A former broker who masterminded an annuity scheme to profit from the deaths of terminally ill patients has agreed to an $850,000 fine and to be banned from the securities industry, the U.S. Securities and Exchange Commission said on Thursday.

The broker, Michael Horowitz of Los Angeles, also admitted to wrongdoing as part of the settlement, the SEC said. The agency filed a civil action against Horowitz in March.

Variable annuities are investment vehicles designed to help retirees maintain a source of income.

Typically, insurance companies who sell the annuities will agree to make periodic payments to people who purchase the product.

But another common feature offered is a death benefit, in which the insurer pays the policyholder's beneficiary under certain conditions.

Horowitz, the SEC said, recruited people to help him steal personal health information from hospice and nursing home patients so he could designate them as annuitants and sell the products to wealthy investors. The people he recruited included another broker, Moshe Marc Cohen, of Brooklyn, the SEC said.

Cohen was also named in the SEC's March civil complaint. An administrative hearing in Cohen's case is set for late August, according to the SEC.

"It's very expensive to litigate against the government and the inducement is to move on," said Robert Rose, Horowitz's lawyer in San Diego, California. "So, he's moved on."

Horowitz and Cohen falsified forms their brokerage firms used to conduct reviews as to whether the annuities were suitable for their customers, the SEC said.

At least 16 terminally ill hospice patients who were designated as annuitants had no family or business relationships with the investors who ultimately bought the products.

All told, the SEC said, the scheme led to the purchase and sale of $80 million in deferred variable annuities between 2007 and 2008, with Horowitz earning $300,000 in commissions and Cohen getting $700,000.

The SEC's settlement with Horowitz is among a growing number in which firms and individuals have admitted to wrongdoing because of a change in the SEC's enforcement policy.

Horowitz's admissions included that he knew his customers would be locked into risky, highly illiquid investment vehicles unless the terminally ill annuities did not die within a matter of months, the SEC said.

The SEC settlement does not disclose the names of the firms where Horowitz worked during the scam. He is not presently licensed. Horowitz most recently worked at Kovack Securities Inc in Beverly Hills, California, for two months, until March of this year.

The brokerage database run by the Financial Industry Regulatory Authority lists Horowitz as being a current registered representative with Kovack Securities Inc.

However, the conduct alleged by the SEC occurred while he was employed with Morgan Stanley, according to both the filing and a March statement to Reuters by Kovack's chief compliance officer.

A Morgan Stanley spokeswoman declined to immediately comment. Morgan is not named in the SEC's action.