Centaurus Financial Inc., and Affiliated Advisors Sanctioned with Cease-and-Desist Order Involving the Sale of GWG L Bonds

• March 26, 2025
• Centaurus Financial

Centaurus Financial, Inc. is a California corporation headquartered in Anaheim, California. Centaurus has been registered with the Commission as a broker-dealer since January 1993 and as an investment adviser since October 1999

Debbie M. Cavanaugh (CRD#:1268420) has been a registered representative, investment adviser representative, and branch manager at Centaurus since February 2020.

Michael Y. Hamilton (CRD#: 2038138) has been a registered representative and investment adviser representative at Centaurus since 2015.

Dana Matthew Hawkins (CRD#: 5731136) been a registered representative, and later an investment adviser representative at Centaurus since 2015.

Timothy N. Tremblay (CRD#: 1201542) has been a registered representative, investment adviser representative, and a branch manager at Centaurus since 2003.

Allegations of Misconduct

According to publicly available records released by the U.S Securities and Exchange Commission (SEC) in February 2025, The Securities and Exchange Commission (“Commission”) deemed it appropriate and in the public interest that public administrative and cease-and-desist proceedings be, and hereby are, instituted against Centaurus Financial, Inc. (“Centaurus”), Debbie M. Cavanaugh (“Cavanaugh”), Michael Y. Hamilton (“Hamilton”), Dana Matthew Hawkins (“Hawkins”), and Timothy N. Tremblay (“Tremblay”) (collectively, the “Respondents”).

Between June 30, 2020, the compliance date for Regulation Best Interest (“Regulation BI”), and approximately April 16, 2021 (the “Relevant Period”), Respondents did not comply with Regulation BI in connection with their recommendations of corporate bonds called “L Bonds” offered by GWG Holdings, Inc. (“GWG”) to certain retail customers. According to GWG’s disclosures during the Relevant Period: (a) L Bond investments involved a high degree of risk, including the risk of losing an investor’s entire investment; (b) L Bond investments may be considered speculative; (c) L Bond investments were only suitable for investors with substantial financial resources and no need for liquidity in the investment; and (d) GWG may use a portion of the L Bond proceeds to repay existing L Bond holders.

Despite these disclosures, Centaurus and its registered representatives – Respondents Cavanaugh, Hamilton, Hawkins and Tremblay, recommended the purchase of L Bonds to 18 retail customers for whom Respondents did not have a reasonable basis to believe that the recommendations were in those customers’ best interest based on those customers’ investment profiles and the potential risks, rewards, and costs associated with the L Bonds. As a result, Centaurus, Cavanaugh, Hamilton, Hawkins and Tremblay did not comply with the Customer-Specific Prong of Regulation BI’s Care Obligation found in Exchange Act Rule 15l-1(a)(2)(ii)(B). Centaurus also did not reasonably enforce its own written policies and procedures requiring personnel to take training related to Regulation BI and training related to a 2020 Offering of GWG L Bonds. As a result, Centaurus did not comply with Regulation BI’s Compliance Obligation found in Exchange Act Rule 15l-1(a)(2)(iv). By not complying with these Regulation BI component obligations, the Respondents each willfully violated Regulation BI’s General Obligation found in Exchange Act Rule 15l-1(a)(1).

Respondents Centaurus, Cavanaugh, Hamilton, Hawkins, and Tremblay are censured. Respondent Centaurus shall pay disgorgement of $6,407, prejudgment interest of $1,551.55, and a civil money penalty of $160,000. Respondent Cavanaugh shall pay disgorgement of $4,883.56, prejudgment interest of $1,196.87, and a civil money penalty of $12,500. Respondent Hamilton shall pay disgorgement of $5,204.30, prejudgment interest of $1,240.74, and a civil money penalty of $12,500. Respondent Hawkins shall pay disgorgement of $1,122.49, prejudgment interest of $259.28, and a civil money penalty of $12,500. Respondent Tremblay shall pay disgorgement of $6,060.50, prejudgment interest of $1,454.99, and a civil money penalty of $12,500.

For a copy of the Cease-and-Desist Order, Click here.

Wolper Law Firm Is Investigating GWG Holdings Claims

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 disastrous outcome for unsecured stock and bond holders as all income payments have ceased and the opportunity for any 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.

We Help Investors Recover Investment Losses

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. To the extent any of these duties are breached, the customer may be entitled to a recovery of his or her investment losses.