TOPEKA — Democratic Sen. Tom Holland requested state banking regulators immediately suspend operations of a company unique to Kansas and established to provide wealthy individuals an opportunity to secure loans against assets not easily converted to cash.
Holland’s plea could fall on deaf ears because legislation creating the foundation of Dallas-based Beneficient’s business model in Kansas was endorsed last year by Gov. Laura Kelly and nearly all members of the Kansas Legislature. In the 2022 session, House and Senate members again voted to build upon the state’s relationship with Beneficient.
The State Banking Commission also received part of $1 million from the state-chartered Beneficient to craft rules and regulations serving as guardrails against financial misconduct at Beneficient’s so-called TEFFI or Technology Enabled Fiduciary Financial Institution. TEFFI’s are a specialized trust company and offer services typically reserved for larg institutional investors.
“I am requesting that your office immediately order Beneficient to suspend operations,” Holland said. “Additionally, I am also requesting that a joint investigation including the Kansas Securities Commission, the Kansas Bureau of Investigation and your office be conducted.”
Holland said the inquiry should include Beneficient and GWG Holdings, which was Beneficient’s parent company during the state-required pilot program for the TIFFI. GWG Holdings and company officials are accused in a federal lawsuit of misleading investors and selling hundreds of millions of dollars in bonds now viewed as “worthless” in terms of market value.
GWG Holdings also has been grappling with an investigation by the U.S. Securities and Exchange Commission.
GWG Holdings controlled Beneficient until November. In December, Beneficient completed the pilot program required in state law and began operations in service of investors seeking liquidity, custody and trustee management of investments.
In the letter sent Friday to state banking officials, Holland referenced reporting by The Kansas City Star that raised questions about the broad influence Beneficient executives had on details of the state’s regulatory approach to TEFFIs. The article pointed to a flurry of campaign contributions to Kelly, Attorney General Derek Schmidt and legislators tied to formation of the TEFFI.
“I also have a number of questions about the appearance of excessive influence Beneficient and or the Kansas Legislature may have had with your office in establishing regulations of the TEFFI financial tool,” Holland said.
Rep. Stephen Owens, a Hesston Republican and a vocal advocate of the TEFFI experiment, said the evolution of state banking law could transform Kansas into an investment magnet in the way South Dakota developed its economy through credit card banking and Utah responded to demand for industrial loan …….