Ex-LPL Broker Suspended for Selling “Life-Settlement” Insurance Investment
A former bank-based broker affiliated with LPL Financial has been suspended for 14 months by the Financial Industry Regulatory Authority for selling a private securities transaction without the firm’s permission and for violating its particular policy prohibiting brokers from offering life or viatical settlements.
Scott Klor, who was a registered rep from 1994 until he was terminated by LPL in 2017, raised $1.4 million from five people in 2012 to form a partnership that bought a variable life insurance policy from a terminally ill individual, according to a settlement letter that Finra published on Thursday.
The investors, two of whom were brokerage customers, each lost over $200,000 because the premiums they paid overshadowed the death benefit they collected after the former policyholder died in 2017.
“Klor communicated with potential investors regarding the policy, assisted in making sales presentations regarding the proposed viatical settlements, and consulted with professionals regarding the formation of the LLC,” the settlement document said, and worked at a bank that loaned the partnership the $2 million to buy the policy. In return for his work, he received a 4% interest in the partnership.
In addition to suspending Klor, Finra fined him $5,000 for participating in a private securities transaction without receiving written permission and for violating its catch-all Rule 2010 requiring brokers to observe high standards of commercial honor. “Regardless of whether notice was provided,” Finra regulators wrote, “the firm’s policies prohibited registered representatives from participating in the offer of life or viatical settlements.
Klor used his firm email account to communicate with investors, but for three consecutive years wrote “no” to compliance questionnaires asking specifically whether he participated in viatical settlements and joint ventures involving pooling of investor funds.
Klor, who is not currently registered as a broker, did not return a request for comment. An LPL spokesman did not return a request for comment on whether it has reached out to any of Klor’s customers who participated in the offering.
Klor first registered as a representative with Commerce Brokerage Services in 1994, shifted to Primevest Financial Services in 2004 and affiliated with LPL predecessor UVEST Financial Services Group in 2005, according to BrokerCheck.
A year before he was fired, Klor attended LPL’s Private Wealth Symposium for “top LPL financial advisors serving affluent families and institutional clients,” according to a press release from Business FIrst Bank, a Baton Rouge, La.-based bank.