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Consumer Alert:

08/05/2013

Florida Attorney General, Chief Financial Officer and Office of Financial Regulation Warn Floridians to Be Wary of Buying or Selling Pensions

 

 

Florida Attorney General, Chief Financial Officer and Office of Financial Regulation Warn Floridians to Be Wary of Buying or Selling Pensions
TALLAHASSEE, Fla. (August 5, 2013) – Florida Attorney General, Pam Bondi, Florida Chief Financial Officer, Jeff Atwater and the Florida Office of Financial Regulation (OFR) Commissioner, Drew J. Breakspear, want to caution Floridians about buying or selling pension or settlement income streams. The U.S. Securities and Exchange Commission (SEC) and the Financial Industry Regulatory Authority (FINRA) recently issued an Investor Alert warning consumers about buying and selling pension or settlement income streams.
 
Persons receiving monthly pensions, including military and government retirees, as well as citizens who have received a large settlement such as a personal injury lawsuit  may be targeted by salespeople offering an immediate lump sum in exchange for rights to some or all payments of a pension or settlement. In most cases, this payout will be drastically lower than the value of the future income stream.
 
"I urge Floridians to use great caution when buying or selling their pensions or settlement income streams. In many cases, it may seem like a great deal to receive a lump sum now; however, that decision today could have dire financial consequences down the road. You may end up receiving money today that is significantly less than if you continued to receive your scheduled payments," said Florida Attorney General Pam Bondi.
 
“Floridians considering whether to buy or sell a pension or settlement income stream must do their research and be wary of questionable promises that might ultimately be detrimental to their financial future,” said CFO Atwater. “I appreciate the efforts of the Attorney General’s Office and the Office of Financial Regulation, as well as the efforts of others like Representatives Pafford and Fasano, who are helping us educate Floridians about this scheme and why its short term benefit often fails to outweigh its long term cost.”

“Seventeen percent of Florida’s population is over 65 years old and many are dependent upon monthly pension payments,” said OFR Commissioner Breakspear. “It is our responsibility to protect Floridians using the financial services industry and ensure those selling securities are acting in the best interest of their clients.”
 
The Investor Alert issued by the SEC and FINRA recommends that consumers ask themselves the following questions before selling their income streams.

• Is the transaction legal?  Some laws prohibit or restrict the assignment of pensions.

• Is the transaction worth the cost? If you are in need of instant income, compare the discounted rate from selling your pension  versus taking out a bank loan.

• What is the reputation of the company offering the lump sum?  Ensure that you are working with registered individuals and entities.

• Will the purchaser require you to buy life insurance?  The additional life insurance may increase your costs.
• What are the tax consequences?  The lump-sum payment you collect may be taxable.
 
Those looking to buy pensions or structured settlement income streams should be cautious as well.  These products may or may not be considered securities and are often not registered with the SEC or state securities regulators, thus making reliable information difficult to find should an investment not go as planned. Further, if the income stream is not assignable, your “rights” to the income stream may not be valid and you may have difficulty enforcing a claim against the seller. Also, investors may pay commissions of seven percent or higher on the full value of the pension or structured settlement even though returns on these investments are not without risk. 
 
Floridians who suspect questionable practices should contact the OFR to file a complaint. Consumers can file a complaint online at www.FLOFR.com or call the OFR at (850) 487-9687.
 
Individuals providing investment advice or those who sell securities in Florida are required to be registered with the OFR.
Before selling your rights or investing in someone else’s pension income, visit www.FLOFR.com, click on “Verify a License,” then select BrokerCheck or IAPD to obtain a detailed report of the  offeror’s registration information and any disclosure events.  In addition, check with your local Better Business Bureau to ensure the company has not received any complaints.
 
For more information, contact the OFR Office of Communications:
                                 
Tiffany Vause 
(850) 410-9709
Katie Norris
(850) 410-9826
Katie.Norris@flofr.com