Portland insurance agent not licensed to sell “death futures”

safeA Portland insurance agent who solicited business at a “senior financial workshop” promising a free meal recently made restitution of $35,000 to a 77-year-old client he convinced to invest in life insurance policies.

Oregon law considers this type of investment, known as a life settlement, a security or investment contract under Oregon law. The agent, James Walter Malanowski, wasn’t licensed with the state to sell securities and restitution resulted from the state’s investigation.

Life settlements are transactions where companies buy life insurance policies from people and then sell shares of the future death benefit to investors. Investors gamble that they will earn a profit when the person dies and they get their share of the death benefit.

Because the success of the investment hinges on the accuracy of life expectancy projections, they are sometimes called “death futures.”

“These long-term investments are rarely appropriate for seniors because they can’t quickly access their money,” said David Tatman, administrator of the Division of Finance and Corporate Securities.

The division, which is part of the Oregon Department of Consumer and Business Services, regulates securities.

In addition to being unlicensed, the investment wasn’t registered with the division. Registration ensures that investors get information about potential risks.

Malanowski met the victim at a February 2011 workshop, where he was promoting the sale of life settlements. The client later bought shares in three life insurance policies. When the victim learned that the investment was both inappropriate for him and unregistered, and that Malanowski wasn’t properly licensed, he complained to the division.

As a result of the state investigation, Malanowski made restitution to the victim and paid $1,000 into a Consumer Protection Trust Fund the division uses to educate Oregon consumers about financial and investment topics. The division also fined Malanowski $4,000 for being unlicensed and for selling an unregistered security. The Insurance Division worked with the Division of Finance and Corporate Securities in investigating Malanowski, and decided not to impose additional penalties.