- October 21, 2024
- Moloney Securities Co.
Moloney Securities (CRD# 38535) is a registered brokerage firm in Manchester, MO.
Allegations of Misconduct
According to publicly available records released by the Financial Industry Regulatory Authority (FINRA), in September 2024, 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 against Moloney Securities Co., Inc. (Moloney), Donald R. Hancock, David F. La Grange, and Laura B. Barnes (Collectively, the Respondents). The commission finds that these proceedings arise out of Respondents’ failures to comply with Regulation Best Interest (Regulation BI) in connection with recommendations of corporate bonds called L Bonds offered by GWG Holdings, Inc. (GWG) to retail customers between June 30, 2020, the compliance date for Regulation BI, and approximately January 15, 2022 (the relevant period).
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 would use a portion of the L Bond proceeds to repay existing L Bond holders.
In addition, in November 2021, among other things, GWG disclosed that several enumerated factors raised substantial doubt regarding its ability to continue as a going concern. Despite these disclosures, in recommending the purchase of L Bonds to certain retail customers, Moloney failed to exercise reasonable diligence, care, and skill to understand the potential risks, rewards, and costs associated with the recommendations. Moloney also recommended the purchase of L Bonds to certain retail customers for whom it did not have a reasonable basis to believe that the recommendations were in the customers’ best interest, based on the customers’ investment profiles and the potential risks, rewards, and costs associated with the L Bonds.
As a result, the Firm is ordered to cease and desist from committing or causing any violations and any future violations of Rule 15L-1(A)(1) of the Exchange Act, are censured, and shall pay disgorgement of $58,698, prejudgment interest of $8,218, and a civil money penalty of $250,000.
In addition, Moloney Securities has been the subject of eight other FINRA disclosures:
- December 2022—“Without admitting or denying the findings, the firm consented to the sanctions and to the entry of finding that it negligently omitted material facts by failing to tell investors in an offering related to an alternative asset management firm that the issuer failed to timely make required filings with the SEC, including filings audited financial statements.” The firm was censured and ordered to pay $268,082.64, plus interest, in partial restitution to customers.
- May 2020—“Without admitting or denying the findings, the firm consented to the sanctions and to the entry of findings that it failed to establish and maintain a supervisory system, including WSPS reasonably designed to achieve compliance with FINRA’s suitability rule with respect to qualitative suitability and concentration in high-risk products.” The firm was censured, fined $100,000 and ordered to pay $15,574.13, plus interest, in restitution to a customer.
- September 2016—“The Securities and Exchange Commission (Commission) deems it appropriate and in the public interest that public administrative and cease-and-desist proceedings be, and hereby are, instituted pursuant to sections 15(B) and 21C of the Securities and Exchange Act of 1934 (“Exchange Act”), and Sections 203(E) and 203(K) of the Investment Advisers Act of 1940 (“Advisers Act”), against Moloney Securities Co., Inc. (“Moloney or Respondent”). On the basis of this order and respondent’s offer, the commission finds that this matter concerns Moloney’s multiple and repeated violation of the Advisers Act.” Moloney was ordered to pay a civil money penalty in the amount of $34,000.
- June 2016—“ Respondents failed to promptly update application information that had become inaccurate.” Monetary/Fine $25,000.
- December 2015—“ Without admitting or denying the findings, the firm consented to the sanctions and to the entry of findings that it failed to adequately and promptly investigate the conduct of one of its representatives after learning that a customer had filed a complaint against him.” The firm was censured and fined $15,000.
- April 2014—“ Without admitting or denying the findings, the firm consented to the sanctions and to the entry of findings that it allowed its representatives to recommend and sell non-traditional ETFs to customers.” Monetary/fine $20,000.00.
- September 2005—“Respondent member failed to report to trace the correct time of trade execution in transactions in trace-eligible securities.” The firm was censured and fined $21,000.
- February 2000— “Respondent Moloney Securities Co., Inc. allegedly transacted business in Minnesota as a broker0dealer without being licensed in violation of Minn. Stat. Ch. 80A.04 (1998) and filed a false or misleading application for broker-dealer licensure in Minnesota in Violation of Minn. Stat. Ch. 80A.07.” Monetary/Fine $2,000.00, and cease and desist/injunction.
For a copy of Moloney Securities’ FINRA BrokerCheck, 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 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.