Secondary Market Annuities

A Statement from Somerset Wealth Strategies, LLC

When you purchase an SMA that is a Factored Structured Settlement, (FSS) you are purchasing the rights to receive payments from a structured settlement that are funded by an annuity rather than the annuity itself. The entity that issues the annuity (and therefore responsible to make such payments) is usually a highly-rated insurance company. It is important to understand that while the payments are funded by annuities, FSS’s are not annuities.

While FSS’s have been safe and stable, there have recently been developments in the structured settlement industry that raise new risks which need to be considered, along with other factors described in this site, prior to purchasing a FSS. Specifically, the Attorney General of the State of Maryland has filed a lawsuit against a factoring company that originates FSS’s, the companies’ principals, and others associated with the company, to declare invalid certain court orders obtained in Maryland that approved the transfer of payments. The lawsuit alleges that a factoring company that purchased and resold the right to payments fraudulently misled annuitants who sold their rights to payments and the courts that approved the transfers, and did not follow the Maryland law that governs the sale of these rights to payments. In addition, court orders in other states have been attacked by litigious plaintiffs’ lawyers on behalf of sellers of payments who claim that their laws have been violated. Even law firms have been sued for fraudulently obtaining court orders. These lawsuits, if successful, could result in folks who purchased FSS’s not receiving all of the payments they purchased. While these actions are not wide-spread throughout the industry, in an abundance of caution, Somerset has decided, for the protection of purchasers of FSS’s, to suspend its FSS program until it is determined how the Maryland Attorney General and the other actions described above are resolved and what such resolution could mean for the future of FSS’s. Somerest intends to monitor these actions closely. In the meantime, Somerset will continue to educate investors on FSS’s so that in the event the suspension is lifted, they will have all of the information necessary regarding whether to decide to purchase FSS’s.

Even though we are suspending our FSS program, this site will describe and explain the ABCs of SMAs generally, and FSS’s specifically, as a service to our clients and others who may have an interest in these investments.