In re Health Insurance

 
 
 
UNITED STATES OF AMERICA 
Before the 
SECURITIES AND EXCHANGE COMMISSION 
 
SECURITIES ACT OF 1933 
Release No. 11084 / July 20, 2022 
 
SECURITIES EXCHANGE ACT OF 1934 
Release No. 95323 / July 20, 2022 
 
ADMINISTRATIVE PROCEEDING 
File No. 3-20932 
 
 
In the Matter of  
Health Insurance 
Innovations, Inc., now 
named Benefytt 
Technologies, Inc., and 
Gavin D. Southwell  
Respondents. 
ORDER 
INSTITUTING 
CEASE-AND-DESIST 
PROCEEDINGS, PURSUANT 
TO SECTION 8A OF THE 
SECURITIES ACT OF 1933 
AND SECTION 21C OF THE 
SECURITIES EXCHANGE 
ACT OF 1934, MAKING 
FINDINGS, AND 
IMPOSING A CEASE-AND- 
DESIST ORDER 
 
I. 
 
 The Securities and Exchange Commission (“Commission” or “SEC”) deems it appropriate 
that cease-and-desist proceedings be, and hereby are, instituted pursuant to Section 8A of the 
Securities Act of 1933 (“Securities Act”) and Section 21C of the Securities Exchange Act of 1934 
(“Exchange Act”) against Health Insurance Innovations, Inc., now named Benefytt 
Technologies, Inc. (“HII” or “Respondent”) and Gavin D. Southwell (“Southwell” or 
“Respondent”). 
II. 
 
In anticipation of the institution of these proceedings, Respondents have submitted Offers 
of Settlement (the “Offers”), which the Commission has determined to accept.  Solely for the 
purpose of these proceedings and any other proceedings brought by or on behalf of the 
Commission, or to which the Commission is a party, and without admitting or denying the 
findings herein, except as to the Commission’s jurisdiction over Respondents and the subject 
matter of these proceedings, which are admitted, and except as provided herein in Section V,  
Respondents consent to the entry of this Order Instituting Cease-and-Desist Proceedings Pursuant 
to Section 8A of the Securities Act of 1933 and Section 21C of the Securities Exchange Act of 

 
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1934, Making Findings, and Imposing a Cease-and-Desist Order (“Order”), as set forth below. 
 
 III. 
 
On the basis of this Order and Respondents’ Offers, the Commission finds
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that: 
 
Summary 
 
1. From March 2017 through March 2020, HII, a technology platform, billing 
administrator and distributor of short-term and limited health insurance products, and its CEO 
Southwell made a series of false and misleading statements to investors, which concealed 
extensive consumer complaints about products being sold through misrepresentations. 
2. HII and Southwell falsely told investors that HII held its insurance distributors to 
its high compliance standards, which prohibited insurance agents from making 
misrepresentations to consumers.  HII and Southwell falsely stated that HII had 99.99% 
consumer satisfaction and misleadingly stated that state departments of insurance received very 
few consumer complaints regarding HII.  HII and Southwell understated the amount of 
business that had been generated by its most productive distributor, Simple Health Plans LLC 
(“Simple Health”), which amassed the most consumer complaints.  HII and Southwell 
misrepresented that HII had terminated its relationship with a different distributor in 2016 for 
compliance failures, when in fact, HII re-hired this distributor despite continuing compliance 
problems.  These statements were made in reports filed with the SEC, press releases, earnings 
calls and other communications with investors.  Southwell also disseminated misleading 
information about HII’s compliance to research analysts and a subscription news service, which 
included the information in research reports and a news article that were distributed to 
investors. 
3. In reality, throughout the time period, HII tracked tens of thousands of dissatisfied 
consumers complaining that third-party insurance agents that contracted with HII made 
misrepresentations to sell products, failed to cancel plans when consumers requested and 
charged consumers for products they did not authorize.  Numerous consumers complained that 
these agents deceptively sold limited plans offered on HII’s platform under the guise of 
comprehensive medical insurance, leaving some consumers with unpaid medical bills when 
they sought treatment. 
4. When Southwell joined HII in 2016, he learned that Simple Health and other HII 
distributors were misrepresenting to consumers the scope of coverage provided by 
insurance products and were not complying with HII’s compliance standards.  Beginning 
in 2017, Southwell increased funding and staffing for the compliance department and 
encouraged tracking of complaints, monitoring of certain consumer calls, conducting 
secret shopping calls and agent training.  But he continued to receive information 
indicating there were persistent problems at HII’s distributors and a large volume of 
consumer complaints.  Nevertheless, Southwell failed to assess whether HII’s compliance 
                                                             
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The findings herein are made pursuant to Respondents’ Offers of Settlement and are not 
binding on any other person or entity in this or any other proceeding.
   

 
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efforts were effective before making misstatements to investors. 
5. The Federal Trade Commission (“FTC”) filed an emergency action in late-October 
2018 to shut down Simple Health for defrauding consumers.  When HII publicly disclosed the 
FTC’s action on November 2, 2018, HII’s stock price dropped.  HII and Southwell, however, 
never fully disclosed HII’s compliance problems and continued making false and misleading 
statements.  In February 2019, while HII’s stock price was still inflated, Southwell sold shares 
of HII stock.  In March 2019, HII’s stock price experienced another significant decline after 
Congress announced an investigation into how HII and others were marketing short-term 
insurance products to consumers.  
6. HII and Southwell violated the antifraud provisions of Section 17(a)(2) and (3) of 
the Securities Act of 1933 (“Securities Act”), by making materially false and misleading 
statements that operated as a fraud upon investors.  HII also violated, and Southwell caused HII’s 
violations of, the reporting provisions of Section 13(a) of the Exchange Act and Rules 12b-20, 
13a-1, and 13a-11 thereunder, by filing with the Commission annual and current reports 
containing materially false and misleading statements. 
Respondents 
 
7. Health Insurance Innovations, Inc., which changed its name in March 2020 to 
Benefytt Technologies, Inc., is a Delaware corporation, headquartered in Tampa, Florida.  From 
2013 until August 2020, HII had a class of shares registered pursuant to Section 12(b) of the 
Exchange Act and filed periodic reports with the Commission.  HII’s shares were listed and 
traded on the NASDAQ Global Market.  HII filed Forms S-8, including on August 8, 2016 and 
August 4, 2017, to register securities to be offered pursuant to its Long Term Incentive Plan.  
Both Forms S-8 incorporated HII’s annual and current reports.  HII granted restricted stock under 
the Incentive Plan on a number of occasions during the pendency of the misconduct.  On August 
31, 2020, HII terminated its registration of securities when it merged with several private funds 
managed by an investment adviser registered with the Commission. 
 
8. Gavin D. Southwell, age 44, is a resident of Florida.  Southwell became a 
consultant to HII in April 2016, was appointed President of HII in July 2016 and was HII’s Chief 
Executive Officer from November 2016 to August 12, 2021.  Southwell served on HII’s Board of 
Directors and was a member of its Risk and Compliance Committee. 
Related Entities 
 
9. Simple Health Plans LLC (also known as Health Benefits One LLC), a Florida 
limited liability company, was HII’s largest revenue generating distributor from at least 2015 
through 2018.  HII helped to fund Simple Health’s operations by providing loans (also called 
advanced commissions) of more than $118 million from 2012 to 2019.  Simple Health repaid HII 
from premium commissions on sales of insurance products on HII’s platform.  On October 31, 
2018, a federal judge ordered a halt to Simple Health’s operations as a result of a lawsuit brought 
by the FTC alleging that Simple Health routinely misled consumers into believing that they were 
purchasing comprehensive health insurance.  On November 2, 2018, that order and the FTC 
lawsuit became public.  On April 12, 2019, the court appointed receiver in the FTC’s case 
reported that Simple Health’s business was not legally viable because deception permeated the 

 
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entire relationship between Simple Health and its customers.   
 
10.  Distributor A, a Florida corporation, was another one of HII’s distributors.  HII 
repeatedly stated it had terminated its relationship with this distributor in 2016 for compliance 
failures.  Despite continuing compliance problems, HII continued working with this distributor. 
Facts 
 
  HII’s Insurance-Related Business and Southwell’s Role 
 
11. HII is a technology platform, billing administrator and distributor of short-term and 
limited health insurance plans and other related products.  HII sold products directly to 
consumers and also had contractual relationships with third-party distributors that sold products 
to consumers.  HII handled the customer service and billing functions for products sold through 
third-party distributors, had direct contact with consumers who purchased products offered on 
HII’s platform, and tracked and received consumer complaints concerning products sold either 
directly or through distributors.     
 
12. HII’s platform provided consumers with access to short term and limited duration 
insurance plans, as well as limited indemnity benefit plans, life insurance plans and medical 
discount plans.  These products provided minimal health benefits, did not cover pre-existing 
conditions, hospital care or prescriptions, and were not considered qualifying health coverage 
under the Affordable Care Act.   
 
13. Southwell was in charge of HII’s business.  As Southwell himself explained to a 
board member in June 2018, “Every investor, every carrier, every distributor, every initiative 
we’ve done has been because of me.  All the ideas are mine.”  Southwell also oversaw the 
compliance department, received compliance updates, was consulted on compliance issues and 
made key decisions linked to distributor compliance. 
 
HII and Southwell Misrepresented to Investors that HII Held Distributors to 
Its High Compliance Standards 
14. HII’s compliance standards prohibited its representatives and third-party agents 
from making misrepresentations to consumers and charging consumers after they asked to 
cancel products, and required agents to comply with applicable laws, which similarly 
prohibited deceptive practices.   
 
15. From 2017 to 2020, HII and Southwell falsely stated to investors that HII held 
its distributors to HII’s high compliance standards and had terminated two non-compliant 
distributors.  HII and Southwell also gave investors and a subscription news service the 
misleading impression that HII held distributors to its standards by providing detailed 
descriptions of how HII purportedly ensured distributor compliance, including: training 
agents; setting metrics; tracking complaints, cancellations and chargebacks (demands by 
dissatisfied consumers to their banks or credit card providers to return their money where the 
banks or credit card providers then charged HII for those amounts); conducting “secret 
shopping” calls (where an independent contractor anonymously contacts a distributor and 

 
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poses as a typical consumer seeking to purchase insurance); and terminating non-compliant 
distributors.   
   
16. HII and Southwell Made the Following Misstatements Regarding Holding 
Distributors to HII’s Standards: 
Date Type Content 
 
May 4, 2017 
 
Earnings 
Call 
 
Southwell stated, “[w]hat we do after [adding new distributors] 
is we want to make sure that the distribution is meeting our 
compliance standards . . . and so we track them very closely over 
that initial period live, the number of sales, the number of 
cancellations, the number of customer service calls.  There’s a 
lot of different metrics in there.  So we wait a period of time 
after we’ve added new distribution, and we’ve ensured that the 
partnership is working the way that we want...” 
August 3, 
2017 
Earnings 
Call 
 
Southwell stated that HII “drive[s] compliance to the highest 
standard . . . “[W]e set standards for all of our distribution”.  “So 
the number of calls that people make to the customer service, 
number of escalated calls, the number of complaints, the number 
of cancellations, the number of chargebacks, we track this very 
closely. And if people can't hit these metrics, then sadly they are 
not a partner of ours.”   
Southwell further stated “during ‘16, we had some very good, 
some very well performing distributors, who we no longer do 
business with, because we made a conscious decision we are 
going to operate in this market, a very highly regulated market in 
a way that means when we sit with departments of insurance or 
any other stakeholders, we are able to say we have the best 
customer service and the best compliance.” 
November 1, 
2017  
Form 8-K 
attaching a 
press 
release 
In a press release, which Southwell helped draft and approved, 
HII stated it was “upholding the highest standards in customer 
service and compliance [and] continu[ing] to enforce the 
Company’s policies and procedures with third-party 
distributors.”   
The press release detailed HII’s compliance measures including:  
(1) maintaining distributor-performance score cards measuring 
key metrics such as member complaints, escalations and 
chargebacks monthly; (2) conducting secret shopping to ensure 
adherence to HII’s best in class process and procedures; and (3) 
terminating two distributors in 2016 for not meeting compliance 
metrics and benchmarks. 
  

 
6 
Date Type Content 
December 
2017 
Southwell 
provided an 
interview 
to a news 
service, 
whose 
subscribers 
included 
investors 
Southwell gave the misleading impression that HII held agents 
to its standards by claiming in an interview with a news service 
that HII trained agents and secret shopped distributors, and “we 
police [thousands of agents] very very carefully.”  The news 
service included Southwell’s remarks in an article which was 
distributed to investors. 
May 3, 2018  
 
Earnings 
Call 
 
Southwell described HII’s distributors as “highly-compliant” 
and stated, “as I’ve often explained, all of our partners must 
meet our very high standards to compliance and consumer 
satisfaction...  The point that we always add in is anybody we 
deal with has to go through a process of training, of meeting 
and constantly hitting our compliance matrix, our market 
leading compliance.” 
March 2, 
2017 
March 1, 
2018 
March 14, 
2019  
March 4, 
2020 
Forms 10-
K for 
2016, 
2017, 2018 
and 2019 
HII’s 2016 annual report, which Southwell signed, 
represented, “We have terminated, and could continue to 
terminate relationships, with distributors for their failure to 
follow our compliance standards or their otherwise engaging 
in problematic business practices. In 2016, we terminated two 
of our largest distributors for failure to comply with our 
standards.” 
HII made similar representations in the subsequent three 
annual reports, which Southwell signed. 
 
17. Contrary to the above statements, HII’s compliance department documented 
extensive failures to comply with the company’s compliance standards and applicable laws.  
For example, between 2017 and mid-2019, HII documented more than 24,000 consumer 
complaints alleging that insurance agents: (1) made misrepresentations to consumers in order to 
sell products; (2) failed to cancel plans when consumers requested; and (3) charged consumers for 
products whose purchase they had not authorized.  HII also monitored certain calls from consumers 
asking distributors to cancel products.  A large percentage of those calls did not comply with HII’s 
standards and involved agent misrepresentations.  In addition, HII had records of more than a 
dozen secret shopping calls to Simple Health and Distributor A in 2017 and 2018, all of which 
indicated that agents of these distributors used deceptive tactics to sell products.    
18.  In 2016, Southwell learned that Simple Health, Distributor A and other HII 
distributors were misrepresenting to consumers the scope of coverage provided by insurance 

 
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products and were not complying with HII’s compliance standards.  Beginning in 2017, 
Southwell increased funding for the compliance department and encouraged tracking of 
complaints, monitoring of certain consumer calls, conducting secret shopping calls and agent 
training.  Southwell, however, continued to receive information including emails, spreadsheets 
and PowerPoint presentations, indicating there were persistent problems at HII’s distributors 
and a large volume of consumer complaints.   
19. For example, in July 2017, Southwell was notified that the Attorney General’s 
Office of Nebraska issued a scam alert against Simple Health for making misrepresentations to 
consumers who found it difficult to cancel services.  On July 13, 2017, Southwell was 
forwarded emails from an HII vice president expressing concerns that a Nebraska newspaper 
was investigating Simple Health and stating she was “seeing high complaints and chargebacks 
overall.”  In another example, on March 7, 2018, Southwell received a compliance update 
showing that HII’s distributors were failing to comply with HII’s standards when dealing with 
consumers who wanted to cancel their plans.   
20.  Additionally, starting in late-2016, Southwell was informed that HII continued to 
do business with agents associated with Distributor A, which it had supposedly terminated that 
same year.  Southwell was informed that these agents were compliant when brought back, but he 
also received contradictory information showing agents associated with Distributor A continued to 
deceitfully sell insurance products offered on HII’s platform.   
21. Notwithstanding the information Southwell received and had access to, he failed 
to assess whether HII’s compliance efforts were effective before falsely telling investors that 
HII held distributors to its high compliance standards and terminated non-compliant 
distributors.     
HII and Southwell Provided Investors False and Misleading Information about 
Consumer Satisfaction and Complaints  
22. HII and Southwell falsely told investors that virtually all consumers were 
satisfied and misleadingly stated that consumers had lodged only a few complaints against HII 
with state departments of insurance.   
23. HII and Southwell Made the Following Misstatements Regarding 
Consumer Satisfaction and Complaints: 
Date Type Content 
 
August 3, 
2017 
Earnings 
Call 
Southwell asserted that “our current customer satisfaction is 
99.99%.” 
March 1, 
2018 
Earnings 
Call 
 
Southwell stated that “[h]ere at HIIQ, we are committed to the 
highest standards in compliance and customer service and 
maintaining our high level of consumer satisfaction,” which he 
had previously asserted was 99.99%. 

 
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Date Type Content 
 
May 3, 2018 Earnings 
Call 
 
Southwell stated:  “This outstanding compliance performance at 
HIIQ continues in 2018 with only 6 Department of Insurance 
(DOI) complaints in the entire first quarter of 2018. . . [and] 
there was a total of 1, DOI complaint upheld against the 
company.” 
August 2, 
2018 
Earnings 
Call 
 
Southwell gave an update to the figures provided in May and 
said there were only 12 complaints to state departments of 
insurance, only 3 of which were upheld. 
October 30, 
2018 
Earnings 
Call 
 
Southwell asserted that HII could show state departments of 
insurance “a very happy consumer base, we can show them, a 
very low number of complaints, a very high number customer 
satisfaction.” 
December 20, 
2018 
 
Presentation 
at Investor 
Analyst Day 
in New York 
City, in 
which 
Southwell 
participated   
 
HII stated that “[i]n terms of complaints, they are down with the 
Department of Insurance complaints at 15 YTD vs. 28 YTD 
2017 and only 3 upheld vs. 4 last year.” 
A research analyst included HII’s presentation of the low 
number of departments of insurance complaints in his December 
20, 2018 research report.  The report was published and 
distributed to institutional investors and also sent to Southwell, 
who did not correct or supplement the misleading information. 
A different research analyst issued a December 21, 2018 report 
stating, “the most power chart of the day” included the low 
number of DOI complaints, which are “hardly an operating 
concern or a level that would give the short theses any 
credibility.” 
January 7, 
2019 (Form 
8-K)  
May 22, 2019 
Investor 
Presentations 
(with one 
filed with 
Form 8-K) 
 
HII stated there were 28 complaints to departments of insurance 
in 2017 with only 4 upheld and 15 complaints in 2018 with only 
3 upheld.   
 
   
24. From 2017 to mid-2019, HII documented more than 24,000 dissatisfied consumers 
complaining about agent misrepresentations, unauthorized billing and failures to cancel plans.  HII 
also documented approximately 28,000 chargebacks.  HII recognized that many of these 

 
9 
chargebacks may have been initiated by consumers who claimed the charges were not authorized.  
Thus, HII’s and Southwell’s above statements to investors concerned only a small fraction of the 
total number of consumer complaints and dissatisfied consumers that HII tracked.  Moreover, 
investors were never told that HII itself, not the departments of insurance, designated certain 
complaints as “upheld” and HII made those designations without even contacting complaining 
consumers. 
25. Before making the above statements, Southwell was on notice of a high number of 
complaints and chargebacks and a large number of dissatisfied consumers trying to cancel plans.  
For instance, in February 2017, Southwell received an email from an insurance carrier noting that 
consumer complaints were “becoming more prevalent and requiring more resources.”  In addition, 
by at least September 2017, Southwell had communicated with the Better Business Bureau 
about its “F” rating for HII, which was based on a pattern of consumer complaints alleging 
agent misrepresentations.  In another example, in September 2017, Southwell received an 
email from HII’s compliance and risk officers about a series of reports of consumers 
requesting cancellations, where the agents either refused to cancel or said the cancellations 
had been made when in fact they were not.  Nevertheless, Southwell failed to determine the 
magnitude of complaints and chargebacks tracked by HII or otherwise verify that his statements 
about consumer satisfaction and complaints were accurate before making them.  
HII and Southwell Understated the Amount of Sales Generated by Simple 
Health  
26. On a November 2, 2017 investor call, an analyst asked Southwell whether HII had 
any revenue concentration issues, such as any distributors that originated more than 10% of sales.  
Southwell responded, “in 2016, we terminated two large distributors which was about 16% of 
sales.  And what I can confirm is that we don’t have any third party distributor as large as the guys 
we . . . terminated back in 2016.”  Several months before the call, Southwell had received HII 
statistics showing that one distributor—Simple Health—generated significantly more sales than 
the two terminated distributors combined. 
27. Additionally, after the FTC’s action against Simple Health became public, on 
November 2, 2018, HII issued a press release, with Southwell’s approval, stating that:  (1) it was 
terminating its relationship with Simple Health; (2) Simple Health was one of 100 sales agencies 
working with HII; and (3) Simple Health was the agency of record for less than 10% of submitted 
policies in 2018.  HII stated at its December 20, 2018 Investor Analyst day presentation that 
Simple Health contributed only 8.2% of submitted policies in 2018.  Southwell knew these 
statements were provided to research analysts who included them in their research reports.  HII’s 
January 7, 2019 investor presentation, filed on Form 8-K, included a similar statement about 
Simple Health contributing 8.2% of submitted policies in 2018.  The statements about the 
percentage of submitted policies were misleading because Simple Health accounted for well over 
20% of HII’s premiums, revenue and profits in just the first ten months of 2018, before Simple 
Health was shut down.   
 

 
10 
HII’s and Southwell’s False and Misleading Statements Were Material to 
Investors 
28. HII’s and Southwell’s false and misleading statements, which involved specific 
verifiable facts about its compliance and the amount of business generated by Simple Health, were 
material to investors.   
29. In SEC filings, HII and Southwell repeatedly highlighted the importance of 
compliance as a competitive strength in the highly-regulated insurance industry.  HII and 
Southwell also acknowledged in the SEC filings that the failure of third-party distributors to 
comply with applicable laws and regulations could adversely affect HII’s business.   
30. HII’s and Southwell’s false and misleading statements related to an important 
component of HII’s business.  For example, in May 2016, Southwell was notified by HII’s then-
president that Simple Health’s compliance problem was HII’s biggest financial risk.  In 2017, 
Simple Health accounted for 31% of premiums collected by HII from consumers, 37% of HII’s 
revenue and 27% of its profits.  Southwell decided in September 2017 not to terminate Simple 
Health, after receiving an internal analysis showing termination would result in a significant loss of 
revenue and more than $15 million in loans that Simple Health had not yet repaid to HII.  From 
January through October 2018, when it was shut down by the FTC’s action, Simple Health 
accounted for 21% of premiums collected by HII from consumers, 25% of HII’s revenue and 20% 
of its profits.   
31. Research analysts and the media included information they received from HII and 
Southwell about the company’s compliance in their research reports and articles which were then 
distributed to investors. 
32. The price of HII stock declined significantly after two negative news 
announcements.  When the FTC’s lawsuit against Simple Health became public on November 2, 
2018, HII’s stock price dropped 8.8% from the prior day’s closing price.  HII’s stock price dropped 
an additional 14.4% the following trading day.  After a March 13, 2019 congressional press release 
announcing an investigation into HII and other short-term health insurance sellers, HII’s stock 
declined 17.2%.   
Southwell’s Sales of HII Stock 
33. Southwell sold 80,000 shares of HII stock in February 2019 for proceeds of $3.2 
million and profits of $320,000 based on inflation in the stock price as a result of the misconduct 
detailed herein.     
Violations 
34. In light of the information that Southwell received and had access to, Southwell and 
HII knew or should have known the statements described above in reports filed with the SEC, 
press releases, earnings calls and other communications with investors, research analysts and the 
media, were materially false and misleading. 

 
11 
35. As a result of the conduct described above, HII and Southwell violated Sections 
17(a)(2) and (3) of the Securities Act, which prohibit, in the offer or sale of securities, materially 
false and misleading statements and practices that would operate as a fraud or deceit upon the 
purchasers of securities.  Negligence is sufficient to establish violations of Sections 17(a)(2) and 
(3) of the Securities Act.  Aaron v. SEC, 446 U.S. 680, 696-97 (1980). 
36. As a result of the conduct described above, HII violated Section 13(a) of the 
Exchange Act and Rules 12b-20, 13a-1 and 13a-11, which require every issuer of a security 
registered pursuant to Section 12 of the Exchange Act to file with the Commission accurate annual 
and current reports, which include such further information as may be necessary to make the 
required statements not misleading.  Scienter is not required for a violation of the reporting 
provisions.  See SEC v. McNulty, 137 F.3d 732, 740-41 (2d Cir. 1998). 
37. As a result of the conduct described above, Southwell caused HII’s violations of 
Section 13(a) of the Exchange Act and Rules 12b-20, 13a-1 and 13a-11 by signing and authorizing 
the issuance of annual and current reports, when he knew or should have known they were 
materially false and misleading.  Negligence is sufficient for causing a primary violation that does 
not require scienter. See KPMG, LLP v. SEC, 289 F.3d 109, 120 (D.C. Cir. 2002) 
Disgorgement 
38. The disgorgement and prejudgment interest ordered in Section IV.D below is 
consistent with equitable principles, does not exceed Southwell’s net profits from his violations, 
and will be distributed to harmed investors to the extent feasible. The Commission will hold funds 
paid pursuant to paragraph IV.D in an account at the United States Treasury pending distribution. 
Upon approval of the distribution final accounting by the Commission, any amounts remaining 
that are infeasible to return to investors, and any amounts returned to the Commission in the future 
that are infeasible to return to investors, may be transferred to the general fund of the U.S. 
Treasury, subject to Section 21F(g)(3) of the Exchange Act.   
IV. 
 
In view of the foregoing, the Commission deems it appropriate and in the public interest 
to impose the sanctions agreed to in Respondents’ Offers. 
 
Accordingly, it is hereby ORDERED that: 
A. Pursuant to Section 8A of the Securities Act and Section 21C of the Exchange Act, HII 
and Southwell cease and desist from committing or causing any violations and any future violations 
of Sections 17(a)(2) and (3) of the Securities Act and Section 13(a) of the Exchange Act and Rules 
12b-20, 13a-1 and 13a-11 thereunder. 
B. Respondent HII shall, within 10 days of the entry of this Order, pay a civil penalty of 
$11 million to the Securities and Exchange Commission.  If timely payment is not made, interest 
shall accrue pursuant to 31 U.S.C. § 3717. 
C. Respondent Southwell shall, within 10 days of the entry of this Order, pay a civil 

 
12 
money penalty in the amount of $750,000 to the Securities and Exchange Commission.  If timely 
payment is not made, interest shall accrue pursuant to 31 U.S.C. § 3717. 
D. Respondent Southwell shall, within 10 days of the entry of this Order, pay 
disgorgement of $320,000 and prejudgment interest of $41,511 to the Securities and Exchange 
Commission.  If timely payment is not made, additional interest shall accrue pursuant to SEC Rule 
of Practice 600. 
E. The foregoing payments must be made in one of the following ways: 
 
(1) Respondents may transmit payment electronically to the Commission, 
which will provide detailed ACH transfer/Fedwire instructions upon request; 
 
(2) Respondents may make direct payment from a bank account via 
Pay.gov through the SEC website at 
http://www.sec.gov/about/offices/ofm.htm; or 
 
(3) Respondents may pay by certified check, bank cashier’s check, or  United 
States postal money order, made payable to the Securities and Exchange 
Commission and hand-delivered or mailed to: 
 
Enterprise Services Center  
Accounts Receivable Branch  
HQ Bldg., Room 181, AMZ-341 
6500 South MacArthur Boulevard 
Oklahoma City, OK 73169 
 
Payments by check or money order must be accompanied by a cover letter identifying HII or 
Southwell as Respondents in these proceedings, and the file number of these proceedings; a copy of 
the cover letter and check or money order must be sent to Lisa Deitch, Assistant Director, Division 
of Enforcement, Securities and Exchange Commission, 100 F St., NE, Washington, DC 20549.  
F. Pursuant to Section 308(a) of the Sarbanes-Oxley Act of 2002, a Fair Fund is created 
for the disgorgement, prejudgment interest, and penalties referenced in paragraphs IV. B, C, and D, 
above.  Amounts ordered to be paid as civil money penalties pursuant to this Order shall be treated 
as penalties paid to the government for all purposes, including all tax purposes.  To preserve the 
deterrent effect of the civil penalty, Respondents agree that in any Related Investor Action, they 
shall not argue that they are entitled to, nor shall they benefit by, offset or reduction of any award 
of compensatory damages by the amount of any part of Respondents’ payment of a civil penalty in 
this action (“Penalty Offset”).  If the court in any Related Investor Action grants such a Penalty 
Offset, Respondents agree that they shall, within 30 days after entry of a final order granting the 
Penalty Offset, notify the Commission’s counsel in this action and pay the amount of the Penalty 
Offset to the Securities and Exchange Commission.  Such a payment shall not be deemed an 
additional civil penalty and shall not be deemed to change the amount of the civil penalty imposed 
in this proceeding.  For purposes of this paragraph, a “Related Investor Action” means a private 
damages action brought against the Respondents by or on behalf of one or more investors based 
on substantially the same facts as alleged in the Order instituted by the Commission in this 

 
13 
proceeding. 
V. 
 
It is further Ordered that, solely for purposes of exceptions to discharge set forth in Section 
523 of the Bankruptcy Code, 11 U.S.C. §523, the findings in this Order are true and admitted by 
Respondent Southwell, and further, any debt for disgorgement, prejudgment interest, civil penalty 
or other amounts due by Respondent Southwell under this Order or any other judgment, order, 
consent order, decree or settlement agreement entered in connection with this proceeding, is a debt 
for the violation by Respondent Southwell of the federal securities laws or any regulation or order 
issued under such laws, as set forth in Section 523(a)(19) of the Bankruptcy Code, 11 
U.S.C. §523(a)(19). 
 
By the Commission. 
 
 
 
Vanessa A. Countryman  
Secretary 

UNITED STATES OF AMERICA 

Before the 

SECURITIES AND EXCHANGE COMMISSION 

 

SECURITIES ACT OF 1933 

Release No. 11084 / July 20, 2022 

 

SECURITIES EXCHANGE ACT OF 1934 

Release No. 95323 / July 20, 2022 

 

ADMINISTRATIVE PROCEEDING 

File No. 3-20932 

 

 

In the Matter of  

Health Insurance 

Innovations, Inc., now 

named Benefytt 

Technologies, Inc., and 

Gavin D. Southwell  

Respondents. 

ORDER 

INSTITUTING 

CEASE-AND-DESIST 

PROCEEDINGS, PURSUANT 

TO SECTION 8A OF THE 

SECURITIES ACT OF 1933 

AND SECTION 21C OF THE 

SECURITIES EXCHANGE 

ACT OF 1934, MAKING 

FINDINGS, AND 

IMPOSING A CEASE-AND- 

DESIST ORDER 

 

I. 

 

 The Securities and Exchange Commission (“Commission” or “SEC”) deems it appropriate 

that cease-and-desist proceedings be, and hereby are, instituted pursuant to Section 8A of the 

Securities Act of 1933 (“Securities Act”) and Section 21C of the Securities Exchange Act of 1934 

(“Exchange Act”) against Health Insurance Innovations, Inc., now named Benefytt 

Technologies, Inc. (“HII” or “Respondent”) and Gavin D. Southwell (“Southwell” or 

“Respondent”). 

II. 

 

In anticipation of the institution of these proceedings, Respondents have submitted Offers 

of Settlement (the “Offers”), which the Commission has determined to accept.  Solely for the 

purpose of these proceedings and any other proceedings brought by or on behalf of the 

Commission, or to which the Commission is a party, and without admitting or denying the 

findings herein, except as to the Commission’s jurisdiction over Respondents and the subject 

matter of these proceedings, which are admitted, and except as provided herein in Section V,  

Respondents consent to the entry of this Order Instituting Cease-and-Desist Proceedings Pursuant 

to Section 8A of the Securities Act of 1933 and Section 21C of the Securities Exchange Act of 



 

2 

1934, Making Findings, and Imposing a Cease-and-Desist Order (“Order”), as set forth below. 
 
 III. 

 

On the basis of this Order and Respondents’ Offers, the Commission finds1 that: 

 

Summary 

 

1. From March 2017 through March 2020, HII, a technology platform, billing 

administrator and distributor of short-term and limited health insurance products, and its CEO 

Southwell made a series of false and misleading statements to investors, which concealed 

extensive consumer complaints about products being sold through misrepresentations. 

2. HII and Southwell falsely told investors that HII held its insurance distributors to 

its high compliance standards, which prohibited insurance agents from making 

misrepresentations to consumers.  HII and Southwell falsely stated that HII had 99.99% 

consumer satisfaction and misleadingly stated that state departments of insurance received very 

few consumer complaints regarding HII.  HII and Southwell understated the amount of 

business that had been generated by its most productive distributor, Simple Health Plans LLC 

(“Simple Health”), which amassed the most consumer complaints.  HII and Southwell 

misrepresented that HII had terminated its relationship with a different distributor in 2016 for 

compliance failures, when in fact, HII re-hired this distributor despite continuing compliance 

problems.  These statements were made in reports filed with the SEC, press releases, earnings 

calls and other communications with investors.  Southwell also disseminated misleading 

information about HII’s compliance to research analysts and a subscription news service, which 

included the information in research reports and a news article that were distributed to 

investors. 

3. In reality, throughout the time period, HII tracked tens of thousands of dissatisfied 

consumers complaining that third-party insurance agents that contracted with HII made 

misrepresentations to sell products, failed to cancel plans when consumers requested and 

charged consumers for products they did not authorize.  Numerous consumers complained that 

these agents deceptively sold limited plans offered on HII’s platform under the guise of 

comprehensive medical insurance, leaving some consumers with unpaid medical bills when 

they sought treatment. 

4. When Southwell joined HII in 2016, he learned that Simple Health and other HII 

distributors were misrepresenting to consumers the scope of coverage provided by 

insurance products and were not complying with HII’s compliance standards.  Beginning 

in 2017, Southwell increased funding and staffing for the compliance department and 

encouraged tracking of complaints, monitoring of certain consumer calls, conducting 

secret shopping calls and agent training.  But he continued to receive information 

indicating there were persistent problems at HII’s distributors and a large volume of 

consumer complaints.  Nevertheless, Southwell failed to assess whether HII’s compliance 

                                                             
1  The findings herein are made pursuant to Respondents’ Offers of Settlement and are not 

binding on any other person or entity in this or any other proceeding.   



 

3 

efforts were effective before making misstatements to investors. 

5. The Federal Trade Commission (“FTC”) filed an emergency action in late-October 

2018 to shut down Simple Health for defrauding consumers.  When HII publicly disclosed the 

FTC’s action on November 2, 2018, HII’s stock price dropped.  HII and Southwell, however, 

never fully disclosed HII’s compliance problems and continued making false and misleading 

statements.  In February 2019, while HII’s stock price was still inflated, Southwell sold shares 

of HII stock.  In March 2019, HII’s stock price experienced another significant decline after 

Congress announced an investigation into how HII and others were marketing short-term 

insurance products to consumers.  

6. HII and Southwell violated the antifraud provisions of Section 17(a)(2) and (3) of 

the Securities Act of 1933 (“Securities Act”), by making materially false and misleading 

statements that operated as a fraud upon investors.  HII also violated, and Southwell caused HII’s 

violations of, the reporting provisions of Section 13(a) of the Exchange Act and Rules 12b-20, 

13a-1, and 13a-11 thereunder, by filing with the Commission annual and current reports 

containing materially false and misleading statements. 

Respondents 

 

7. Health Insurance Innovations, Inc., which changed its name in March 2020 to 

Benefytt Technologies, Inc., is a Delaware corporation, headquartered in Tampa, Florida.  From 

2013 until August 2020, HII had a class of shares registered pursuant to Section 12(b) of the 

Exchange Act and filed periodic reports with the Commission.  HII’s shares were listed and 

traded on the NASDAQ Global Market.  HII filed Forms S-8, including on August 8, 2016 and 

August 4, 2017, to register securities to be offered pursuant to its Long Term Incentive Plan.  

Both Forms S-8 incorporated HII’s annual and current reports.  HII granted restricted stock under 

the Incentive Plan on a number of occasions during the pendency of the misconduct.  On August 

31, 2020, HII terminated its registration of securities when it merged with several private funds 

managed by an investment adviser registered with the Commission. 

 

8. Gavin D. Southwell, age 44, is a resident of Florida.  Southwell became a 

consultant to HII in April 2016, was appointed President of HII in July 2016 and was HII’s Chief 

Executive Officer from November 2016 to August 12, 2021.  Southwell served on HII’s Board of 

Directors and was a member of its Risk and Compliance Committee. 

Related Entities 

 

9. Simple Health Plans LLC (also known as Health Benefits One LLC), a Florida 

limited liability company, was HII’s largest revenue generating distributor from at least 2015 

through 2018.  HII helped to fund Simple Health’s operations by providing loans (also called 

advanced commissions) of more than $118 million from 2012 to 2019.  Simple Health repaid HII 

from premium commissions on sales of insurance products on HII’s platform.  On October 31, 

2018, a federal judge ordered a halt to Simple Health’s operations as a result of a lawsuit brought 

by the FTC alleging that Simple Health routinely misled consumers into believing that they were 

purchasing comprehensive health insurance.  On November 2, 2018, that order and the FTC 

lawsuit became public.  On April 12, 2019, the court appointed receiver in the FTC’s case 

reported that Simple Health’s business was not legally viable because deception permeated the 



 

4 

entire relationship between Simple Health and its customers.   

 

10.  Distributor A, a Florida corporation, was another one of HII’s distributors.  HII 

repeatedly stated it had terminated its relationship with this distributor in 2016 for compliance 

failures.  Despite continuing compliance problems, HII continued working with this distributor. 

Facts 
 
  HII’s Insurance-Related Business and Southwell’s Role 

 

11. HII is a technology platform, billing administrator and distributor of short-term and 

limited health insurance plans and other related products.  HII sold products directly to 

consumers and also had contractual relationships with third-party distributors that sold products 

to consumers.  HII handled the customer service and billing functions for products sold through 

third-party distributors, had direct contact with consumers who purchased products offered on 

HII’s platform, and tracked and received consumer complaints concerning products sold either 

directly or through distributors.     

 

12. HII’s platform provided consumers with access to short term and limited duration 

insurance plans, as well as limited indemnity benefit plans, life insurance plans and medical 

discount plans.  These products provided minimal health benefits, did not cover pre-existing 

conditions, hospital care or prescriptions, and were not considered qualifying health coverage 

under the Affordable Care Act.   

 
13. Southwell was in charge of HII’s business.  As Southwell himself explained to a 

board member in June 2018, “Every investor, every carrier, every distributor, every initiative 

we’ve done has been because of me.  All the ideas are mine.”  Southwell also oversaw the 

compliance department, received compliance updates, was consulted on compliance issues and 

made key decisions linked to distributor compliance. 
 

HII and Southwell Misrepresented to Investors that HII Held Distributors to 
Its High Compliance Standards 

14. HII’s compliance standards prohibited its representatives and third-party agents 

from making misrepresentations to consumers and charging consumers after they asked to 

cancel products, and required agents to comply with applicable laws, which similarly 

prohibited deceptive practices.   

 

15. From 2017 to 2020, HII and Southwell falsely stated to investors that HII held 

its distributors to HII’s high compliance standards and had terminated two non-compliant 

distributors.  HII and Southwell also gave investors and a subscription news service the 

misleading impression that HII held distributors to its standards by providing detailed 

descriptions of how HII purportedly ensured distributor compliance, including: training 

agents; setting metrics; tracking complaints, cancellations and chargebacks (demands by 

dissatisfied consumers to their banks or credit card providers to return their money where the 

banks or credit card providers then charged HII for those amounts); conducting “secret 

shopping” calls (where an independent contractor anonymously contacts a distributor and 



 

5 

poses as a typical consumer seeking to purchase insurance); and terminating non-compliant 

distributors.   

   

16. HII and Southwell Made the Following Misstatements Regarding Holding 

Distributors to HII’s Standards: 

Date Type Content 

 

May 4, 2017 

 

Earnings 

Call 

 

Southwell stated, “[w]hat we do after [adding new distributors] 

is we want to make sure that the distribution is meeting our 

compliance standards . . . and so we track them very closely over 

that initial period live, the number of sales, the number of 

cancellations, the number of customer service calls.  There’s a 

lot of different metrics in there.  So we wait a period of time 

after we’ve added new distribution, and we’ve ensured that the 

partnership is working the way that we want…” 

August 3, 

2017 

Earnings 

Call 

 

Southwell stated that HII “drive[s] compliance to the highest 

standard . . . “[W]e set standards for all of our distribution”.  “So 

the number of calls that people make to the customer service, 

number of escalated calls, the number of complaints, the number 

of cancellations, the number of chargebacks, we track this very 

closely. And if people can't hit these metrics, then sadly they are 

not a partner of ours.”   

Southwell further stated “during ‘16, we had some very good, 

some very well performing distributors, who we no longer do 

business with, because we made a conscious decision we are 

going to operate in this market, a very highly regulated market in 

a way that means when we sit with departments of insurance or 

any other stakeholders, we are able to say we have the best 

customer service and the best compliance.” 

November 1, 

2017  

Form 8-K 

attaching a 

press 

release 

In a press release, which Southwell helped draft and approved, 

HII stated it was “upholding the highest standards in customer 

service and compliance [and] continu[ing] to enforce the 

Company’s policies and procedures with third-party 

distributors.”   

The press release detailed HII’s compliance measures including:  

(1) maintaining distributor-performance score cards measuring 

key metrics such as member complaints, escalations and 

chargebacks monthly; (2) conducting secret shopping to ensure 

adherence to HII’s best in class process and procedures; and (3) 

terminating two distributors in 2016 for not meeting compliance 

metrics and benchmarks. 

  



 

6 

Date Type Content 

December 

2017 

Southwell 

provided an 

interview 

to a news 

service, 

whose 

subscribers 

included 

investors 

Southwell gave the misleading impression that HII held agents 

to its standards by claiming in an interview with a news service 

that HII trained agents and secret shopped distributors, and “we 

police [thousands of agents] very very carefully.”  The news 

service included Southwell’s remarks in an article which was 

distributed to investors. 

May 3, 2018  

 

Earnings 

Call 

 

Southwell described HII’s distributors as “highly-compliant” 

and stated, “as I’ve often explained, all of our partners must 

meet our very high standards to compliance and consumer 

satisfaction…  The point that we always add in is anybody we 

deal with has to go through a process of training, of meeting 

and constantly hitting our compliance matrix, our market 

leading compliance.” 

March 2, 

2017 

March 1, 

2018 

March 14, 

2019  

March 4, 

2020 

Forms 10-

K for 

2016, 

2017, 2018 

and 2019 

HII’s 2016 annual report, which Southwell signed, 

represented, “We have terminated, and could continue to 

terminate relationships, with distributors for their failure to 

follow our compliance standards or their otherwise engaging 

in problematic business practices. In 2016, we terminated two 

of our largest distributors for failure to comply with our 

standards.” 

HII made similar representations in the subsequent three 

annual reports, which Southwell signed. 

 

17. Contrary to the above statements, HII’s compliance department documented 

extensive failures to comply with the company’s compliance standards and applicable laws.  

For example, between 2017 and mid-2019, HII documented more than 24,000 consumer 

complaints alleging that insurance agents: (1) made misrepresentations to consumers in order to 

sell products; (2) failed to cancel plans when consumers requested; and (3) charged consumers for 

products whose purchase they had not authorized.  HII also monitored certain calls from consumers 

asking distributors to cancel products.  A large percentage of those calls did not comply with HII’s 

standards and involved agent misrepresentations.  In addition, HII had records of more than a 

dozen secret shopping calls to Simple Health and Distributor A in 2017 and 2018, all of which 

indicated that agents of these distributors used deceptive tactics to sell products.    

18.  In 2016, Southwell learned that Simple Health, Distributor A and other HII 

distributors were misrepresenting to consumers the scope of coverage provided by insurance 



 

7 

products and were not complying with HII’s compliance standards.  Beginning in 2017, 

Southwell increased funding for the compliance department and encouraged tracking of 

complaints, monitoring of certain consumer calls, conducting secret shopping calls and agent 

training.  Southwell, however, continued to receive information including emails, spreadsheets 

and PowerPoint presentations, indicating there were persistent problems at HII’s distributors 

and a large volume of consumer complaints.   

19. For example, in July 2017, Southwell was notified that the Attorney General’s 

Office of Nebraska issued a scam alert against Simple Health for making misrepresentations to 

consumers who found it difficult to cancel services.  On July 13, 2017, Southwell was 

forwarded emails from an HII vice president expressing concerns that a Nebraska newspaper 

was investigating Simple Health and stating she was “seeing high complaints and chargebacks 

overall.”  In another example, on March 7, 2018, Southwell received a compliance update 

showing that HII’s distributors were failing to comply with HII’s standards when dealing with 

consumers who wanted to cancel their plans.   

20.  Additionally, starting in late-2016, Southwell was informed that HII continued to 

do business with agents associated with Distributor A, which it had supposedly terminated that 

same year.  Southwell was informed that these agents were compliant when brought back, but he 

also received contradictory information showing agents associated with Distributor A continued to 

deceitfully sell insurance products offered on HII’s platform.   

21. Notwithstanding the information Southwell received and had access to, he failed 

to assess whether HII’s compliance efforts were effective before falsely telling investors that 

HII held distributors to its high compliance standards and terminated non-compliant 

distributors.     

HII and Southwell Provided Investors False and Misleading Information about 

Consumer Satisfaction and Complaints  

22. HII and Southwell falsely told investors that virtually all consumers were 

satisfied and misleadingly stated that consumers had lodged only a few complaints against HII 

with state departments of insurance.   

23. HII and Southwell Made the Following Misstatements Regarding 

Consumer Satisfaction and Complaints: 

Date Type Content 

 

August 3, 

2017 

Earnings 

Call 

Southwell asserted that “our current customer satisfaction is 

99.99%.” 

March 1, 

2018 

Earnings 

Call 

 

Southwell stated that “[h]ere at HIIQ, we are committed to the 

highest standards in compliance and customer service and 

maintaining our high level of consumer satisfaction,” which he 

had previously asserted was 99.99%. 



 

8 

Date Type Content 

 

May 3, 2018 Earnings 

Call 

 

Southwell stated:  “This outstanding compliance performance at 

HIIQ continues in 2018 with only 6 Department of Insurance 

(DOI) complaints in the entire first quarter of 2018. . . [and] 

there was a total of 1, DOI complaint upheld against the 

company.” 

August 2, 

2018 

Earnings 

Call 

 

Southwell gave an update to the figures provided in May and 

said there were only 12 complaints to state departments of 

insurance, only 3 of which were upheld. 

October 30, 

2018 

Earnings 

Call 

 

Southwell asserted that HII could show state departments of 

insurance “a very happy consumer base, we can show them, a 

very low number of complaints, a very high number customer 

satisfaction.” 

December 20, 

2018 

 

Presentation 

at Investor 

Analyst Day 

in New York 

City, in 

which 

Southwell 

participated   

 

HII stated that “[i]n terms of complaints, they are down with the 

Department of Insurance complaints at 15 YTD vs. 28 YTD 

2017 and only 3 upheld vs. 4 last year.” 

A research analyst included HII’s presentation of the low 

number of departments of insurance complaints in his December 

20, 2018 research report.  The report was published and 

distributed to institutional investors and also sent to Southwell, 

who did not correct or supplement the misleading information. 

A different research analyst issued a December 21, 2018 report 

stating, “the most power chart of the day” included the low 

number of DOI complaints, which are “hardly an operating 

concern or a level that would give the short theses any 

credibility.” 

January 7, 

2019 (Form 

8-K)  

May 22, 2019 

Investor 

Presentations 

(with one 

filed with 

Form 8-K) 

 

HII stated there were 28 complaints to departments of insurance 

in 2017 with only 4 upheld and 15 complaints in 2018 with only 

3 upheld.   

 

   

24. From 2017 to mid-2019, HII documented more than 24,000 dissatisfied consumers 

complaining about agent misrepresentations, unauthorized billing and failures to cancel plans.  HII 

also documented approximately 28,000 chargebacks.  HII recognized that many of these 



 

9 

chargebacks may have been initiated by consumers who claimed the charges were not authorized.  
Thus, HII’s and Southwell’s above statements to investors concerned only a small fraction of the 

total number of consumer complaints and dissatisfied consumers that HII tracked.  Moreover, 

investors were never told that HII itself, not the departments of insurance, designated certain 

complaints as “upheld” and HII made those designations without even contacting complaining 

consumers. 

25. Before making the above statements, Southwell was on notice of a high number of 

complaints and chargebacks and a large number of dissatisfied consumers trying to cancel plans.  

For instance, in February 2017, Southwell received an email from an insurance carrier noting that 

consumer complaints were “becoming more prevalent and requiring more resources.”  In addition, 

by at least September 2017, Southwell had communicated with the Better Business Bureau 

about its “F” rating for HII, which was based on a pattern of consumer complaints alleging 

agent misrepresentations.  In another example, in September 2017, Southwell received an 

email from HII’s compliance and risk officers about a series of reports of consumers 

requesting cancellations, where the agents either refused to cancel or said the cancellations 

had been made when in fact they were not.  Nevertheless, Southwell failed to determine the 

magnitude of complaints and chargebacks tracked by HII or otherwise verify that his statements 

about consumer satisfaction and complaints were accurate before making them.  

HII and Southwell Understated the Amount of Sales Generated by Simple 

Health  

26. On a November 2, 2017 investor call, an analyst asked Southwell whether HII had 

any revenue concentration issues, such as any distributors that originated more than 10% of sales.  

Southwell responded, “in 2016, we terminated two large distributors which was about 16% of 

sales.  And what I can confirm is that we don’t have any third party distributor as large as the guys 

we . . . terminated back in 2016.”  Several months before the call, Southwell had received HII 

statistics showing that one distributor—Simple Health—generated significantly more sales than 

the two terminated distributors combined. 

27. Additionally, after the FTC’s action against Simple Health became public, on 

November 2, 2018, HII issued a press release, with Southwell’s approval, stating that:  (1) it was 

terminating its relationship with Simple Health; (2) Simple Health was one of 100 sales agencies 

working with HII; and (3) Simple Health was the agency of record for less than 10% of submitted 

policies in 2018.  HII stated at its December 20, 2018 Investor Analyst day presentation that 

Simple Health contributed only 8.2% of submitted policies in 2018.  Southwell knew these 

statements were provided to research analysts who included them in their research reports.  HII’s 

January 7, 2019 investor presentation, filed on Form 8-K, included a similar statement about 

Simple Health contributing 8.2% of submitted policies in 2018.  The statements about the 

percentage of submitted policies were misleading because Simple Health accounted for well over 

20% of HII’s premiums, revenue and profits in just the first ten months of 2018, before Simple 

Health was shut down.   

 



 

10 

HII’s and Southwell’s False and Misleading Statements Were Material to 

Investors 

28. HII’s and Southwell’s false and misleading statements, which involved specific 

verifiable facts about its compliance and the amount of business generated by Simple Health, were 

material to investors.   

29. In SEC filings, HII and Southwell repeatedly highlighted the importance of 

compliance as a competitive strength in the highly-regulated insurance industry.  HII and 

Southwell also acknowledged in the SEC filings that the failure of third-party distributors to 

comply with applicable laws and regulations could adversely affect HII’s business.   

30. HII’s and Southwell’s false and misleading statements related to an important 

component of HII’s business.  For example, in May 2016, Southwell was notified by HII’s then-

president that Simple Health’s compliance problem was HII’s biggest financial risk.  In 2017, 

Simple Health accounted for 31% of premiums collected by HII from consumers, 37% of HII’s 

revenue and 27% of its profits.  Southwell decided in September 2017 not to terminate Simple 

Health, after receiving an internal analysis showing termination would result in a significant loss of 

revenue and more than $15 million in loans that Simple Health had not yet repaid to HII.  From 

January through October 2018, when it was shut down by the FTC’s action, Simple Health 

accounted for 21% of premiums collected by HII from consumers, 25% of HII’s revenue and 20% 

of its profits.   

31. Research analysts and the media included information they received from HII and 

Southwell about the company’s compliance in their research reports and articles which were then 

distributed to investors. 

32. The price of HII stock declined significantly after two negative news 

announcements.  When the FTC’s lawsuit against Simple Health became public on November 2, 

2018, HII’s stock price dropped 8.8% from the prior day’s closing price.  HII’s stock price dropped 

an additional 14.4% the following trading day.  After a March 13, 2019 congressional press release 

announcing an investigation into HII and other short-term health insurance sellers, HII’s stock 

declined 17.2%.   

Southwell’s Sales of HII Stock 

33. Southwell sold 80,000 shares of HII stock in February 2019 for proceeds of $3.2 

million and profits of $320,000 based on inflation in the stock price as a result of the misconduct 

detailed herein.     

Violations 

34. In light of the information that Southwell received and had access to, Southwell and 

HII knew or should have known the statements described above in reports filed with the SEC, 

press releases, earnings calls and other communications with investors, research analysts and the 

media, were materially false and misleading. 



 

11 

35. As a result of the conduct described above, HII and Southwell violated Sections 

17(a)(2) and (3) of the Securities Act, which prohibit, in the offer or sale of securities, materially 

false and misleading statements and practices that would operate as a fraud or deceit upon the 

purchasers of securities.  Negligence is sufficient to establish violations of Sections 17(a)(2) and 

(3) of the Securities Act.  Aaron v. SEC, 446 U.S. 680, 696-97 (1980). 

36. As a result of the conduct described above, HII violated Section 13(a) of the 

Exchange Act and Rules 12b-20, 13a-1 and 13a-11, which require every issuer of a security 

registered pursuant to Section 12 of the Exchange Act to file with the Commission accurate annual 

and current reports, which include such further information as may be necessary to make the 

required statements not misleading.  Scienter is not required for a violation of the reporting 

provisions.  See SEC v. McNulty, 137 F.3d 732, 740-41 (2d Cir. 1998). 

37. As a result of the conduct described above, Southwell caused HII’s violations of 

Section 13(a) of the Exchange Act and Rules 12b-20, 13a-1 and 13a-11 by signing and authorizing 

the issuance of annual and current reports, when he knew or should have known they were 

materially false and misleading.  Negligence is sufficient for causing a primary violation that does 

not require scienter. See KPMG, LLP v. SEC, 289 F.3d 109, 120 (D.C. Cir. 2002) 

Disgorgement 

38. The disgorgement and prejudgment interest ordered in Section IV.D below is 

consistent with equitable principles, does not exceed Southwell’s net profits from his violations, 

and will be distributed to harmed investors to the extent feasible. The Commission will hold funds 

paid pursuant to paragraph IV.D in an account at the United States Treasury pending distribution. 

Upon approval of the distribution final accounting by the Commission, any amounts remaining 

that are infeasible to return to investors, and any amounts returned to the Commission in the future 

that are infeasible to return to investors, may be transferred to the general fund of the U.S. 

Treasury, subject to Section 21F(g)(3) of the Exchange Act.   

IV. 

 

In view of the foregoing, the Commission deems it appropriate and in the public interest 

to impose the sanctions agreed to in Respondents’ Offers. 

 

Accordingly, it is hereby ORDERED that: 

A. Pursuant to Section 8A of the Securities Act and Section 21C of the Exchange Act, HII 

and Southwell cease and desist from committing or causing any violations and any future violations 

of Sections 17(a)(2) and (3) of the Securities Act and Section 13(a) of the Exchange Act and Rules 

12b-20, 13a-1 and 13a-11 thereunder. 

B. Respondent HII shall, within 10 days of the entry of this Order, pay a civil penalty of 

$11 million to the Securities and Exchange Commission.  If timely payment is not made, interest 

shall accrue pursuant to 31 U.S.C. § 3717. 

C. Respondent Southwell shall, within 10 days of the entry of this Order, pay a civil 



 

12 

money penalty in the amount of $750,000 to the Securities and Exchange Commission.  If timely 

payment is not made, interest shall accrue pursuant to 31 U.S.C. § 3717. 

D. Respondent Southwell shall, within 10 days of the entry of this Order, pay 

disgorgement of $320,000 and prejudgment interest of $41,511 to the Securities and Exchange 

Commission.  If timely payment is not made, additional interest shall accrue pursuant to SEC Rule 

of Practice 600. 

E. The foregoing payments must be made in one of the following ways: 

 

(1) Respondents may transmit payment electronically to the Commission, 

which will provide detailed ACH transfer/Fedwire instructions upon request; 

 

(2) Respondents may make direct payment from a bank account via 

Pay.gov through the SEC website at 

http://www.sec.gov/about/offices/ofm.htm; or 

 

(3) Respondents may pay by certified check, bank cashier’s check, or  United 

States postal money order, made payable to the Securities and Exchange 

Commission and hand-delivered or mailed to: 

 

Enterprise Services Center  

Accounts Receivable Branch  

HQ Bldg., Room 181, AMZ-341 

6500 South MacArthur Boulevard 

Oklahoma City, OK 73169 

 

Payments by check or money order must be accompanied by a cover letter identifying HII or 

Southwell as Respondents in these proceedings, and the file number of these proceedings; a copy of 

the cover letter and check or money order must be sent to Lisa Deitch, Assistant Director, Division 

of Enforcement, Securities and Exchange Commission, 100 F St., NE, Washington, DC 20549.  

F. Pursuant to Section 308(a) of the Sarbanes-Oxley Act of 2002, a Fair Fund is created 

for the disgorgement, prejudgment interest, and penalties referenced in paragraphs IV. B, C, and D, 

above.  Amounts ordered to be paid as civil money penalties pursuant to this Order shall be treated 

as penalties paid to the government for all purposes, including all tax purposes.  To preserve the 

deterrent effect of the civil penalty, Respondents agree that in any Related Investor Action, they 

shall not argue that they are entitled to, nor shall they benefit by, offset or reduction of any award 

of compensatory damages by the amount of any part of Respondents’ payment of a civil penalty in 

this action (“Penalty Offset”).  If the court in any Related Investor Action grants such a Penalty 

Offset, Respondents agree that they shall, within 30 days after entry of a final order granting the 

Penalty Offset, notify the Commission’s counsel in this action and pay the amount of the Penalty 

Offset to the Securities and Exchange Commission.  Such a payment shall not be deemed an 

additional civil penalty and shall not be deemed to change the amount of the civil penalty imposed 

in this proceeding.  For purposes of this paragraph, a “Related Investor Action” means a private 

damages action brought against the Respondents by or on behalf of one or more investors based 

on substantially the same facts as alleged in the Order instituted by the Commission in this 

http://www.sec.gov/about/offices/ofm.htm%3B


 

13 

proceeding. 

V. 

 

It is further Ordered that, solely for purposes of exceptions to discharge set forth in Section 

523 of the Bankruptcy Code, 11 U.S.C. §523, the findings in this Order are true and admitted by 

Respondent Southwell, and further, any debt for disgorgement, prejudgment interest, civil penalty 

or other amounts due by Respondent Southwell under this Order or any other judgment, order, 

consent order, decree or settlement agreement entered in connection with this proceeding, is a debt 

for the violation by Respondent Southwell of the federal securities laws or any regulation or order 

issued under such laws, as set forth in Section 523(a)(19) of the Bankruptcy Code, 11 

U.S.C. §523(a)(19). 

 

By the Commission. 

 

 

 

Vanessa A. Countryman  

Secretary 


	22._Michael_John_Grondahl
	23._Gavin_D._Southwell
	17._Gavin_D._Southwell
	18._Operator
	19._Mark_Nicholas_Argento
	20._Gavin_D._Southwell