GWG Holdings Loss Recovery Lawyer
Update 6/15/2022: The SEC files enforcement actions against Western International Securities and various brokers for violating Regulation Best Interest (Reg BI) regarding the sale of GWG.
GWG Holdings (GWGH) formally defaulted on its obligation to L bondholders on February 14, 2022. Red flags were raised among investors after the company notified them that no interest or dividend payments would be made in January 2022, nor would maturity or redemption requests be honored, making the L bonds virtually worthless. On April 20, 2022, the Dallas company, which made a name for itself through life insurance bond sales, filed for bankruptcy protection after financing arrangements could not be made. This is a disasterous outcome for unsecured stock and bond holders as all income payments have ceased and the opportunity for principal recovery appears unlikely.
GWG Holdings’ L Bonds–What You Need to Know
Retail investors in these privately issued, high-interest L bonds purchased more than $1B worth of them through more than 100 broker-dealers. But these alternative securities were created as high-risk, speculative investments–not typically suitable for low-risk tolerance investors who count on the liquidity of their securities. GWG Holdings bought life insurance policies through secondary sales using money raised by L bond sales; when the life insurance policies paid out, those funds repaid investors.
What Does This Mean for Investors?
Successful L bond sales are critical to GWG Holdings’ ability to cover life insurance premiums, payments to investors, and otherwise meet its obligations. Because of accounting concerns and delays in filing required SEC reports in early 2021, the company then suspended sales of L bonds for several months, and investor interest never recovered once these bonds were available for sale again. SEC filings show GWG Holdings’ cash on hand is far short of what it needs to cover liabilities, generating serious concerns about investment loss and prompting investors to consider ways to take action over investment loss and suitability concerns.
Financial advisors have a legal and regulatory obligation to recommend only suitable investments that are appropriate for their clients’ needs and objectives. Their employing brokerage firm has a legal and regulatory obligation to supervise the financial advisors’ sales practices and dealings with clients. If you’re concerned about your L bond investments offered by GWG Holdings, talking to an expert can help you identify your next steps.
A large swath of brokerage firms across the country sold GWG to their retail clients. Emerson Equity, based in California, is one of the largest selling agents. Recently, Emerson reported in its financial disclosures that the sale of GWG L bonds may have a material impact on the company going forward. In addition, in May 2022, it was reported that Centaurus Financial, also based in California, boosted the sale of GWG L bonds, despite the known existence of accounting and reporting issues within GWG Holdings. It has been reported that Centaurus actually raised the cap of allowable sales by brokers at Centaurus to individual clients.
According to InvestmentNews in an article on June 9, 2022, the CEO of IFP Securities revealed that some of their advisors wanted to take concentrations for alternative investments to 60% or 70%. This is particularly alarming as the North American Securities Administrators Association recommends 10%. FINRA clearly explains the importance of concentration limits and why concentrations at this level aren’t in the best interests of almost all investors.
We Help Investors Recover Investment Losses
The Wolper Law Firm represents investors nationwide in securities litigation and arbitration on a contingency fee basis. Matt Wolper, the Managing Principal of the Wolper Law Firm, is a trial lawyer who has handled hundreds of securities cases during his career involving a wide range of products, strategies and securities. Prior to representing investors, he was a partner with a national law firm, where he represented some of the largest banks and brokerage firms in the world in securities matters. We can be reached at (800) 931-8452 or by email at email@example.com.