As unsuitable GWG Holdings L Bond sales continue to rack up losses for customers whose brokers or investment advisers improperly purchased or recommended them, jilted clients may wonder what their options are to recover damages, or if their broker or investment advisor is even liable for the losses.
If you are one such investor who suffered losses with GWG Holdings' L Bond product, The Law Offices of Jonathan W. Evans & Associates is available to investigate and consult with (800) 699-1881 for an investigation and consultation and potential litigation, arbitration, or mediation.
GWG L Bonds are the securities regulator's textbook definition of a "Complex, Costly, and Risky" Product.
To understand why GWG Holdings (NASDAQ: GWGH)'s L Bonds have taken center stage and proven themselves so financially harmful to customers, we begin with defining L Bonds themselves.
Issued by GWG Holdings from 2012 through 2021, L Bonds are high-yield, alternative debt instruments or bonds that in turn were used to purchase life insurance policies on secondary markets. Nearly half of the aforementioned insurance policies covered elderly customers more than 85 years old.
Because of their complexity, L Bonds were considered exceptionally risky and illiquid—so much so that GWG itself included in its prospectus several warnings about the product, such as a risk of default, in which case the firm would stop making payments to investors, including cessation of interest payments, redemptions, or dividends for its GWGH stock. Amazingly, the company did not believe there was a secondary market for the bonds, writing deep in the bonds' prospectus "No public market for the L Bonds exists and none is expected to develop."
GWG further cryptically cautioned: "Investing in our L Bonds may be considered speculative and involves a high degree of risk, including the risk of losing your entire investment."
GWG set each investor's minimum investment value at $25,000 for the L Bonds. However, 7.25% of the sales proceeds went to pay for "Aggregate Commissions, Fees, and Expense Allowances." That means an investor immediately lost 7.25% at the point of sale. It was this money that paid the commissions and fees to the brokers and advisors selling the GWG-L Bond product.
This level of risk and complexity is where a FINRA-member brokerage firm (and its registered representative staff)'s responsibility to its customers comes into play.
If, for instance, a broker improperly recommended L Bond purchases to an investor whose objectives and risk tolerance preferences indicated a certain aversion to risk, or simply put a desire not to purchase significantly risky and illiquid alt investment products—and the broker nonetheless recommended, marketed, or sold these products to the customer—then that broker could be liable for the damages caused by their unsuitable recommendation.
This could also include misleading statements, misrepresentations, omissions of material facts (such as L Bonds' riskiness), as well as purchasing too many L Bonds and over-concentrating a client's portfolio or even purchasing unsuitable L Bonds without permission, or unauthorized use of discretion.
Brokerage firms can be liable for their representatives' misconduct, especially if the broker-dealer failed to adequately supervise or review the actions and transactions of its registered representatives.
If a broker or investment adviser unsuitably recommended purchasing GWG Holdings' L Bonds and you are experiencing losses or other financial damages as a result, please call an experienced FINRA arbitration attorney at The Law Offices of Jonathan W. Evans & Associates at (800) 699-1881 for an investigation and consultation.