Code of Ethics Enforcement Procedures
A. Background and Purposes
The principal purposes of the Life Insurance Settlement Association’s (“LISA”) Code of Ethics (the “Code”) and Standards of Professional Conduct (the “Standards”) (hereinafter referred to collectively as the “Code and Ethics Standards”) are to promote responsible, professional and ethical behavior by LISA’s members (each, a “Member”), to help protect the public and to reinforce the public’s confidence in the life insurance settlement industry.
This document articulates the enforcement procedures (the “Enforcement Procedures”) that are followed by LISA’s Board of Directors (the “Board”) as it carries out its duties to enforce the Code and Ethics Standards. A major goal of these Enforcement Procedures is to ensure objectivity and fundamental fairness to all individuals who may be parties to a complaint arising under the Code and Ethics Standards. LISA holds its Members accountable to the Code and Ethics Standards and is intolerant of practices that threaten the integrity and reputation of the life settlements industry.
The Enforcement Procedures are used to help ensure compliance with the Code and Ethics Standards, which represent the values and principles that members of the life settlement industry profession have identified as important. Acceptance of LISA membership commits individuals to adherence to the Code and Ethics Standards and cooperation with its Enforcement Procedures by both the business entity and all individuals employed thereby.
These Enforcement Procedures are established and maintained by the Board, and the LISA Governance Committee appointed by the Board is tasked with keeping these Enforcement Procedures up to date.
B. Possible Disciplinary Actions/Sanctions
If, pursuant to the procedures set forth herein, the Board determines that conduct proscribed by this Code and Ethics Standards has occurred, the Board may impose sanctions, including reprimand, censure, probation (with terms), suspension, or permanent revocation of LISA membership. In all cases, except those involving only reprimand, the Board will report the conclusions and sanctions to LISA’s membership. Sanctions which can be imposed by the Board include, but are not limited to, one or a combination of the following:
(1) Reprimand—A formal expression of disapproval of conduct communicated privately by the Board to the pertinent Member.
(2) Censure—A formal expression of disapproval that is public.
(3) Probation of Membership Subject to Terms—Failure to meet terms will subject a LISA member to any of the disciplinary actions or sanctions.
(4) Restrictions on Use of Marks— Restrictions on utilization of LISA marks and/or publicizing the Member’s association with LISA.
(5) Suspension—Suspension of LISA membership for a specified period of time.
(6) Revocation—Revocation of LISA membership.
(7) Additional Sanctions—Any additional sanction the Board determines is appropriate taking into consideration the facts and circumstances of each particular situation.
C. Lodging a Complaint.
Complaints may be lodged under the Code and Ethics Standard as follows:
(1) Any individual may lodge a complaint concerning possible violation of the Code and Ethics Standards (a “Complaint”), whether or not the individual or entity is a member of LISA. A Complaint must be in writing, preferably on LISA’s form, “Complaint of Ethics Standards Violation.” A Complaint must include the name, position, address, telephone number and signature of the author of the Complaint and a statement of the Code and Ethics and Standards sections alleged to have been violated. Complaints will be logged by LISA staff and forwarded to President and CEO of LISA and the chair of the LISA’s
Governance Committee.
(2) These Enforcement Procedures are not a substitute for a court of law. The Board may, in its discretion, defer any action on a Complaint if a legal proceeding has commenced or is pending with regard to the subject matter of a Complaint, or for other exigent circumstances.
D. Investigation or Rejection of Complaint
(1) Within thirty (30) calendar days of receipt of a Complaint, the Governance Committee must determine whether the Complaint against the Member: (x) alleges a violation of the Code and Ethics Standards and (y) contains sufficient and reliable information and is not patently frivolous or inconsequential so as to warrant initiation of steps to determine factual sufficiency for a hearing.
(2) If, by a simple majority vote, the disinterested members (“disinterested” meaning no significant business or personal relationships with the Member who is the subject of the Complaint) of the Governance Committee determine that a Complaint satisfies the criteria above, they will refer the matter for investigation pursuant to these Enforcement Procedures.
(3) If, by a simple majority vote, the disinterested members of the Governance Committee determine that a Complaint does not satisfy the criteria above, they may recommend to the Board that the Complaint be dismissed as without merit. If the Board approves such dismissal, it shall authorize the Governance Committee to notify the complainant of this decision.
(4) If the Governance Committee determines that a Complaint warrants investigation pursuant to D(2) above, the Governance Committee shall promptly:
(a) Provide the Member against whom the Complaint was filed copies of LISA’s Code and Ethics Standards, these Enforcement Procedures and written notification (a “Notification”) stating that an investigation is to be conducted.
The Notification shall summarize the issues raised in the Complaint and notify the Member that the Member may submit a response and supporting documentation to the Governance Committee; and
(b) Notify, in writing, the complainant that the Complaint has been received and indicating the status of the Complaint; and
All material gathered by LISA in the course of any investigation or hearing conducted under these Enforcement Procedures, including but not limited to information submitted by a complainant and the Member against whom a Complaint has been lodged, will be the property of LISA.
E. Investigation Hearing Panels
(1) Appointment of Investigation and Hearing Panels. Upon delivery of a Notification pursuant to Section D(4)(a) above, the Board shall appoint an investigation and hearing panel (a “Panel”) composed of three (3) disinterested (“disinterested” meaning no significant business or personal relationships with the Member who is the subject of the Complaint) members of LISA, one (1) of whom shall be a member of the Governance Committee. For the avoidance of doubt, disinterested members of the Board are eligible to serve on a Panel.
(2) Quorum. The three (3) members of a Panel shall constitute a quorum. A Panel shall act only with the concurrence of two members of such Panel. When appointed, the Board shall designate one of the Panel members as the Chair of such Panel.
(3)Powers and Duties of Panels. Panels shall have the power and duty to: (a) investigate the allegations in a Complaint via such means as they deem necessary, including, but limited to: (i) the submission of written queries to parties to a Complaint, (ii) interviews (in person or by telephone) of person with knowledge of matters alleged in a Complaint, and (iii) to conduct hearings into allegations contained in a Complaint; and (b) to submit to the Board findings of fact, conclusions, and recommendations, together with the record of any hearing that has occurred in relation to the Complaint.
(4) Powers and Duties of Panel Chair. Each Panel Chair shall have the power and duty: (a) to conduct prehearing conferences; (b) to consider and decide prehearing motions and procedural questions, and (c) to convene and conduct a hearing.
F. Hearings
(1) Nature of Proceedings. Panel hearing and proceedings under the Code and Standards are neither civil nor criminal in nature, but are private matters conducted pursuant to the terms of these Enforcement Procedures.
(2) Proceedings Not Governed by Rules of Civil Procedure and Evidence. These proceedings are meant to be informal and, except as expressly set forth herein, shall not be governed by the rules of civil procedure of any state or federal court or rules of evidence. Questions of procedure and evidence shall be decided by the hearing Panel.
(3) Standard of Proof. Charges of alleged violations of the Code and/or Standards shall be established by clear and convincing evidence.
(4) Burden of Proof. The burden of proof in proceedings seeking discipline or sanctions is on the complainant.
(5) Prehearing Conference. At the discretion of the Panel or upon request of either party, a conference may be ordered for the purpose of obtaining admissions or otherwise narrowing the issues presented by the Complaint or anticipated to be presented at the hearing. The conference shall be held before the Panel Chair or another member of the panel designated by the Chair.
(6) Hearings Recorded. Upon the request and at the expense of a party, a Panel shall allow the hearing to be recorded.
(7) Failure to Answer. Failure to answer charges made shall constitute an admission of the factual allegations.
(8) Failure to Appear. If a party should fail to appear when specifically so requested by the Panel or the Board, the party shall have been deemed to have admitted the factual allegations which were to be the subject of such appearance and/or a concession to any motion or recommendations to be considered at such appearance. The Panel or Board shall not, absent good cause, continue or delay proceedings due to a party’s failure to appear.
(9) Confidentiality. Prior to the imposition of sanctions by the Board, all proceedings for alleged violations of the Code and Ethics Standards shall be confidential within LISA, except that the pendency, subject matter, and status of an matter may be disclosed by LISA if: (a) the respondent Member has waived confidentiality; (b) the proceeding is based upon allegations that include either the conviction of a crime or discipline by a governmental agency with jurisdiction over the Member; (c) the proceeding is based upon allegations that have become generally known to the public; or (d) there is a need to notify another person or organization in order to protect the public or the administration of justice.
G. Grounds for Discipline; Sanctions
(1) Grounds for Discipline. It shall be a ground for discipline for a Member to: (a) violate the Code and Ethics Standards, or any other laws or rules of any jurisdiction regarding the life settlement industry; (b) willfully violate the Board’s decision to impose discipline; or (c) willfully fail to appear before a Panel.
(2) Potential Resolutions. Upon the conclusion of a hearing, a Panel may recommend to the Board: (a) that the matter be dismissed; (b) that the Board impose a sanction upon the Member; (c) the particular sanction, if one is recommended. Upon the recommendation of a Panel, the Board may: (a) dismiss the matter; or (b) impose a sanction upon the Member.
(3) Types of Sanctions. Sanctions include: (a) revocation of membership; (b) suspension of membership; (c) restrictions on utilization of LISA marks and/or publicizing the Member’s association with LISA; (d) probation; (e) reprimand or censure (which may be either public or private); (f) admonishment; and (g) any one or more or combination of the foregoing. Conditions may be attached to a probation, admonition, censure or reprimand. Failure to comply with such conditions shall be grounds for reconsideration of the matter and imposing additional sanctions against the Member.
(4)Factors to be Considered in Imposing Sanctions. In imposing a sanction, the Board shall consider the following factors: (a) whether the Member has violated a duty owed to a client, to the public or to the life settlement profession; (b) whether the Member acted intentionally, knowingly, or negligently; (c) the amount of the actual or potential injury caused by the Member’s actions or inactions; and (d) the existence of any aggravating or mitigating factors.
(5) Public Nature of Sanctions. Disposition of discipline of Members shall be public in cases of revocation or suspension of membership, probation, and reprimand.
H. Lifting Sanctions
(1) Generally. A Member whose membership is suspended for more than six months or whose membership is revoked shall be reinstated or readmitted only upon written decision of the Board. No Member may petition for reinstatement until the period of suspension has expired or in the case of revocation, until two (2) years after the effective date of revocation. Any other sanction, if necessary (e.g., restrictions on utilization of LISA marks) shall set forth the time at which the sanction shall be lifted or shall expire.
(2) Petition. A petition for the lifting of sanctions shall specify with particularity the manner in which the Member meets each of the criteria specified in paragraph 3 below or, if not, why there is good and sufficient reason for the lifting of sanctions. The Member petitioning for lifting of sanctions shall file a copy of the petition (which need not take any particular form) with the Board, which, if applicable, shall serve a copy upon the original complainant.
(3) Criteria for Lifting of Sanctions. A Member is eligible for consideration of the lifting of sanctions only if the Member meets each of the following criteria, or, if not, presents good and sufficient reason why the Member’s sanctions should nevertheless be lifted:
(a) The Member has fully complied with the terms and conditions of any prior sanction.
(b) The Member recognizes the wrongful and serious nature of the misconduct for which the sanction was imposed.
(c) The Member has not engaged in any other misconduct since imposition of the sanction that would itself constitute a violation of the Code and Ethics Standards.
(4) Review of Petition. Within thirty (30) days after receiving a Member’s petition for lifting of sanctions, the Board shall promptly refer the matter to a hearing panel in accordance with the procedures set forth in section F. above. Within sixty (60) days of appointment, the hearing panel shall conduct a hearing at which the Member shall have the burden of demonstrating by clear and convincing evidence that he or she has met each of the criteria in paragraph H(3) or, if not, that there is good and sufficient reason why the sanctions imposed upon the Member should nevertheless be lifted. The hearing panel shall file a report with the Board containing its findings and recommendations. The Board shall promptly review the report of the hearing panel and issue its decision. If the Board denies petition for lifting of sanctions, the Board shall issue a written opinion setting forth the ground for its decision and shall identify the period after which the Member may reapply. Generally, no Member should be permitted to reapply for lifting of sanctions within one year following an adverse judgment upon a petition for the lifting of same.
(5) Conditions on Lifting of Sanctions. The Board, in appropriate cases, may impose conditions on the lifting of sanctions upon a Member.
These procedures were approved and implemented by the Life Insurance Settlement Association’s Board of Directors on November 2, 2012.