WACO, Texas ( TheStreet) -- Life Partners Holdings ( LPHI) warned Friday it could face civil charges from the Securities and Exchange Commission.

Life Partners disclosed that it received a Wells notice from the SEC on Monday saying SEC staff would recommend civil charges against the company, as well as its CEO, Brian D. Pardo, and its general counsel, R. Scott Peden.

The Waco, Texas-based company purchases life insurance policies at a discount from individuals and then sells them to investors.

The charges are related to what the company knew -- and what it disclosed to investors -- about the accuracy of life expectancies of people whose insurance policies Life Partners purchased.

Life Partners said Friday it has been cooperating with the SEC investigation.

Wells notices are not formal allegations of wrongdoing but advise companies of actions the SEC is considering. Following the receipt a Wells notice, a company is allowed to present its position to the SEC before the commission decides whether to take formal action.

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Life Partners first disclosed it was the subject of an SEC investigation in January, following reporting by The Wall Street Journal that questioned how the company calculated life expectancies on the insurance policies it purchased.

The calculations are crucial to the investors who purchase the policies from Life Partners, because they can affect investors' total payout.

Shares of Life Partners fell $1.42, or 20.2%, Friday to $5.62 on news of the Wells notice.
This article was written by a staff member of TheStreet.