The Six-Feet Over/Under

"The key thing is we certainly do disclose,'' says Elliot Holtz, a National Financial executive vice president for marketing. "It is really about getting the best sale for the client in a highly competitive market.''

Abacus CEO Seitel says the relationship is "not an issue,'' noting that it's fully disclosed in contracts. He says Advanced accounts for between 15% and 20% of the policies Abacus purchases.

"It provides me with a good relationship with a broker," says Seitel. "I get a good look at the Advanced cases, but I have to compete like everyone else. I have to show I have the highest bid from my investors.''

But the potential for a conflict of interest is of concern to an industry that's seen as less-than-savory by many on Wall Street and in the regulatory community. Industry sources note that life-settlement contracts are often lengthy documents, and the disclosure statements in the Advanced and Abacus documents might not mean much to some sellers, particularly unsophisticated ones.

A recently adopted Maryland law, for instance, makes it clear that the prime responsibility of a life-settlements broker lies with the seller of a policy. The law, which goes into effect next month, also bars brokers, in some situations, from having a financial interest in a company that's buying a life-settlements policy.

It's not certain what, if any, impact the new Maryland law would have on Advanced. But Todd Cioni, Maryland's associate insurance commissioner, says the law's clear intent is to limit potential conflicts and encourage fuller and complete disclosure by brokers.

"This industry is in its infancy, and we don't think people understand who all the parties and players are,'' says Cioni.

Meanwhile, New York Attorney General Eliot Spitzer, who two years ago went after the insurance industry over allegations that brokers received kickbacks for steering commercial insurance policies to certain underwriters, has opened an investigation into the life-settlement business. National Financial, a conglomeration of dozens of financial services firms, is one of the companies Spitzer's office recently served with a subpoena.

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