______. Amend Senate Bill 505 by replacing everything after the enacting clause with the following:

"Section 1. Short title. This Act may be cited as the Viatical and Life Settlements Act of 2005.

Section 5. Definitions.

"Advertising" means any written, electronic, or printed communication or any communication 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 before the public in this State, for the purpose of creating an interest in or inducing a person to sell, assign, devise, bequest, or transfer the death benefit or ownership of a policy pursuant to a viatical settlement contract.

"Business of viatical settlements" means any activity involved in the offering, solicitation, negotiation, procurement, effectuation, purchasing, investing, financing, monitoring, tracking, underwriting, selling, transferring, assigning, pledging, or hypothecating of viatical settlement contracts or any other action affecting viatical settlement contracts.

"Chronically ill" means:

(1) having a level of disability as determined by the Secretary of Health and Human Services or being unable to perform at least 2 activities of daily living, such as eating, toileting, transferring, bathing, dressing, or continence; or

(2) requiring substantial supervision to protect the individual from threats to health and safety due to severe cognitive impairment.

"Department" means the Department of Financial and Professional Regulation.

"Financing entity" means an underwriter, placement agent, lender, purchaser of securities, purchaser of a policy or certificate from a viatical settlement provider, credit enhancer, or an entity that has a direct ownership in a policy that is the subject of a viatical settlement contract and:

(1) whose principal activity related to the transaction is providing funds to effect the viatical settlement or purchase of one or more viaticated policies; and

(2) who has an agreement in writing with one or more licensed viatical settlement providers to finance the acquisition of viatical settlement contracts or to provide stop loss insurance. "Financing entity" does not include a nonaccredited investor.

"Fraudulent viatical settlement act" includes:

(1) Acts or omissions committed by a person who, knowingly or with intent to defraud for the purpose of depriving another of property or for pecuniary gain, commits or permits its employees or its agents to engage in acts including:

(A) presenting, causing to be presented, or preparing with knowledge or belief that it will be presented to or by a viatical settlement provider, financing entity, insurer, insurance producer, or another person, false material information or concealing material information as part of, in support of, or concerning a fact material to one or more of the following:

(i) an application for the issuance of a viatical settlement contract or policy;

(ii) the underwriting of a viatical settlement contract or policy;

(iii) a claim for payment or benefit pursuant to a viatical settlement contract or policy;

(iv) premiums paid on a policy;

(v) payments and changes in ownership or beneficiary made in accordance with the terms of a viatical settlement contract or policy;

(vi) the reinstatement or conversion of a policy;

(vii) in the solicitation, offer, effectuation, or sale of a viatical settlement contract or policy;

(viii) the issuance of written evidence of a viatical settlement contract or policy; or

(ix) a financing transaction;

(B) employing any device, scheme, or artifice to defraud related to viaticated policies.

(2) In the furtherance of a fraud or to prevent the detection of a fraud a person commits or permits its employees or its agents to:

(A) remove, conceal, alter, destroy, or sequester from the Secretary the assets or records of a licensee or other person engaged in the business of viatical settlements;

(B) misrepresent or conceal the financial condition of a licensee, financing entity, insurer, or other person;

(C) transact the business of viatical settlements in violation of laws requiring a license, certificate of authority, or other legal authority for the transaction of the business of viatical settlements; or

(D) file with the Secretary or the chief insurance regulatory official of another jurisdiction a document containing false information or otherwise conceals information about a material fact from the Secretary.

(3) Embezzlement, theft, misappropriation, or conversion of monies, funds, premiums, credits, or other property of a viatical settlement provider, life insurance producer, insurer, insured, viator, policyowner, or another person engaged in the business of viatical settlements or insurance.

(4) Recklessly entering into, negotiating, or otherwise dealing in a viatical settlement contract, the subject of which is a policy that was obtained by presenting false information concerning a fact material to the policy, or by concealing, for the purpose of misleading another, information concerning a fact material to the policy, where the viator or the viator's agent intended to defraud the insurance company that issued the policy. "Recklessly" means engaging in the conduct in conscious and clearly unjustifiable disregard of a substantial likelihood of the existence of the relevant facts or risks, this disregard involving a gross deviation from acceptable standards of conduct.

(5) Attempting to commit, assist, aid, or abet in the commission of or conspiracy to commit the acts or omissions specified in this definition.

"Licensee" means any viatical settlement provider or viatical settlement broker licensed in this State.

"Life insurance producer" means a person licensed as a resident or nonresident insurance producer pursuant to Article XXXI of the Illinois Insurance Code with a life line of authority pursuant to Section 500-35 of the Illinois Insurance Code.

"Person" means any natural or artificial entity including, but not limited to, individuals, partnerships, limited liability company, associations, trusts, or corporations.

"Policy" means an individual or group policy, group certificate, contract, or arrangement of life insurance affecting the rights of a resident of this State or bearing a reasonable relation to this State, regardless of whether delivered or issued for delivery in this State.

"Related provider trust" means a titling trust or other trust established by a licensed viatical settlement 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. The trust shall have a written agreement with the licensed viatical settlement provider under which the licensed viatical settlement provider is responsible for ensuring compliance with all statutory and regulatory requirements and under which the trust agrees to make all records and files related to viatical settlement transactions available to the Secretary as if those records and files were maintained directly by the licensed viatical settlement provider.

"Secretary" means the Secretary of Financial and Professional Regulation.

"Special purpose entity" means a corporation, partnership, trust, limited liability company, or other similar entity formed only to provide, directly or indirectly, access to institutional capital markets for a financing entity or licensed viatical settlement provider.

"Terminally ill" means having an illness or sickness that reasonably is expected to result in death in 24 months or less.

"Viatical settlement contract" means a written agreement establishing the terms under which the viatical settlement provider will pay compensation or anything of value is paid, which compensation or value is less than the expected death benefit of the policy, in return for the viator's assignment, transfer, sale, devise, or bequest of the death benefit or ownership of any portion of the policy. A viatical settlement contract also includes a contract for a loan or other financing transaction with a viator secured primarily by an individual or group life insurance policy, other than a loan by a life insurance company pursuant to the terms of the policy, or a loan secured by the cash value of a policy. A viatical settlement contract includes an agreement with a viator to transfer ownership or change the beneficiary designation at a later date regardless of the date that compensation is paid to the viator. A viatical settlement contract does not mean a written agreement entered into between a viator and a person having an insurable interest in the insured's life.

"Viatical settlement provider" means a person, other than a viator, who enters into or effectuates a viatical settlement contract. "Viatical settlement provider" does not include:

(1) a bank, savings and loan association, credit union, or other licensed lending institution that takes an assignment of a policy as collateral for a loan;

(2) the issuer of a policy providing accelerated benefits under the policy;

(3) an authorized or eligible insurer that provides stop loss coverage to a viatical settlement provider, financing entity, special purpose entity, or related provider trust;

(4) a natural person who enters into or effectuates no more than one agreement in a calendar year for the transfer of policies for any value less than the expected death benefit;

(5) a financing entity;

(6) a special purpose entity;

(7) a related provider trust; or

(8) an accredited investor or qualified institutional buyer as defined, respectively, in Regulation D, Rule 501 or Rule 144A of the Federal Securities Act of 1933, as amended, and who purchases a purchased policy from a viatical settlement provider.

"Viaticated policy" means a life insurance policy held by a viatical settlement provider, directly or indirectly, that has been acquired by a viatical settlement provider pursuant to a viatical settlement contract.

"Viator" means the owner of a life insurance policy or a life insurance certificate holder who is a resident of this State, who enters or seeks to enter into a viatical settlement contract. For the purposes of this Act, a viator is not limited to an owner of a policy insuring the life of an individual with a terminal or chronic illness or condition except where specifically addressed. If there is more than one owner on a single policy and the owners are residents of different states, the transaction shall be governed by the law of the state in which the owner having the largest percentage ownership resides or, if the owners hold equal ownership, the state of residence of one owner agreed upon in writing by all owners. Viator does not include:

(1) a licensee under this Act, including a life insurance producer;

(2) an accredited investor or qualified institutional buyer as defined, respectively, in Regulation D, Rule 501 or Rule 144A of the Federal Securities Act of 1933, as amended;

(3) a financing entity;

(4) a special purpose entity; or

(5) a related provider trust.

Section 10. License Requirements.

(a) A person shall not negotiate viatical settlement contracts between a viator and one or more viatical settlement providers or otherwise act on behalf of a viator unless the person is a life insurance producer.

(b) A life insurance producer, as defined in this Act, who has been licensed for at least one year, shall be permitted to negotiate, as defined in Section 500-10 of the Illinois Insurance Code, viatical settlement contracts between a viator and one or more viatical settlement providers. For purposes of this Section, the one year requirement is deemed to be satisfied if the person has been licensed as a resident life insurance producer in his or her home state for at least one year. Not later than 30 days from the first day of negotiating a viatical settlement contract on behalf of a viator, the life insurance producer shall notify the Secretary of the activity on a form prescribed by the Secretary, and shall pay any applicable fees as determined by the Secretary. Notification must include an acknowledgment by the producer that he or she will operate in accordance with this Act.

(c) Notwithstanding any other provision of this Section, a person licensed as an attorney, certified public accountant, or financial planner accredited by a nationally recognized accreditation agency who is retained to represent the viator and whose compensation is not paid directly or indirectly by the viatical settlement provider may negotiate viatical settlement contracts without having to obtain a license as a life insurance producer.

(d) A person shall not operate as a viatical settlement provider from within this State or for persons residing in this State without first having obtained a viatical settlement provider license from the Secretary.

(e) Application for a viatical settlement provider license shall be made to the Secretary by the applicant on a form prescribed by the Secretary. The application shall be accompanied by a fee of $1,500, which shall be deposited into the Insurance Producer Administration Fund.

Viatical settlement providers' licenses may be renewed from year to year on the anniversary date of the license upon (i) submission of renewal forms prescribed by the Secretary and (ii) payment of the annual renewal fee of $750, which shall be deposited into the Insurance Producer Administration Fund. Failure to pay the fee within the terms prescribed by the Secretary shall result in the expiration of the license.

(f) Applicants for a viatical settlement provider's license shall provide information prescribed by the Secretary on forms prescribed by the Secretary. The Secretary shall have authority, at any time, to require the applicant to fully disclose the identity of all stockholders, partners, officers, members, and employees, except stockholders owning fewer than 5% of the shares of an applicant whose shares are publicly traded. The Secretary may, in the exercise of discretion, refuse to issue a license in the name of a legal entity, if not satisfied that an officer, employee, stockholder, member, or partner thereof who may materially influence the applicant's conduct meets the standards of this Act.

(g) A viatical settlement provider's license issued to a legal entity authorizes all partners, members, officers, and designated employees to act as viatical settlement providers, as applicable, under the license. All those persons must be named in the application and any supplements thereto.

(h) Upon the filing of an application for a viatical settlement provider's license and the payment of the license fee, the Secretary may request information from the applicant relating to the applicant's qualifications to be licensed as a viatical settlement provider and shall issue a license if the Secretary finds that the applicant:

(1) has provided a detailed plan of operation;

(2) is competent and trustworthy and intends to act in good faith in the capacity authorized by the license applied for;

(3) has a good business reputation and has had experience, training, or education so as to be qualified in the business for which the license is applied for;

(4) provides a certificate of good standing from the state of its domicile if the applicant is a legal entity; and

(5) has provided an anti-fraud plan that meets the requirements of this Act.

The Secretary may not issue a license to a nonresident applicant unless a written designation of an agent for service of process is filed and maintained with the Secretary or the applicant has filed with the Secretary the applicant's written irrevocable consent that any action against the applicant may be commenced against the applicant by service of process on the Secretary.

A viatical settlement provider shall provide to the Secretary new or revised information about officers, 10% or more stockholders, partners, directors, members, or designated employees within 30 days of a change.

Section 15. License suspension, denial, nonrenewal, and revocation.

(a) The Secretary may refuse to issue or renew or may suspend or revoke the license of any viatical settlement provider if the Secretary finds any of the following:

(1) there was material misrepresentation in the application for the license;

(2) the licensee or any officer, partner, member, or key management personnel has been convicted of fraudulent or dishonest practices, is subject to a final administrative action, or is otherwise shown to be untrustworthy or incompetent;

(3) the licensee demonstrates a pattern of unreasonable payments to viators;

(4) the licensee or any officer, partner, member, or key management personnel has been found guilty of, or pleaded guilty or nolo contendere to, any felony or misdemeanor involving fraud or moral turpitude, regardless of whether a judgment or conviction has been entered by the court;

(5) the licensee has entered into any viatical settlement contract that has not been approved pursuant to this Act;

(6) the licensee has failed to honor contractual obligations set out in a viatical settlement contract;

(7) the licensee no longer meets the requirements for initial licensure;

(8) the licensee has assigned, transferred, or pledged a purchased policy to a person other than a viatical settlement provider licensed in this State, an accredited investor or qualified institutional buyer as defined, respectively, in Regulation D, Rule 501 or Rule 144A of the Federal Securities Act of 1933, as amended, a financing entity, a special purpose entity, or a related provider trust; or

(9) the licensee or any officer, partner, member, or key management personnel has violated any of the provision of this Act.

(b) The Secretary may suspend, revoke, or refuse to renew the license of a life insurance producer if the Secretary finds that the life insurance producer has violated the provisions of this Act.

(c) Before the Secretary denies a license application or suspends, revokes, or refuses to renew the license of a viatical settlement provider or life insurance producer the Secretary shall conduct a hearing in accordance with the Illinois Administrative Procedure Act.

Section 20. Approval of viatical settlement contracts. No viatical settlement provider may use a viatical settlement contract or provide to a viator a disclosure statement form in this State unless it has been filed with and approved by the Secretary. A viatical settlement contract form filed with the Secretary shall be deemed approved if it has not been disapproved within 60 days of the filing. The Secretary shall disapprove a viatical settlement contract form or a disclosure statement form if, in the Secretary's opinion, the contract or provisions contained therein are unreasonable, contrary to the interests of the public, or otherwise misleading or unfair to the viator. At the Secretary's discretion, the Secretary may require the viatical settlement provider to submit copies of its advertising material.

Section 25. Reporting requirements.

(a) Each viatical settlement provider shall file with the Secretary on or before March 1 of each year an annual statement containing information that the Secretary may prescribe by rule. This information shall not include individual transaction data regarding the business of viatical settlements or data that compromises the privacy of personal, financial, and health information of the viator or insured.

(b) Any information relating to the identity of an insured individual and an insured individual's financial or medical information collected, received, or maintained by any entity directly or indirectly involved with a viatical settlement transaction, including a viatical settlement provider, life insurance producer, information bureau, rating agency or company, or any other person with actual knowledge of a viator's or insured's identity, shall be subject to the requirements of Article XL of the Illinois Insurance Code, except as provided below or otherwise allowed or required by law. The information may not be disclosed unless the disclosure is:

(1) necessary to effect a viatical settlement contract between the viator and a viatical settlement provider and the viator or insured or both, as may be required, have provided prior written consent to the disclosure;

(2) provided in response to an investigation or examination by the Secretary or another governmental officer or agency;

(3) a term of or condition to the transfer of a policy by one viatical settlement provider to another viatical settlement provider;

(4) necessary to permit a financing entity, related provider trust, or special purpose entity to finance the purchase of policies by a viatical settlement provider and the viator and insured have provided prior written consent to the disclosure;

(5) necessary to allow the viatical settlement provider or their authorized representatives to make contacts for the purpose of determining health status; or

(6) required to purchase stop loss coverage.

Section 30. Examination of applicants and licensees.

(a) The Secretary may conduct an examination of a licensee as often as the Secretary in his or her sole discretion deems appropriate. The Secretary has the authority to order a licensee or applicant to produce any records, books, files, or other information reasonably necessary to ascertain whether or not the licensee or applicant is acting or has acted in violation of the law or otherwise contrary to the interests of the public.

For purposes of completing an examination of a licensee under this Act, the Secretary may examine or investigate any person, or the business of any person, insofar as the examination or investigation is, in the sole discretion of the Secretary, necessary or material to the examination of the licensee.

In lieu of an examination under this Act of any foreign or alien licensee licensed in this State, the Secretary may, at the Secretary's discretion, accept an examination report on the licensee as prepared by the chief insurance regulatory official for the licensee's state of domicile or port-of-entry state.

(b) A person required to be licensed by this Act shall for 5 years retain copies of:

(1) proposed, offered, or executed contracts, underwriting documents, policy forms, and applications from the date of the proposal, offer, or execution of the contract, which ever is later;

(2) all checks, drafts, or other evidence and documentation related to the payment, transfer, deposit, or release of funds from the date of the transaction;

(3) all complaints received against the licensee and those viatical settlement agents representing the licensee; and

(4) all other records and documents related to the requirements of this Act.

This subsection (b) does not relieve a person of the obligation to produce these documents to the Secretary after the retention period has expired if the person has retained the documents.

Records required to be retained by this subsection (b) must be legible and complete and may be retained in paper, photograph, micro process, magnetic, mechanical, or electronic media, or by any process that accurately reproduces or forms a durable medium for the reproduction of a record.

The Secretary may adopt rules to prescribe the minimum records that must be maintained by licensees.

(c) Upon determining that an examination should be conducted, the Secretary shall issue an examination warrant appointing one or more examiners to perform the examination and instructing them as to the scope of the examination. In conducting the examination, the examiner may employ guidelines or procedures that the Secretary may deem appropriate.

Every licensee, its officers, directors, and agents, and any other person from whom information is sought shall provide to the examiners timely, convenient, and free access at all reasonable hours at its offices to all books, records, accounts, papers, documents, assets, and computer or other recordings relating to the property, assets, business, and affairs of the licensee being examined. The officers, directors, employees, and agents of the licensee or person shall facilitate the examination and aid in the examination so far as it is in their power to do so. The refusal of a licensee by its officers, directors, employees, or agents, to submit to examination or to comply with any reasonable written request of the Secretary shall be grounds for suspension or refusal to renew of any license or authority held by the licensee to engage in the viatical settlement business or other business subject to the Secretary's jurisdiction. Any proceedings for suspension, revocation, or refusal of any license or authority shall be conducted pursuant to the Illinois Administrative Procedures Act.

The Secretary or any of his or her examiners shall have the power to issue subpoenas, to administer oaths, and to examine under oath any person as to any matter pertinent to the examination. Upon the failure or refusal of a person to obey a subpoena, the Secretary may petition a court of competent jurisdiction, and upon proper showing, the court may enter an order compelling the witness to appear and testify or produce documentary evidence. Failure to obey the court order shall be punishable as contempt of court.

When making an examination under this Act, the Secretary may retain attorneys, appraisers, independent actuaries, independent certified public accountants, or other professionals and specialists as examiners, the reasonable cost of which shall be borne by the licensee that is the subject of the examination.

(d) Nothing contained in this Act shall be construed to limit the Secretary's authority to terminate or suspend an examination in order to pursue other legal or regulatory action pursuant to the insurance laws of this State. Findings of fact and conclusions made pursuant to any examination shall be prima facie evidence in any legal or regulatory action.

(e) Nothing contained in this Act shall be construed to limit the Secretary's authority to use and, if appropriate, to make public any final report.

(f) The Secretary may charge the expenses incurred in any examination authorized by this Section to the person being examined. The charge shall be reasonably related to the cost of the examination, including, but not limited to, a per diem charge of $300 per examiner, electronic data processing costs, supervision and preparation of an examination report, and lodging and travel expenses. All lodging and travel expenses shall be in accord with the applicable travel regulations published by the Department of Central Management Services and approved by the Governor's Travel Control Board, except that out-of-state lodging and travel expenses shall be in accordance with travel rates prescribed under 41 C.F.R. 301 for reimbursement of subsistence expenses incurred during official travel. All lodging and travel expenses may be reimbursed directly upon authorization by the Secretary. All electronic data processing costs incurred by the Department in the performance of any examination shall be billed directly to the person being examined for payment to the Statistical Services Revolving Fund. With the exception of the direct reimbursements authorized by the Secretary, all other examination charges collected by the Department shall be paid to the Insurance Producers Administration Fund.

The payment of fees or charges shall be made by separate check, or other payment method approved by the Secretary, for each invoice issued by the Department.

Any fee or charge assessed pursuant to this Part, in which a payment due date has not been established, must be paid within 30 days after the date of the Department's invoice.

Any company, person, or entity failing to make any payment of $100 or more as required under this subsection (f) is liable, in addition to the tax and any penalties, for interest on the deficiency at the rate of 12% per annum, or at higher adjusted rates as are or may be established under subsection (b) of Section 6621 of the Internal Revenue Code, from the date that payment was due, determined without regard to any extensions, to the date of payment of the amount.

When a licensee fails to pay the full amount of any fee of $200 or more due under this subsection (f), there shall be added to the amount due, as a penalty, the greater of $100 or an amount equal to 10% of the deficiency for each month or part of a month that the deficiency remains unpaid.

When a licensee fails to timely pay the full amount of any fee or charge of $100 or more due under this subsection (f), there may be added to the amount due, as a penalty, the greater of $50 or an amount equal to 5% of the deficiency for each month or part of a month that the deficiency remains unpaid. In addition to the fee or charge, interest on the deficiency shall be assessed at the rate of 12% per annum, or at higher adjusted rates as are or may be established under subsection (b) of Section 6621 of the Internal Revenue Code, from the date that payment of the fee or charge was due to the date of payment of the amount.

Any person or company required to pay a fee or charge pursuant to this Section may request a hearing to be held for the purposes of determining if the assessed fee or charge is appropriate. The hearing request shall be made pursuant to 50 Ill. Admin. Code 2500.50 and shall be based only on (i) the grounds set forth in Section 412 of the Illinois Insurance Code, (ii) a mistake of fact, (iii) an error in calculation, or (iv) an erroneous interpretation of a statute of this or any other state.

(g) Examination reports shall be comprised only of facts appearing upon the books, records, or other documents of the licensee, its agents, or other persons examined, or as ascertained from the testimony of its officers or agents or other persons examined concerning its affairs and the conclusions and recommendations that the examiners find reasonably warranted from the facts.

(h) No later than 60 days following completion of the examination, the examiner in charge shall file with the Secretary a verified written report of examination under oath. Upon receipt of the verified report, the Secretary shall transmit the report to the licensee examined, together with a notice that shall afford the licensee examined a reasonable opportunity of not more than 30 days to make a written submission or rebuttal with respect to any matters contained in the examination report.

Within 30 days after the end of the period allowed for the receipt of written submissions or rebuttals the Secretary shall fully consider and review the report, together with any written submissions or rebuttals and any relevant portions of the examiner's workpapers and enter an order doing one of the following:

(1) Adopting the examination report as filed or with modification or corrections. If the examination report reveals that the company is operating in violation of any law, rule, or prior order of the Secretary, the Secretary may order the company to take any action the Secretary considers necessary and appropriate to cure the violation.

(2) Rejecting the examination report with directions to the examiners to reopen the examination for purposes of obtaining additional data, documentation, or information and refiling.

(3) Calling for an investigatory hearing with no less than 20 days notice to the company for purposes of obtaining additional documentation, data, information, and testimony.

All orders entered pursuant to this subsection (h) shall be accompanied by findings and conclusions resulting from the Secretary's consideration and review of the examination report, relevant examiner workpapers, and any written submissions or rebuttals. Any order issued pursuant to paragraph (3) of this subsection (h) shall be considered a final administrative decision and may be appealed pursuant to the Administrative Review Law and shall be served upon the company by certified mail, together with a copy of the adopted examination report. Within 30 days of the issuance of the adopted report the company shall file affidavits executed by each of its directors stating under oath that they have received a copy of the adopted report and related orders.

(i) Hearings conducted pursuant to this Section shall be subject to the following requirements:

(1) Any hearing conducted pursuant to this Section by the Secretary or the Secretary's authorized representative shall be conducted as a nonadversarial confidential investigatory proceeding as necessary for the resolution of any inconsistencies, discrepancies, or disputed issues apparent upon the face of the filed examination report or raised by or as a result of the Secretary's review of relevant workpapers or by the written submission or rebuttal of the company. Within 20 days of the conclusion of any hearing, the Secretary shall enter an order pursuant to paragraph (1) of subsection (h) of this Section.

(2) The Secretary may appoint an authorized representative to conduct the hearing, except that the authorized representative may not be an examiner. The hearing shall proceed expeditiously with discovery by the company limited to the examiner's workpapers that tend to substantiate any assertions set forth in any written submission or rebuttal. The Secretary or the Secretary's representative may issue subpoenas for the attendance of any witnesses or the production of any documents considered relevant to the investigation whether under the control of the Secretary, the company, or other persons. The documents produced shall be included in the record and testimony taken by the Secretary or the Secretary's representative shall be under oath and preserved for the record. Nothing contained in this Section shall require the Secretary to disclose any information or records that would indicate or show the existence or content of any investigation or activity of a criminal justice agency.

(3) The hearing shall proceed with the Secretary or the Secretary's representative posing questions to the persons subpoenaed. Thereafter, the company and the Secretary may present testimony relevant to the investigation. Cross-examination may be conducted only by the Secretary or the Secretary's representative. The company and the Secretary shall be permitted to make closing statements and may be represented by the counsel of their choice.

(j) In the event the Secretary determines that regulatory action is appropriate as a result of an examination, the Secretary may initiate any proceedings or actions provided by law.

(k) Names and individual identification data for all viators shall be considered private and confidential information and shall not be disclosed by the Secretary unless required by law.

Except as otherwise provided in this Act, all examination reports, working papers, recorded information, documents and copies thereof produced by, obtained by or disclosed to the Secretary or any other person in the course of an examination made under this Act or the law of another state or jurisdiction that is substantially similar to this Act, or in the course of analysis or investigation by the Secretary of the financial condition or market conduct of a licensee are (i) confidential by law and privileged, (ii) not subject to the Freedom of Information Act, (iii) not subject to subpoena, and (iv) not subject to discovery or admissible in evidence in any private civil action.

The Secretary is authorized to use the documents, materials, or other information in the furtherance of any regulatory or legal action brought as part of the Secretary's official duties.

Documents, materials, or other information, including, but not limited to, all working papers and copies thereof, in the possession or control of the NAIC and its affiliates and subsidiaries are:

(1) confidential by law and privileged;

(2) not subject to subpoena; and

(3) not subject to discovery or admissible in evidence in any private civil action if they are:

(A) created, produced or obtained by or disclosed to the NAIC and its affiliates and subsidiaries in the course of assisting an examination made under this Act or assisting the Secretary in the analysis or investigation of the financial condition or market conduct of a licensee; or

(B) disclosed to the NAIC and its affiliates and subsidiaries under this subsection (k) by the Secretary.

The Secretary or any person that received the documents, material, or other information while acting under the authority of the Secretary, including, but not limited to, the NAIC and its affiliates and subsidiaries, is permitted to testify in any private civil action concerning any confidential documents, materials, or information subject to this subsection (k).

(l) In order to assist in the performance of the Secretary's duties, the Secretary may:

(1) share documents, materials, or other information, including the confidential and privileged documents, materials, or information subject to subsection (k) of this Section, with other state, federal, and international regulatory agencies, with the NAIC and its affiliates and subsidiaries, and with state, federal, and international law enforcement authorities, provided that the recipient agrees to maintain the confidentiality and privileged status of the document, material, communication, or other information;

(2) receive documents, materials, communications, or information, including otherwise confidential and privileged documents, materials, or information, from the NAIC and its affiliates and subsidiaries and from regulatory and law enforcement officials of other foreign or domestic jurisdictions, and shall maintain as confidential or privileged any document, material, or information received with notice or the understanding that it is confidential or privileged under the laws of the jurisdiction that is the source of the document, material, or information; and

(3) enter into agreements governing sharing and use of information consistent with this Section.

(m) No waiver of any applicable privilege or claim of confidentiality in the documents, materials, or information shall occur as a result of disclosure to the Secretary under this Section or as a result of sharing as authorized in subsection (l) of this Section.

(n) A privilege established under the law of any state or jurisdiction that is substantially similar to the privilege established under this Section shall be available and enforced in any proceeding in and in any court of this State.

(o) Nothing contained in this Act shall prevent or be construed as prohibiting the Secretary from disclosing the content of an examination report, preliminary examination report or results, or any matter relating thereto, to the chief insurance regulatory official of any other state or country, or to law enforcement officials of this or any other state or agency of the federal government at any time or to the NAIC, so long as the agency or office receiving the report or matters relating thereto agrees in writing to hold it confidential and in a manner consistent with this Act.

(p) An examiner may not be appointed by the Secretary if the examiner, either directly or indirectly, has a conflict of interest or is affiliated with the management of or owns a pecuniary interest in any person subject to examination under this Act. This Section shall not be construed to automatically preclude an examiner from being:

(1) a viator;

(2) an insured in a purchased policy; or

(3) a beneficiary in an insurance policy that is proposed to be the subject of a viatical settlement contract.

Notwithstanding the requirements of this subsection (p), the Secretary may retain from time to time, on an individual basis, qualified actuaries, certified public accountants, or other similar individuals who are independently practicing their professions, even though these persons may from time to time be similarly employed or retained by persons subject to examination under provisions of this Act.

(q) The expenses incurred in conducting any examination shall be paid by the licensee or applicant.

(r) No cause of action shall arise nor shall any liability be imposed against the Secretary, the Secretary's authorized representatives, or any examiner appointed by the Secretary for any statements made or conduct performed in good faith while carrying out the provisions of this Section.

No cause of action shall arise, nor shall any liability be imposed against any person for the act of communicating or delivering information or data to the Secretary or the Secretary's authorized representative or examiner pursuant to an examination made under this Section, if the act of communication or delivery was performed in good faith and without fraudulent intent or the intent to deceive. This subsection (r) does not abrogate or modify in any way any common law or statutory privilege or immunity heretofore enjoyed by any person identified in this subsection (r).

A person identified in this subsection (r) shall be entitled to an award of attorney's fees and costs if he or she is the prevailing party in a civil cause of action for libel, slander, or any other relevant tort arising out of activities in carrying out the provisions of this Section and the party bringing the action was not substantially justified in doing so. For purposes of this Section, a proceeding is "substantially justified" if it had a reasonable basis in law or fact at the time that it was initiated.

(s) The Secretary may investigate suspected fraudulent viatical settlement acts and persons engaged in the business of viatical settlements.

Section 35. Disclosure.

(a) With each application for a viatical settlement contract, a viatical settlement provider or life insurance producer shall provide the viator with at least the following disclosures no later than the time the viatical settlement contract is signed by all parties. The disclosures must be provided in a separate document that is signed by the viator and the viatical settlement provider or life insurance producer, and shall provide the following information:

(1) That there exist possible alternatives to a viatical settlement contract including any accelerated death benefits or policy loans offered under the viator's life insurance policy.

(2) That some or all of the proceeds of the viatical settlement contract may be taxable under federal income tax and state franchise and income taxes, and assistance may be sought from a professional tax advisor.

(3) That proceeds of the viatical settlement contract may be subject to the claims of creditors.

(4) That receipt of the proceeds of a viatical settlement contract may adversely affect the viator's eligibility for Medicaid or other government benefits or entitlements, and advice may be obtained from the appropriate government agencies.

(5) That the viator has the right to rescind a viatical settlement contract before the earlier of 30 calendar days after the date the viatical settlement contract is executed by all parties or for 15 calendar days after the receipt of the viatical settlement proceeds by the viator. Rescission, if exercised by the viator, is effective only if both notice of the rescission is given and repayment of all proceeds and any premiums, loans, and loan interest to the viatical settlement provider is made within the rescission period. If the insured dies during the rescission period, the viatical settlement contract is deemed to have been rescinded, subject to repayment being made to the viatical settlement provider of all viatical settlement proceeds and any premiums, loans, and loan interest within 90 days after the death of the insured.

(6) That funds must be sent to the viator within 3 business days after the viatical settlement provider has received the insurer or group administrator's acknowledgment that ownership of the purchased policy has been transferred and the beneficiary has been designated.

(7) That entering into a viatical 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 viator. Assistance may be sought from a financial adviser.

(8) That the disclosure to a viator must include distribution of a brochure, approved by the Secretary, describing the process of viatical settlements.

(9) That the disclosure document must contain the following language: "All medical, financial, or personal information solicited or obtained by a viatical settlement provider or a life insurance producer about an insured, 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 viatical settlement contract between the viator and the viatical settlement 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.".

(10) That the insured may be contacted by either the viatical settlement provider or its authorized representative for the purpose of determining the insured's health status. This contact is limited to once every 3 months if the insured has a life expectancy of more than one year, and no more than once each month if the insured has a life expectancy of one year or less.

(b) A viatical settlement provider shall provide the viator with at least the following disclosures no later than the date the viatical settlement contract is signed by all parties. The disclosures must be displayed conspicuously in the viatical settlement contract or in a separate document signed by the viator and the viatical settlement provider, and provide the following information:

(1) The affiliation, if any, between the viatical settlement provider and the issuer of the insurance policy to be acquired pursuant to a viatical settlement contract.

(2) The name, address, and telephone number of the viatical settlement provider.

(3) If a policy to be acquired pursuant to a viatical settlement contract has been issued as a joint policy or involves family riders or any coverage of a life other than the insured under the policy to be acquired pursuant to a viatical settlement contract, the viator must be informed of the possible loss of coverage on the other lives under the policy and must be advised to consult with his or her insurance producer or the insurer issuing the policy for advice on the proposed viatical settlement contract.

(4) The dollar amount of the current death benefit payable to the viatical settlement provider under the policy. If known, the viatical settlement provider also shall disclose the availability of additional guaranteed insurance benefits, the dollar amount of accidental death and dismemberment benefits under the policy or certificate, and the viatical settlement provider's interest in those benefits.

(5) The name, business address, and telephone number of the independent third party escrow agent, and the fact that the viator may inspect or receive copies of the relevant escrow or trust agreements or documents.

(c) If the viatical settlement provider transfers ownership or changes the beneficiary of the policy, the viatical settlement provider shall communicate the change in ownership or beneficiary to the insured within 20 days after the change.

Section 40. General rules.

(a) A viatical settlement provider entering into a viatical settlement contract shall first obtain:

(1) if the viator is the insured, a written statement from a licensed attending physician that the viator is of sound mind and under no constraint or undue influence to enter into a viatical settlement contract; and

(2) a document in which the insured consents to the release of his or her medical records to a viatical settlement provider or insurance producer and, if the policy was issued less than 2 years from the date of application for a viatical settlement contract, to the insurance company that issued the policy.

(b) The insurer shall respond to a request for verification of coverage submitted by a viatical settlement provider or life insurance producer not later than 30 calendar days after the date the request is received. The request for verification of coverage must be made on a form approved by the Secretary. The insurer shall complete and issue the verification of coverage or indicate in which respects it is unable to respond. In its response, the insurer 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, and shall provide sufficient detail of all reasons for the investigation to the viatical settlement provider or life insurance producer.

(c) Before or at the time of execution of the viatical settlement contract, the viatical settlement provider shall obtain a witnessed document in which the viator consents to the viatical settlement contract, represents that the viator has a full and complete understanding of the viatical settlement contract and the benefits of the policy, acknowledges that the viator is entering into the viatical settlement contract freely and voluntarily, and, for persons with a terminal or chronic illness or condition, acknowledges that the insured has a terminal or chronic illness or condition and that the terminal or chronic illness or condition was diagnosed after the policy was issued.

(d) If a life insurance producer performs any of these activities required of the viatical settlement provider, the viatical settlement provider is deemed to have fulfilled the requirements of this Section.

(e) All medical information solicited or obtained by any licensee shall be subject to the requirements of Article XL of the Illinois Insurance Code.

(f) A viatical settlement contract entered into in this State shall provide the viator with an unconditional right to rescind the contract before the earlier of 30 calendar days after the date the viatical settlement contract is executed by all parties or 15 calendar days from the receipt of the viatical settlement proceeds by the viator. Rescission, if exercised by the viator, is effective only if both notice of the rescission is given and repayment of all proceeds and any premiums, loans, and loan interest to the viatical settlement provider is made within the rescission period. If the insured dies during the rescission period, the viatical settlement contract shall be deemed to have been rescinded, subject to repayment being made to the viatical settlement provider of all viatical settlement proceeds and any premiums, loans, and loan interest within 90 days after the death of the insured.

(g) The viatical settlement provider shall instruct the viator 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 escrow agent receives the documents, or within 3 days after the date the viatical settlement provider receives the documents if the viator erroneously provides the documents directly to the viatical settlement provider, the viatical settlement provider shall pay or transfer the proceeds of the viatical settlement contract into an escrow or trust account maintained in a State or federally chartered financial institution whose deposits are insured by the Federal Reserve System. Upon payment of the viatical settlement proceeds into the escrow account, the escrow agent shall deliver the original change in ownership, assignment, or change in beneficiary forms to the viatical settlement provider or related provider trust. Upon the escrow agent's receipt of the acknowledgment of the properly completed transfer of ownership, assignment, or designation of beneficiary from the insurance company, the escrow agent shall pay the viatical settlement proceeds to the viator.

(h) Failure to tender consideration to the viator for the viatical settlement by contract within the time disclosed pursuant to this Code renders the viatical settlement contract voidable by the viator for lack of consideration until the time consideration is tendered to and accepted by the viator.

(i) contact with the insured, for the purpose of determining the health status of the insured by the viatical settlement provider after the viatical settlement contract has been executed, may only be made by the licensed viatical settlement provider or its authorized representatives and is limited to once every 3 months for insureds with a life expectancy of more than one year, and not more than once each month for insureds with a life expectancy of one year or less. The viatical settlement provider shall explain the procedure for these contacts at the time the viatical settlement contract is entered into. The limitations provided for in this subsection (i) do not apply to a contact with an insured for reasons other than determining the insured's health status. A viatical settlement provider is responsible for the actions of its authorized representatives.

Section 45. Authority to adopt rules.

(a) The Secretary shall have the authority to do all the following:

(1) Issue rules implementing this Act.

(2) Establish standards for evaluating reasonableness of payments under a viatical settlement contract for a person who is terminally or chronically ill. This authority includes, but is not limited to, regulation of discount rates used to determine the amount paid in exchange for assignment, transfer, sale, devise, or bequest of a benefit under a policy. A viatical settlement provider, where the insured is not terminally or chronically ill, shall pay an amount greater than the cash surrender value or accelerated death benefit then available.

(3) Establish appropriate licensing requirements, fees, and standards for continued licensure for a viatical settlement provider and a fee for life insurance producers.

(4) Require a bond or other mechanism for financial accountability for a viatical settlement provider.

(5) Adopt rules governing the relationship and responsibilities of an insurer and a viatical settlement provider, life insurance producer, and others in the business of viatical settlements during the period of consideration or effectuation of a viatical settlement contract.

(b) Any rules adopted pursuant to the authority granted in the Viatical Settlements Act shall remain in effect until repealed or modified by rules adopted by the Secretary pursuant to this Act.

Section 50. Application.

(a) A viatical settlement provider lawfully transacting business in this State may continue to do so pending approval or disapproval of the viatical settlement provider's application for a license under this Act as long as the application is filed with the Secretary not later than 30 days after the effective date of this Act. A viatical settlement provider currently licensed in this State may continue to transact business under that license, but must revise any licensing information at the time of the license renewal, if applicable.

(b) A person who has lawfully negotiated viatical settlement contracts between a viator and one or more viatical settlement providers in this State for at least one year immediately prior to the effective date of this Act may continue to negotiate viatical settlements in this State for a period of 60 days after the effective date of this Act, at which time the person must either become a licensed life insurance producer or cease negotiating viatical settlement contracts.

Section 55. Violations. It is a violation of this Act for a person to enter into a viatical settlement contract within a 2-year period commencing with the date of issuance of the policy unless the viator certifies to the viatical settlement provider that one or more of the following conditions have been met within the 2-year period:

(1) The policy was issued upon the viator'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 24 months. The time covered under a group policy must be calculated without regard to a change in insurance carriers, provided the coverage has been continuous and under the same group sponsorship.

(2) The viator submits independent evidence to the viatical settlement provider that one or more of the following conditions have been met within the 2-year period:

(A) the viator or insured is terminally or chronically ill; or

(B) the viator or insured disposes of his ownership interests in a closely held corporation, pursuant to the terms of a buyout or other similar agreement in effect at the time the insurance policy was initially issued.

Copies of the independent evidence described in paragraph (2) of this Section and documents required by this Act must be submitted to the insurer when the viatical settlement provider submits a request to the insurer for verification of coverage. The copies must be accompanied by a letter of attestation from the viatical settlement provider that the copies are true and correct copies of the documents received by the viatical settlement provider.

If the viatical settlement provider submits to the insurer a copy of independent evidence provided for in paragraph (2) of this Section when the viatical settlement provider submits a request to the insurer to effect the transfer of the policy to the viatical settlement provider, the copy is deemed to conclusively establish that the viatical settlement contract satisfies the requirements of this Section and the insurer shall respond timely to the request.

Section 60. Advertisements.

(a) The purpose of this Section is to provide a prospective viator with clear and unambiguous statements in the advertisement of a viatical settlement contract and to assure the clear, truthful, and adequate disclosure of the benefits, risks, limitations, and exclusions of a viatical settlement contract. This purpose is to be accomplished by the establishment of guidelines and standards of permissible and impermissible conduct in the advertising of a viatical settlement contract to assure that a product description is presented in a manner that prevents unfair, deceptive, or misleading advertising and is conducive to accurate presentation and description of a viatical settlement contract through the advertising media and material used by a licensee.

(b) This Section applies to an advertising of a viatical settlement contract or a related product or service intended for dissemination in this State, including Internet advertising viewed by a person located in this State. Where disclosure requirements are established pursuant to federal regulation, this Section must be interpreted so as to minimize or eliminate conflict with federal regulation wherever possible.

(c) Each viatical settlement licensee shall establish and at all times maintain a system of control over the content, form, and method of dissemination of an advertisement of its contracts, products, and services. An advertisement, regardless of who wrote, created, designed, or presented, is the responsibility of the licensee, as well as the individual who created or presented the advertisement. A system of control by the licensee must include regular routine notification at least once a year to agents and others authorized to disseminate advertisements of the requirements and procedures for approval before the use of an advertisement not furnished by the licensee.

(d) An advertisement must be truthful and not misleading in fact or by implication. The form and content of an advertisement of a viatical settlement contract must be sufficiently complete and clear so as to avoid deception. It shall not have the capacity or tendency to mislead or deceive. Whether an advertisement has the capacity or tendency to mislead or deceive shall be determined by the Secretary from the overall impression that the advertisement may be reasonably expected to create upon a person of average education or intelligence within the segment of the public to which it is directed.

(e) The information required to be disclosed pursuant to the provisions of this Section may not be minimized, rendered obscure, or presented in an ambiguous fashion or intermingled with the text of the advertisement so as to be confusing or misleading.

(1) An advertisement may not omit material information or use words, phrases, statements, references, or illustrations if the omission or use has the capacity, tendency, or effect of misleading or deceiving the public as to the nature or extent of any benefit, loss covered, or State or federal tax consequence. The fact that the viatical settlement contract offered is made available for inspection before consummation of the sale, or an offer is made to refund the payment if the viator is not satisfied, or that the viatical settlement contract includes a "free look" period that satisfies or exceeds legal requirements does not remedy misleading statements.

(2) An advertisement may not use the name or title of a life insurance company or a life insurance policy unless the advertisement has been approved by the insurer.

(3) An advertisement may not state or imply that interest charged on an accelerated death benefit or a policy loan is unfair, inequitable, or in any manner an incorrect or improper practice.

(4) The words "free", "no cost", "without cost", "no additional cost", "at no extra cost", or words of similar import may not be used with respect to a benefit or service unless true. An advertisement may specify the charge for a benefit or service or may state that a charge is included in the payment or use other appropriate language.

(5) Any testimonial, appraisal, or analysis used in an advertisement must:

(A) be genuine;

(B) represent the current opinion of the author;

(C) be applicable to the viatical settlement contract, product, or service advertised, if any; and

(D) be accurately reproduced with sufficient completeness to avoid misleading or deceiving prospective viators as to the nature or scope of any testimonial, appraisal, analysis, or endorsement.

In using any testimonial, appraisal, or analysis, the viatical settlement licensee makes as its own all the statements contained in them, and the statements are subject to all the provisions of this Section.

If the individual making a testimonial, appraisal, analysis, or an endorsement has a financial interest in the viatical settlement provider or related entity as a stockholder, director, officer, employee, or otherwise or receives a benefit, directly or indirectly, other than required union scale wages, that fact must be disclosed prominently in the advertisement.

An advertisement may not state or imply that a viatical settlement contract, benefit, or service has been approved or endorsed by a group of individuals, society, association, or other organization, unless that is the fact and unless any relationship between an organization and the licensee is disclosed. If the entity making the endorsement or testimonial is owned, controlled, or managed by the licensee or receives payment or other consideration from the licensee for making an endorsement or testimonial, that fact must be disclosed in the advertisement.

If an endorsement refers to benefits received under a viatical settlement contract, all pertinent information must be retained for a period of 5 years after its use.

(f) An advertisement may not contain statistical information unless it accurately reflects recent and relevant facts. The source of all statistics used in an advertisement must be identified.

(g) An advertisement may not disparage insurers, viatical settlement providers, insurance producers, policies, services, or methods of marketing.

(h) The name of the viatical settlement licensee must be identified clearly in all advertisements about the licensee or its viatical settlement contract, products, or services, and if any specific viatical settlement contract is advertised, the viatical settlement contract must be identified either by form number or some other appropriate description. If an application is part of the advertisement, the name of the viatical settlement provider must be shown on the application.

(i) An advertisement shall not use a trade name, group designation, name of the parent company of a licensee, name of a particular division of the licensee, service mark, slogan, symbol, or other device or reference without disclosing the name of the licensee if the advertisement has the capacity or tendency to mislead or deceive as to the true identity of the licensee or to create the impression that a company other than the licensee has any responsibility for the financial obligation under a viatical settlement contract.

(j) An advertisement shall not use any combination of words, symbols, or physical materials that by their content, phraseology, shape, color, or other characteristics are so similar to a combination of words, symbols, or physical materials used by a government program or agency or otherwise appear to be of such a nature that they tend to mislead prospective viators into believing that the solicitation is in some manner connected with a government program or agency.

(k) An advertisement may state that a licensee is licensed in the state where the advertisement appears, provided it does not exaggerate that fact or suggest or imply that the competing licensee may not be so licensed. The advertisement may ask the audience to consult the licensee's web site or contact that state's department of insurance to find out if that state requires licensing and, if so, whether the licensee or any other company is licensed.

(l) An advertisement may not create the impression that the viatical settlement provider, its financial condition or status, the payment of its claims, or the merits, desirability, or advisability of its viatical settlement contracts are recommended or endorsed by any government entity.

(m) The name of the actual licensee must be stated in all of its advertisements. An advertisement may not use a trade name, any group designation, name of any affiliate or controlling entity of the licensee, service mark, slogan, symbol, or other device in a manner that has the capacity or tendency to mislead or deceive as to the true identity of the actual licensee or create the false impression that an affiliate or controlling entity has any responsibility for the financial obligation of the licensee.

(n) An advertisement may not, directly or indirectly, create the impression that any division or agency of the State or of the United States government endorses, approves, or favors:

(1) a licensee or its business practices or methods of operation;

(2) the merits, desirability, or advisability of a viatical settlement contract;

(3) any viatical settlement contract; or

(4) any policy or life insurance company.

(o) If the advertiser emphasizes the speed with which the viatical settlement contract occurs, the advertising must disclose the average time frame from completed application to the date of offer and from acceptance of the offer to receipt of the funds by the viator.

(p) If the advertising emphasizes the dollar amounts available to viators, the advertising shall disclose the average purchase price as a percent of face value obtained by viators contracting with the licensee during the past 6 months.

(q) Certain viatical settlement advertisements are deemed false and misleading on their face and are prohibited. False and misleading viatical settlement advertisements include, but are not limited to, the following representations:

(1) "guaranteed", "fully secured", "100 percent secured", "fully insured", "secure", "safe", "backed by rated insurance companies", "backed by federal law", "backed by state law", "state guaranty funds", or similar representations;

(2) "no risk", "minimal risk", "low risk", "no speculation", "no fluctuation", or similar representations;

(3) "qualified or approved for individual retirement accounts (IRAs), Roth IRAs, 401(k) plans, simplified employee pensions (SEP), 403(b), Keogh plans, TSA, and other retirement account rollovers", "tax deferred", or similar representations;

(4) use of the word "guaranteed" to describe the fixed return, annual return, principal, earnings, profits, investment, or similar representations;

(5) "no sales charges or fees" or similar representations;

(6) "high yield", "superior return", "excellent return", "high return", "quick profit", or similar representations; and

(7) purported favorable representations or testimonials about the benefits of viatical settlement contracts or viatical settlement purchase agreements as an investment taken out of context from newspapers, trade papers, journals, radio and television programs, and all other forms of print and electronic media.

Section 65. Fraudulent viatical settlement acts.

(a) A person may not commit a fraudulent viatical settlement act.

(b) A person, knowingly or intentionally, may not interfere with the enforcement of the provisions of this Act or investigations of suspected or actual violations of this chapter.

(c) A person in the business of viatical settlements may not knowingly or intentionally permit a person convicted of a felony involving dishonesty or breach of trust to participate in the business of viatical settlements.

(d) A viatical settlement contract and an application for a viatical settlement contract, regardless of the form of transmission, must contain the following statement or a substantially similar statement: "Any person who knowingly presents false information in an application for insurance or viatical settlement contract is guilty of a crime and, upon conviction, may be subject to fines or confinement in prison or both.".

The lack of a statement as provided for in in this subsection (d) does not constitute a defense in any prosecution for a fraudulent viatical settlement act.

(e) A person engaged in the business of viatical settlements having knowledge or a reasonable belief that a fraudulent viatical settlement act is being, will be, or has been committed shall provide to the Secretary the information required by the Secretary in a manner prescribed by the Secretary.

Another person having knowledge or a reasonable belief that a fraudulent viatical settlement act is being, will be, or has been committed may provide to the Secretary the information required by the Secretary in a manner prescribed by the Secretary.

(f) Civil liability may not be imposed on and a cause of action may not arise from a person's furnishing information concerning suspected, anticipated, or completed fraudulent viatical settlement acts, or suspected or completed fraudulent insurance acts, if the information is provided to or received from:

(A) the Secretary or the Secretary's employees, agents, or representatives;

(B) federal, state, or local law enforcement or regulatory officials or their employees, agents, or representatives;

(C) a person involved in the prevention and detection of fraudulent viatical settlement acts or that person's agents, employees, or representatives;

(D) the National Association of Insurance Commissioners (NAIC), National Association of Securities Dealers (NASD), the North American Securities Administrators Association (NASAA), or their employees, agents, or representatives, or other regulatory body overseeing life insurance or viatical settlement contracts; or

(E) the insurer that issued the policy covering the life of the insured.

This subsection (f) does not apply to a statement made with actual malice. In an action brought against a person for filing a report or furnishing other information concerning a fraudulent viatical settlement act or a fraudulent insurance act, the party bringing the action shall plead specifically any allegation that this subsection (f) does not apply because the person filing the report or furnishing the information did so with actual malice.

A person identified in this subsection (f) is entitled to an award of attorney's fees and costs if he or she is the prevailing party in a civil cause of action for libel, slander, or another relevant tort arising out of activities in carrying out the provisions of this Act and the party bringing the action was not substantially justified in doing so. For purposes of this Section, a proceeding is "substantially justified" if it had a reasonable basis in law or fact at the time that it was initiated.

This Section does not abrogate or modify common law or statutory privileges or immunities enjoyed by a person described in this subsection (f).

This subsection (f) does not apply to a person's furnishing information concerning his own suspected, anticipated, or completed fraudulent viatical settlement acts or suspected, anticipated, or completed fraudulent insurance acts.

(g) The documents and evidence provided pursuant to subsection (f) of this Section or obtained by the Secretary in an investigation of suspected or actual fraudulent viatical settlement acts are privileged and confidential and are not a public record and are not subject to discovery or subpoena in a civil or criminal action.

The provisions of this subsection (g) do not prohibit release by the Secretary of documents and evidence obtained in an investigation of suspected or actual fraudulent viatical settlement acts:

(1) in administrative or judicial proceedings to enforce laws administered by the Secretary;

(2) to federal, state, or local law enforcement or regulatory agencies, to an organization established for the purpose of detecting and preventing fraudulent viatical settlement acts, or to the NAIC; or

(3) at the discretion of the Secretary, to a person in the business of viatical settlements that is aggrieved by a fraudulent viatical settlement act.

Release of documents and evidence provided by this subsection (g) does not abrogate or modify the privilege granted in this subsection (g).

(h) This Act does not:

(1) preempt the authority or relieve the duty of other law enforcement or regulatory agencies to investigate, examine, and prosecute suspected violations of law;

(2) prevent or prohibit a person from disclosing voluntarily information concerning fraudulent viatical settlement acts to a law enforcement or regulatory agency other than the Department of Financial and Professional Regulation; or

(3) limit the powers granted elsewhere by the laws of this State to the Secretary or an insurance fraud unit to investigate and examine possible violations of law and to take appropriate action against wrongdoers.

(i) A viatical settlement provider shall adopt anti-fraud initiatives reasonably calculated to detect, assist in the prosecution of, and prevent fraudulent viatical settlement acts. The Secretary may order or, if a licensee requests, may grant these modifications of the following required initiatives as necessary to ensure an effective anti-fraud program. The modifications may be more or less restrictive than the required initiatives so long as the modifications reasonably may be expected to accomplish the purpose of this Section. Anti-fraud initiatives include, but are not limited to:

(1) Fraud investigators, who may be a viatical settlement provider or employees or independent contractors of those viatical settlement providers.

(2) An anti-fraud plan that shall always be available to the Secretary. The anti-fraud plan must include, but is not limited to:

(A) a description of the procedures for detecting and investigating possible fraudulent viatical settlement acts and procedures for resolving material inconsistencies between medical records and insurance applications;

(B) a description of the procedures for reporting possible fraudulent viatical settlement acts to the Secretary;

(C) a description of the plan for anti-fraud education and training of underwriters and other personnel; and

(D) a chart outlining the organizational arrangement of the anti-fraud personnel who are responsible for the investigation and reporting of possible fraudulent viatical settlement acts and investigating unresolved material inconsistencies between medical records and insurance applications.

Anti-fraud plans submitted to the Secretary are privileged and confidential and are not a public record pursuant to the provisions of the Freedom of Information Act and are not subject to discovery or subpoena in a civil or criminal action.

Section 70. Additional penalties.

(a) In addition to the penalties and other enforcement provisions of this Act, if a person violates the provisions of this Act or any rule implementing this Act, the Secretary may seek an injunction in a court of competent jurisdiction and may apply for temporary and permanent orders as the Secretary determines are necessary to restrain the person from committing the violation.

(b) A person damaged by the acts of a person in violation of this Act may bring a civil action against the person committing the violation in a court of competent jurisdiction.

(c) The Secretary may issue a cease and desist order upon a person that violates any provision of this Act, any rule or order adopted by the Secretary, or any written agreement entered into with the Secretary.

(d) When the Secretary finds that an activity in violation of this Act presents an immediate danger to the public that requires an immediate final order, the Secretary may issue an emergency cease and desist order reciting with particularity the facts underlying the findings. The emergency cease and desist order is effective immediately upon service of a copy of the order on the respondent and remains effective for 90 days. If the Secretary begins nonemergency cease and desist proceedings, the emergency cease and desist order remains effective absent an order by a court of competent jurisdiction.

(e) In addition to the penalties and other enforcement provisions of this Act, a person who violates this Act is subject to civil penalties of up to $10,000 for each violation. Imposition of civil penalties is pursuant to an order of the Secretary. The Secretary's order may require a person found to be in violation of this Act to make restitution to a person aggrieved by violations of this Act.

(f) A person who violates a provision of this Act, upon conviction, must be ordered to pay restitution to a person aggrieved by the violation of this Act. Restitution must be ordered in addition to a fine or imprisonment and not instead of a fine or imprisonment.

(g) A person who violates a provision of this Act, upon conviction, must be sentenced based on the greater of the value of property, services, or other benefits wrongfully obtained or attempted to be obtained, or the aggregate economic loss suffered by any person as a result of the violation. A person convicted of theft of property through a viatical settlement transaction in which the value of viatical settlement contract:

(1) exceeds $500,000 is guilty of a Class 1 non-probationable felony;

(2) exceeds $100,000 but does not exceed $500,000 is guilty of a Class 1 felony;

(3) exceeds $10,000 but does not exceed $100,000 is guilty of a Class 2 felony; or

(4) exceeds $300 but does not exceed $10,000 is guilty of a Class 3 felony.

(h) A person convicted of a fraudulent viatical settlement act must be ordered to pay restitution to a person aggrieved by the fraudulent viatical settlement act. Restitution must be ordered in addition to a fine or imprisonment but not instead of a fine or imprisonment.

(i) In a prosecution provided under subsection (h) of this Section, the value of a viatical settlement contract within a 6-month period may be aggregated and the defendant charged accordingly in applying the provisions of subsection (g) of this Section. If 2 or more offenses are committed by the same person in 2 or more counties, the accused may be prosecuted in a county in which one of the offenses was committed for all of the offenses aggregated as provided by this Section. The statute of limitations does not begin to run until the insurance company or law enforcement agency is aware of the fraud, but the prosecution may not be commenced later than 7 years after the act has occurred.

Section 75. Illinois Securities Law of 1953. Nothing in this Act preempts or otherwise limits the provisions of the Illinois Securities Law of 1953, as amended, or any regulations, orders, policy statements, notices, bulletins, or other interpretations issued by or through the Secretary of State or his or her designee acting pursuant to the Illinois Securities Law of 1953, as amended. Compliance with the provisions of this Act does not constitute compliance with any applicable provision of the Illinois Securities Law of 1953, as amended, and any amendments thereto or any regulations, orders, policy statements, notices, bulletins, or other interpretations issued by or through the Secretary of State or his or her designee acting pursuant to the Illinois Securities Law of 1953, as amended.

(215 ILCS 158/Act rep.)

Section 900. The Viatical Settlements Act is repealed.

Section 905. The Freedom of Information Act is amended by changing Section 7 as follows:

(5 ILCS 140/7) (from Ch. 116, par. 207)

Sec. 7. Exemptions.

(1) The following shall be exempt from inspection and copying:

(a) Information specifically prohibited from disclosure by federal or State law or rules and regulations adopted under federal or State law.

(b) Information that, if disclosed, would constitute a clearly unwarranted invasion of personal privacy, unless the disclosure is consented to in writing by the individual subjects of the information. The disclosure of information that bears on the public duties of public employees and officials shall not be considered an invasion of personal privacy. Information exempted under this subsection (b) shall include but is not limited to:

(i) files and personal information maintained with respect to clients, patients, residents, students or other individuals receiving social, medical, educational, vocational, financial, supervisory or custodial care or services directly or indirectly from federal agencies or public bodies;

(ii) personnel files and personal information maintained with respect to employees, appointees or elected officials of any public body or applicants for those positions;

(iii) files and personal information maintained with respect to any applicant, registrant or licensee by any public body cooperating with or engaged in professional or occupational registration, licensure or discipline;

(iv) information required of any taxpayer in connection with the assessment or collection of any tax unless disclosure is otherwise required by State statute;

(v) information revealing the identity of persons who file complaints with or provide information to administrative, investigative, law enforcement or penal agencies; provided, however, that identification of witnesses to traffic accidents, traffic accident reports, and rescue reports may be provided by agencies of local government, except in a case for which a criminal investigation is ongoing, without constituting a clearly unwarranted per se invasion of personal privacy under this subsection; and

(vi) the names, addresses, or other personal information of participants and registrants in park district, forest preserve district, and conservation district programs.

(c) Records compiled by any public body for administrative enforcement proceedings and any law enforcement or correctional agency for law enforcement purposes or for internal matters of a public body, but only to the extent that disclosure would:

(i) interfere with pending or actually and reasonably contemplated law enforcement proceedings conducted by any law enforcement or correctional agency;

(ii) interfere with pending administrative enforcement proceedings conducted by any public body;

(iii) deprive a person of a fair trial or an impartial hearing;

(iv) unavoidably disclose the identity of a confidential source or confidential information furnished only by the confidential source;

(v) disclose unique or specialized investigative techniques other than those generally used and known or disclose internal documents of correctional agencies related to detection, observation or investigation of incidents of crime or misconduct;

(vi) constitute an invasion of personal privacy under subsection (b) of this Section;

(vii) endanger the life or physical safety of law enforcement personnel or any other person; or

(viii) obstruct an ongoing criminal investigation.

(d) Criminal history record information maintained by State or local criminal justice agencies, except the following which shall be open for public inspection and copying:

(i) chronologically maintained arrest information, such as traditional arrest logs or blotters;

(ii) the name of a person in the custody of a law enforcement agency and the charges for which that person is being held;

(iii) court records that are public;

(iv) records that are otherwise available under State or local law; or

(v) records in which the requesting party is the individual identified, except as provided under part (vii) of paragraph (c) of subsection (1) of this Section.

"Criminal history record information" means data identifiable to an individual and consisting of descriptions or notations of arrests, detentions, indictments, informations, pre-trial proceedings, trials, or other formal events in the criminal justice system or descriptions or notations of criminal charges (including criminal violations of local municipal ordinances) and the nature of any disposition arising therefrom, including sentencing, court or correctional supervision, rehabilitation and release. The term does not apply to statistical records and reports in which individuals are not identified and from which their identities are not ascertainable, or to information that is for criminal investigative or intelligence purposes.

(e) Records that relate to or affect the security of correctional institutions and detention facilities.

(f) Preliminary drafts, notes, recommendations, memoranda and other records in which opinions are expressed, or policies or actions are formulated, except that a specific record or relevant portion of a record shall not be exempt when the record is publicly cited and identified by the head of the public body. The exemption provided in this paragraph (f) extends to all those records of officers and agencies of the General Assembly that pertain to the preparation of legislative documents.

(g) Trade secrets and commercial or financial information obtained from a person or business where the trade secrets or information are proprietary, privileged or confidential, or where disclosure of the trade secrets or information may cause competitive harm, including all information determined to be confidential under Section 4002 of the Technology Advancement and Development Act. Nothing contained in this paragraph (g) shall be construed to prevent a person or business from consenting to disclosure.

(h) Proposals and bids for any contract, grant, or agreement, including information which if it were disclosed would frustrate procurement or give an advantage to any person proposing to enter into a contractor agreement with the body, until an award or final selection is made. Information prepared by or for the body in preparation of a bid solicitation shall be exempt until an award or final selection is made.

(i) Valuable formulae, computer geographic systems, designs, drawings and research data obtained or produced by any public body when disclosure could reasonably be expected to produce private gain or public loss. The exemption for "computer geographic systems" provided in this paragraph (i) does not extend to requests made by news media as defined in Section 2 of this Act when the requested information is not otherwise exempt and the only purpose of the request is to access and disseminate information regarding the health, safety, welfare, or legal rights of the general public.

(j) Test questions, scoring keys and other examination data used to administer an academic examination or determined the qualifications of an applicant for a license or employment.

(k) Architects' plans, engineers' technical submissions, and other construction related technical documents for projects not constructed or developed in whole or in part with public funds and the same for projects constructed or developed with public funds, but only to the extent that disclosure would compromise security, including but not limited to water treatment facilities, airport facilities, sport stadiums, convention centers, and all government owned, operated, or occupied buildings.

(l) Library circulation and order records identifying library users with specific materials.

(m) Minutes of meetings of public bodies closed to the public as provided in the Open Meetings Act until the public body makes the minutes available to the public under Section 2.06 of the Open Meetings Act.

(n) Communications between a public body and an attorney or auditor representing the public body that would not be subject to discovery in litigation, and materials prepared or compiled by or for a public body in anticipation of a criminal, civil or administrative proceeding upon the request of an attorney advising the public body, and materials prepared or compiled with respect to internal audits of public bodies.

(o) Information received by a primary or secondary school, college or university under its procedures for the evaluation of faculty members by their academic peers.

(p) Administrative or technical information associated with automated data processing operations, including but not limited to software, operating protocols, computer program abstracts, file layouts, source listings, object modules, load modules, user guides, documentation pertaining to all logical and physical design of computerized systems, employee manuals, and any other information that, if disclosed, would jeopardize the security of the system or its data or the security of materials exempt under this Section.

(q) Documents or materials relating to collective negotiating matters between public bodies and their employees or representatives, except that any final contract or agreement shall be subject to inspection and copying.

(r) Drafts, notes, recommendations and memoranda pertaining to the financing and marketing transactions of the public body. The records of ownership, registration, transfer, and exchange of municipal debt obligations, and of persons to whom payment with respect to these obligations is made.

(s) The records, documents and information relating to real estate purchase negotiations until those negotiations have been completed or otherwise terminated. With regard to a parcel involved in a pending or actually and reasonably contemplated eminent domain proceeding under Article VII of the Code of Civil Procedure, records, documents and information relating to that parcel shall be exempt except as may be allowed under discovery rules adopted by the Illinois Supreme Court. The records, documents and information relating to a real estate sale shall be exempt until a sale is consummated.

(t) Any and all proprietary information and records related to the operation of an intergovernmental risk management association or self-insurance pool or jointly self-administered health and accident cooperative or pool.

(u) Information concerning a university's adjudication of student or employee grievance or disciplinary cases, to the extent that disclosure would reveal the identity of the student or employee and information concerning any public body's adjudication of student or employee grievances or disciplinary cases, except for the final outcome of the cases.

(v) Course materials or research materials used by faculty members.

(w) Information related solely to the internal personnel rules and practices of a public body.

(x) Information contained in or related to examination, operating, or condition reports prepared by, on behalf of, or for the use of a public body responsible for the regulation or supervision of financial institutions or insurance companies, unless disclosure is otherwise required by State law.

(y) Information the disclosure of which is restricted under Section 5-108 of the Public Utilities Act.

(z) Manuals or instruction to staff that relate to establishment or collection of liability for any State tax or that relate to investigations by a public body to determine violation of any criminal law.

(aa) Applications, related documents, and medical records received by the Experimental Organ Transplantation Procedures Board and any and all documents or other records prepared by the Experimental Organ Transplantation Procedures Board or its staff relating to applications it has received.

(bb) Insurance or self insurance (including any intergovernmental risk management association or self insurance pool) claims, loss or risk management information, records, data, advice or communications.

(cc) Information and records held by the Department of Public Health and its authorized representatives relating to known or suspected cases of sexually transmissible disease or any information the disclosure of which is restricted under the Illinois Sexually Transmissible Disease Control Act.

(dd) Information the disclosure of which is exempted under Section 30 of the Radon Industry Licensing Act.

(ee) Firm performance evaluations under Section 55 of the Architectural, Engineering, and Land Surveying Qualifications Based Selection Act.

(ff) Security portions of system safety program plans, investigation reports, surveys, schedules, lists, data, or information compiled, collected, or prepared by or for the Regional Transportation Authority under Section 2.11 of the Regional Transportation Authority Act or the St. Clair County Transit District under the Bi-State Transit Safety Act.

(gg) Information the disclosure of which is restricted and exempted under Section 50 of the Illinois Prepaid Tuition Act.

(hh) Information the disclosure of which is exempted under the State Officials and Employees Ethics Act.

(ii) Beginning July 1, 1999, information that would disclose or might lead to the disclosure of secret or confidential information, codes, algorithms, programs, or private keys intended to be used to create electronic or digital signatures under the Electronic Commerce Security Act.

(jj) Information contained in a local emergency energy plan submitted to a municipality in accordance with a local emergency energy plan ordinance that is adopted under Section 11-21.5-5 of the Illinois Municipal Code.

(kk) Information and data concerning the distribution of surcharge moneys collected and remitted by wireless carriers under the Wireless Emergency Telephone Safety Act.

(ll) Vulnerability assessments, security measures, and response policies or plans that are designed to identify, prevent, or respond to potential attacks upon a community's population or systems, facilities, or installations, the destruction or contamination of which would constitute a clear and present danger to the health or safety of the community, but only to the extent that disclosure could reasonably be expected to jeopardize the effectiveness of the measures or the safety of the personnel who implement them or the public. Information exempt under this item may include such things as details pertaining to the mobilization or deployment of personnel or equipment, to the operation of communication systems or protocols, or to tactical operations.

(mm) Maps and other records regarding the location or security of a utility's generation, transmission, distribution, storage, gathering, treatment, or switching facilities.

(nn) Law enforcement officer identification information or driver identification information compiled by a law enforcement agency or the Department of Transportation under Section 11-212 of the Illinois Vehicle Code.

(oo) Records and information provided to a residential health care facility resident sexual assault and death review team or the Residential Health Care Facility Resident Sexual Assault and Death Review Teams Executive Council under the Residential Health Care Facility Resident Sexual Assault and Death Review Team Act.

(pp) Information the disclosure of which is exempted under the Viatical and Life Settlements Act of 2005.

(2) This Section does not authorize withholding of information or limit the availability of records to the public, except as stated in this Section or otherwise provided in this Act.

(Source: P.A. 92-16, eff. 6-28-01; 92-241, eff. 8-3-01; 92-281, eff. 8-7-01; 92-645, eff. 7-11-02; 92-651, eff. 7-11-02; 93-43, eff. 7-1-03; 93-209, eff. 7-18-03; 93-237, eff. 7-22-03; 93-325, eff. 7-23-03, 93-422, eff. 8-5-03; 93-577, eff. 8-21-03; 93-617, eff. 12-9-03.)

Section 910. The Illinois Securities Law of 1953 is amended by changing Section 2.1 and by adding Section 2.33 as follows:

(815 ILCS 5/2.1) (from Ch. 121 1/2, par. 137.2-1)

Sec. 2.1. Security. "Security" means any note, stock, treasury stock, bond, debenture, evidence of indebtedness, certificate of interest or participation in any profit-sharing agreement, collateral-trust certificate, preorganization certificate or subscription, transferable share, investment contract, viatical investment, investment fund share, face-amount certificate, voting-trust certificate, certificate of deposit for a security, fractional undivided interest in oil, gas or other mineral lease, right or royalty, any put, call, straddle, option, or privilege on any security, certificate of deposit, or group or index of securities (including any interest therein or based on the value thereof), or any put, call, straddle, option, or privilege entered into, relating to foreign currency, or, in general, any interest or instrument commonly known as a "security", or any certificate of interest or participation in, temporary or interim certificate for, receipt for, guarantee of, or warrant or right to subscribe to or purchase, any of the foregoing. "Security" does not mean a mineral investment contract or a mineral deferred delivery contract; provided, however, the Department shall have the authority to regulate these contracts as hereinafter provided.

(Source: P.A. 92-308, eff. 1-1-02; 93-927, eff. 8-12-04.)

(815 ILCS 5/2.33 new)

Sec. 2.33. Viatical investment. "Viatical investment" means the contractual right to receive any portion of the death benefit or ownership of a life insurance policy or certificate for consideration that is less than the expected death benefit of the life insurance policy or certificate. "Viatical investment" does not include:

(1) any transaction between a viator and a viatical settlement provider as defined in the Viatical and Life Settlements Act of 2005;

(2) any transfer of ownership or beneficial interest in a life insurance policy from a viatical settlement provider to another viatical settlement provider, as defined in the Viatical and Life Settlements Act of 2005, or to any legal entity formed solely for the purpose of holding ownership or beneficial interest in a life insurance policy or policies;

(3) the bona fide assignment of a life insurance policy to a bank, savings bank, savings and loan association, credit union, or other licensed lending institution as collateral for a loan; or

(4) the exercise of accelerated benefits pursuant to the terms of a life insurance policy issued in accordance with the Illinois Insurance Code.

Section 997. Severability. The provisions of this Act are severable under Section 1.31 of the Statute on Statutes.

Section 999. Effective date. This Act takes effect upon becoming law.".