The Springfield Journal-Register reported last week on the latest lawsuit to hit Merrill Lynch, the IFDA and the law firm that represented the Association.
One aspect of the lawsuit focuses upon the claim that the key man insurance policies sold to the master trust were not suitable investments. Without an insurable interest, the policies could not provide the tax consequences sought for participating funeral homes. Piercing through the “it’s an insurance policy argument”, the allegations are directed at whether Merrill Lynch has violated securities laws. With the implication of securities laws, the Illinois Secretary of State’s jurisdiction has been triggered.
The article also reports on the lawsuit’s allegations against the law firm that represented the IFDA. Concerns over the investments date back to 1987 (which coincides with the issuance of Rev. Rul. 87-127), when the lawyers sought regulatory approval of the plan. While that approval was never provided, the IFDA moved forward, and the law firm is now being blamed for ‘giving the green light’.