Life Partners Holdings Inc. (LPHI) on Monday disclosed it
received an amended notice from the Securities and Exchange
Commission that the agency's staff will recommend civil action
against the company and three of its officers.
Last month, Life Partners had disclosed it received a so-called
Wells notice from the SEC stating that the staff would recommend
civil action against the company and two executives -- Chief
Executive Brian D. Pardo and General Counsel R. Scott Peden. The
expanded Wells notice includes Chief Financial Officer David M.
Martin.
Shares of Life Partners, which participates in the secondary
market for life insurance, slid as low as 3.6% to $3.76 in
after-hours trading, but were recently even at $3.90.
The company has said the potential SEC action concerns the
accuracy of a key part of the investment equation for its retail
investors: the company's estimates of the life expectancies of
those whose policies they were buying. The shorter the estimated
life expectancy of the insured person, the more money the retail
investors could expect to make.
On Monday, Life Partners disclose the expanded notice also
includes allegations about the disclosures regarding some
accounting policies and practices, including revenue recognition,
impairments of settlements held by the company for investment, and
the stated policy for premium advances Life Partners might make on
some client policies.
A Wells notice gives potential targets of SEC action time to
present a counterargument before any final SEC decision is
made.
-By John Kell, Dow Jones Newswires; 212-416-2480;
john.kell@dowjones.com