The Ninth Circuit heard arguments on Friday from agents involved in selling fractionalized interests in life insurance policies for Pacific West Capital Group. These agents are challenging a district court decision that mandates the repayment of commissions earned from the sale of life settlements, arguing that these transactions do not qualify as investment contracts under securities law.
This long-standing case, brought by the U.S. Securities and Exchange Commission (SEC), stems from a 2018 settlement in which Pacific West Capital Group agreed to disgorge $57.4 million in profits and pay $6.3 million in prejudgment interest. This settlement followed claims that the company defrauded investors by selling fractionalized interests in universal life insurance policies. The SEC filed additional claims against Pacific West’s sales agents, leading to a ruling that found the agents violated securities and broker-dealer requirements. The key question in the case is whether the insurance policy deals in question qualify as investment contracts under the U.S. Supreme Court’s Howey test, which defines securities.
