Fifth Circuit: Life Settlements May Qualify as Investment Securities

To raise capital toward the development of a prototype aircraft and to purchase a competing aircraft manufacturer, Kestral Aircraft Co. (Kestral) entered into an agreement with Living Benefits Asset Management, LLC, (Living Benefits) to purchase and sell life settlements. Kestral never raised the funds he’d hoped to raise and never purchased any life settlements. When Living Benefits filed for Chapter 11 bankruptcy, it sued Kestral for amounts owed under the agreement. The bankruptcy court and district court found Living Benefits never registered as an investment adviser rendering the engagement letter with Kestral voidable. Find out why the Fifth Circuit Court of Appeals agreed.