Final answer:
Viatical and Life Settlements are regulated by both federal laws, which include tax implications and reporting requirements, and state laws, which may include licensing, consumer disclosures, and policyholder protections.
Step-by-step explanation:
Viatical and Life Settlements are complex financial transactions involving the sale of a life insurance policy by the policyholder to a third party for more than the policy's cash surrender value but less than its net death benefit. The correct answer to your question is that Viatical and Life Settlements are regulated by both federal and state laws. At the federal level, there are tax implications and reporting requirements dictated by the IRS. At the state level, regulations can vary widely but typically involve licensing of life settlement providers, consumer disclosure requirements, and provisions for policyholder protections. It is vital for participants in such settlements to adhere to these regulations to ensure the legality and ethical execution of the transaction.