Finra fines former LPL rep $5,000 over viatical sale

LPL terminated Scott Klor in 2017 for violating firm policies

Apr 5, 2019 @ 1:18 pm

By InvestmentNews

The Financial Industry Regulatory Authority Inc. has fined Scott Klor, a former registered representative who had been affiliated with LPL Financial, $5,000 and suspended him for 14 months for his involvement in a lie insurance scheme not disclosed to LPL.

(More: Texas adviser barred for fraudulent sales of life settlements)

Finra said that Mr. Klor, who is no longer affiliated with a securities firm, participated in a private-securities transaction by soliciting investors to purchase a variable life insurance policy through a specially-formed LLC for approximately $1.4 million. For his participation in this transaction, Mr. Klor received a 4% interest in the LLC.

Mr. Klor failed to notify LPL of his participation in the transaction as required by regulation, Finra said.

LPL terminated Mr. Klor on May 9, 2017, saying that Mr. Klor violated firm policy regarding private securities transactions.

Finra said that in late 2012, Mr. Klor solicited investors to purchase a variable life insurance policy on the life of an elderly individual with a terminal illness. The transaction was structured as a viatical settlement, in which investors purchased the life insurance policy for an amount that exceeded the policy's surrender value but was less than the expected death benefit. With Mr. Klor's assistance, Finra said, the investors formed a limited liability company to purchase the policy for approximately $1.4 million.

(More: Investors denied judgment in failed viatical scheme)

For several years, while the insured remained alive, the LLC made quarterly premium payments on the policy and interest payments on the loan. When the insured passed away in August 2017 the death benefit on the policy was worth less than the total amount invested, and each of the five majority members of the LLC lost over $200,000.

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