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Annuity contracts are usually assignable by the annuitant pursuant to the terms of the underlying annuity contract.
Providers of annuities will acknowledge in writing an annuitant’s sale of an annuity to a purchaser and redirect payments under
such annuity to such purchaser. Under the law of many states, annuities are excluded from the scope of Article 9 of the UCC and
therefore the UCC concept of “perfection” may not apply with respect to such assignments although a precautionary UCC-1
financing statement can be filed against the annuitant. Additionally, the procurement of an annuity contract with the intent to assign
it is restricted under the law of many states. In light of such regulations, it is often necessary to wait to purchase annuity payments
streams for at least six months after the issuance of the related annuity contract or seek satisfactory documentation confirming
that the annuitant (or, if applicable, its predecessor in interest) did not procure the annuity contract with the intention to assign it.
In addition, under the law of certain states, contestability or rescission periods apply to the assignment of annuities.
Federal Regulations
Title X of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, or Dodd-Frank, or the Dodd-Frank
Act establishes the Consumer Financial Protection Bureau, or CFPB, which has regulatory, supervisory and enforcement powers
over providers of consumer financial products and services. Included in the powers afforded to the CFPB is the authority to adopt
rules identifying specified acts and practices as being “unfair,” “deceptive” or “abusive,” and hence unlawful. The CFPB could
adopt rules imposing new and potentially burdensome requirements and limitations with respect to our lines of business.
In addition to Dodd-Frank’s grant of regulatory powers to the CFPB, Dodd-Frank gives the CFPB authority to pursue
administrative proceedings or litigation for violations of federal consumer financial laws. In these proceedings, the CFPB can
obtain cease and desist orders (which can include orders for restitution, reformation or rescission of contracts, payment of damages,
refund or disgorgement, as well as other kinds of affirmative relief) and civil monetary penalties ranging from $5,000 per day for
violations of federal consumer financial laws (including the CFPB’s own rules) to $25,000 per day for reckless violations and $1
million per day for knowing violations. Also, where a company has violated Title X of Dodd-Frank or CFPB regulations under
Title X, Dodd-Frank empowers state attorneys general and state regulators to bring civil actions for the kind of cease and desist
orders available to the CFPB. In March 2014, the Company and certain of its affiliates were served with Civil Investigative
Demands, or CIDs, from the CFPB. The CIDs requested various information and documents for the purpose of determining the
Company’s compliance with Sections 1031 and 1036 of the Consumer Financial ProtectionAct of 2010, 12 U.S.C. §§ 5531, 5536;
the Truth in Lending Act, 15 U.S.C. §§ 1601 et seq., or its implementing regulations, and other Federal-consumer financial laws.
The CIDs were designed to broadly solicit general information about the Company and its business. We believe that the Company’s
practices are fully compliant with applicable law, and we have cooperated with the CFPB.
On March 29, 2011, the Office of the Comptroller of the Currency, the Treasury, the Board of Governors of the Federal
Reserve System, the Federal Deposit Insurance Corporation, the Securities and Exchange Commission, the Federal Housing
Finance Agency and Department of Housing and Urban Development issued a joint notice of proposed rulemaking proposing
rules to implement the credit risk retention requirements of section 15G of the Exchange Act, as amended by Section 941 of the
Dodd-Frank Act. The Dodd-Frank Act provides that the sponsor or an affiliate of the sponsor must retain at least 5% of the credit
risk of any asset pool that is securitized. These federal regulators jointly re-proposed this rule on August 28, 2013. It remains
unclear what requirements will be included in the final rule.
Federal anti-money-laundering laws make it a criminal offense to own or operate a money transmitting business without
the appropriate state licenses and registration with the U.S. Department of the Treasury’s Financial Crimes Enforcement Network
or FinCEN. In addition, the USAPATRIOTAct of 2001 and the Treasury Department’s implementing federal regulations requires
“financial institutions” to establish and maintain an anti-money-laundering program. Such a program must include: (i) internal
policies, procedures and controls designed to identify and report money laundering; (ii) a designated compliance officer; (iii) an
ongoing employee-training program; and (iv) an independent audit function to test the program. Because of our compliance with
other federal regulations having essentially a similar purpose, we do not believe compliance with these requirements has had or
will have any material impact on our operations.
In addition, federal regulations require us to report suspicious transactions involving at least $2,000 to FinCEN. The
regulations generally describe three classes of reportable suspicious transactions—one or more related transactions that the money
services business knows, suspects, or has reason to suspect (i) involve funds derived from illegal activity or are intended to hide
or disguise such funds, (ii) are designed to evade the requirements of the Bank Secrecy Act, or (iii) appear to serve no business
or lawful purpose.
In connection with its administration and enforcement of economic and trade sanctions based on U.S. foreign policy and
national security goals, the Treasury Department’s Office of Foreign Assets Control, or OFAC, publishes a list of individuals and
companies owned or controlled by, or acting for or on behalf of, targeted countries. It also lists individuals, groups, and entities,
such as terrorists and narcotics traffickers, designated under programs that are not country-specific. Collectively, such individuals
