FINRA

Former Morgan Stanley Broker Michael R. Neill Suspended

Published on: May 10, 2023 | by Iorio Altamirano

The Financial Industry Regulatory Authority (“FINRA”) has suspended former Morgan Stanley broker Michael R. Neill from the securities industry for one month and fined him $5,000. Mr. Neill consented to the suspension after FINRA alleged that Mr. Neill violated FINRA Rules 4511 and 2010 by altering representative codes for 219 trades from January 2014 through March 2018, causing Morgan Stanley to maintain inaccurate books and records.

Origination of the Matter

This case originated from FINRA’s review of the Form U5 (Uniform Termination Notice for Securities Industry Registration) that was filed by Morgan Stanley after it terminated Mr. Neill.

Centaurus Financial Sanctioned and Fined by Regulators for Supervisory Failures for the Second Time in Three Months

Published on: May 10, 2023 | by Iorio Altamirano

In a recent regulatory case, on May 5, 2023, the Financial Industry Regulatory Authority (FINRA) Office of Hearing Officers imposed sanctions on Centaurus Financial, Inc. and its financial advisor Donnie Ingram for engaging in unsuitable and unethical practices, as well as supervisory failures. Centaurus Financial, Inc. was censured and ordered to pay a $50,000 fine and $388,962 in restitution to harmed customers. Donnie Ingram was suspended from association with any FINRA member firm in any capacity for six months, fined $15,000, and ordered to pay $388,962 in restitution to harmed customers. The sanctions were the result of Ingram’s unsuitable recommendations to customers to purchase Unit Investment Trusts (UITs), Bluerock Residential Growth REIT Inc. (BRG), and MacKenzie Realty Capital, Inc. (MAC) at higher costs when there were lower cost options available.

Earlier this year, in February 2023, Centaurus Financial also agreed to pay a $750,000 civil penalty after the SEC charged the firm in connection with the unsuitable recommendation of variable interest rate structured products to retail customers. The SEC’s order found that Centaurus failed to implement, and its branch manager failed to follow, Centaurus’ customer-specific suitability procedures and that Centaurus violated the broker-dealer books and records provisions of the federal securities laws. The SEC’s order found that Centaurus violated Sections 17(a)(2) and 17(a)(3) of the Securities Act of 1933 (“Securities Act”) and Section 17(a) of the Securities Exchange Act of 1934 (“Exchange Act”) and Rules 17a-4(e)(5), 17a-4(f)(2), and 17a-3(a)(17)(i)(B)(3) thereunder. The SEC concluded that Centaurus failed reasonably to supervise the firm’s brokers.

Financial institutions like Centaurus Financial, Inc. must properly supervise financial advisors and customer accounts. Brokerage firms must establish and maintain a reasonably designed system to oversee account activity, such as recommendations to purchase alternative investments, such as GWG L Bonds, UITs, and REITS, to ensure compliance with securities laws and industry regulations. When a brokerage firm fails to supervise its financial advisors or the investment account activity sufficiently, it may be liable for investment losses sustained by customers.

What L Bondholders Need to Know About GWG Holdings, Inc.’s Chapter 11 Plan

Published on: April 22, 2023 | by Iorio Altamirano

On April 21, 2023, United States Bankruptcy Judge Marvin Isgur approved GWG’s Disclosure Statement that will be sent to creditors to vote on GWG’s Chapter 11 Plan (the “Plan”). The approval of the Disclosure Statement comes one year and one day after GWG filed for Chapter 11 bankruptcy protection in the United States Bankruptcy Court for the Southern District of Texas.

The Plan will now be sent to creditors, including L Bondholders, to accept or reject the Plan. GWG’s Plan is essentially an “orderly” liquidation. If the Plan is accepted, GWG will be liquidated in accordance with the terms of the Plan. If the Plan is rejected, GWG will likely be liquidated in accordance with Chapter 7 of the United States Bankruptcy Code. Either way, GWG will be liquidated and will not continue as a business. Creditors will need to decide which path of liquidation will be more favorable to them.

We believe that it is highly unlikely that L Bondholders will obtain a quick and full recovery through either the Chapter 11 Plan or a Chapter 7 liquidation.

GWG Bankruptcy Update (April 17, 2023): Liquidation Options Become Clearer as Recovery for Bondholders Remain Uncertain

Published on: April 17, 2023 | by Iorio Altamirano

**Update: April 22, 2023** On April 21, 2023, the Bankruptcy Court approved GWG’s further revised Disclosure Statement for its Second Amended Reorganization Plan. The Plan will now be sent to creditors, including L Bondholders, to accept or reject the Plan. For more information, please visit our most recent blog post: What L Bondholders Need to Know About GWG Holdings, Inc.’s Chapter 11 Plan.

Original Post:

GWG Bankruptcy Update (April 17, 2023): Liquidation Options Become Clearer as Recovery for Bondholders Remain Uncertain

Heath Goldstein and Western International Securities: Iorio Altamirano LLP Investigating the Sale of GWG L Bonds – Clark Summit, PA

Published on: April 6, 2023 | by Iorio Altamirano

Iorio Altamirano LLP, a securities arbitration law firm based in New York, NY, is investigating potential securities arbitration claims against Western International Securities, Inc. and its Pennsylvania-based broker, Heath Goldstein, for its sale of L Bonds issued by GWG Holdings, Inc. Western International Securities was part of a network of broker-dealers who sold the speculative, high-risk, and illiquid GWG L Bonds to retail investors.

GWG Holdings, Inc., which stopped making interest and maturity payments to GWG L Bond investors in January 2022, filed for Chapter 11 bankruptcy in April 2022.

According to court filings, in the four years before the bankruptcy filing, Western International Securities received at least $3 million in commissions from GWG Holdings for selling L Bonds to retail investors, and the firm sold approximately $13.3 million in L Bonds to retail investors between June 2020 and January 2022.

Roshan Perera: SEC Charges Former Aegis Capital Broker with Fraud – Long Island, NY

Published on: March 27, 2023 | by Iorio Altamirano

The Securities and Exchange Commission has charged former Aegis Capital Corp. broker Surage Kamal Roshan Perera and his firm, Janues Capital Incorporated, with fraud and obtaining emergency relief in court, including a temporary restraining order and an asset freeze. The SEC alleges that from February 2022 until March 2023, the Bellrose, NY broker defrauded at least one investor out of millions of dollars by lying about investment opportunities and strategies concerning training losses and using funds received from others to give the victim the promised returns in a Ponzi-like scheme. According to his public disclosure report, Mr. Perera was registered as an investment broker with Aegis Capital Corp until September 12, 2022.

In a separate action, the U.S. Attorney’s Office for the Eastern District of New York filed criminal charges against Mr. Perera. He was arrested on Monday, March 27, 2023, and arraigned on a 16-count indictment charging him with securities fraud, investment advisor fraud, wire fraud, and money laundering, in connection with a scheme to induce an investor to purchase stock in companies that traded on the NASDAQ and New York Stock Exchange (NYSE).

Customers of Mr. Perera or Aegis Capital Corp. who have suffered financial losses as a result of Mr. Perera’s negligence or misconduct can contact New York securities arbitration law firm Iorio Altamirano LLP for a free and confidential consultation and review of their legal rights.

GWG Bankruptcy Update (March 14, 2023): GWG Appears to be Headed Toward Liquidation

Published on: March 14, 2023 | by Iorio Altamirano

**Update – April 22, 2023:** On April 21, 2023, the Bankruptcy Court approved GWG’s further revised Disclosure Statement for its Second Amended Reorganization Plan. The Plan will now be sent to creditors, including L Bondholders, to accept or reject the Plan. For more information, please visit our most recent blog post: What L Bondholders Need to Know About GWG Holdings, Inc.’s Chapter 11 Plan.

**Update – April 13, 2023:** On April 13, 2023, GWG submitted a revised Disclosure Statement for its Second Amended Reorganization Plan that provides creditors with more information about potential recoveries. However, the amount bondholders will recover under the proposed restructuring plan remains extremely uncertain and will likely take multiple years to bear fruit. To read more, check out our latest blog post: GWG Bankruptcy Update (April 17, 2023): Liquidation Options Become Clearer as Recovery for Bondholders Remain Uncertain

As GWG Holdings, Inc. continues to navigate the bankruptcy process, Iorio Altamirano LLP urges L bondholders to contact the firm to evaluate their other legal options to recover their investment losses. Iorio Altamirano LLP represents GWG L Bondholders throughout the country in FINRA arbitration claims against the brokerage firms and financial advisors that recommended and sold the L Bonds to retail investors.

Broker-Dealers Sold GWG L Bonds Using Aggressive and Misleading Marketing

Published on: February 1, 2023 | by Iorio Altamirano

In a court filing made on December 15, 2022, in the Chapter 11 bankruptcy court, the Official Committee of Bondholders of GWG Holdings Inc. (“Bondholder Committee”) alleged that broker-dealers sold GWG L Bonds using aggressive and misleading marketing even after it became clear that GWG’s business was failing and that the only way to repay bondholders was to continue to sell more L Bonds to existing and additional retail investors. The Bondholder Committee, which represents the interests of GWG L Bondholders in the Chapter 11 bankruptcy proceeding, alleged that “GWG was a class Ponzi Scheme.”

However, much of the court filing, including specific allegations of wrongdoing, was filed under seal.

On February 1, 2023, the United States Bankruptcy Court for the Southern District of Texas unsealed several significant court filings, including a draft adversary legal complaint against certain current and/or former directors and officers of GWG Holdings, Inc., individuals, and corporate entities affiliated with or controlled by Brad Heppner, transferees of certain fraudulent transfers, and key broker-dealers who marketed and sold L Bonds.

SEC Finds That Some Broker-Dealers Are Using Outdated, Incomplete, and Inaccurate Risk Disclosures

Published on: January 31, 2023 | by Iorio Altamirano

On January 30, 2023, the United States Securities and Exchange Commission (“SEC”) published a Risk Alert including its observations from Broker-Dealer Examinations Related to Regulation Best Interest (“Reg BI”). The risk alert highlights deficiencies observed during regulatory examinations, as well as weak practices by broker-dealers that could result in deficiencies.

Reg BI requires that brokerage firms and brokers act in the best interest of a retail customer at the time of a recommendation to purchase, sell, or hold a security or investment strategy. The broker-dealer and broker must place their retail customers’ interest ahead of their own financial interest. The standard of care also applies to recommendations of account types.

Reg BI requires compliance with four component obligations:

“GWG Was a Classic Ponzi Scheme” – Official Committee of Bondholders of GWG Holdings, Inc.

Published on: December 28, 2022 | by Iorio Altamirano

**Update: February 1, 2023** On February 1, 2023, the United States Bankruptcy Court for the Southern District of Texas unsealed several significant court filings, including a draft legal complaint. The complaint was filed by the Official Committee of Bondholders of GWG Holdings Inc. (“Bondholder Committee”) against certain current and/or former directors and officers of GWG Holdings, Inc., individuals, and corporate entities affiliated with or controlled by Brad Heppner, transferees of certain fraudulent transfers, and key broker-dealers who marketed and sold L Bonds. The Bondholder Committee represents the interests of GWG L Bondholders in the Chapter 11 bankruptcy proceeding.

The unsealed complaint has revealed the following allegations, which were made after the bondholder committees reviewed documents and information that are currently not in the public domain:

Together with other insiders, Brad Heppner was the mastermind behind a Ponzi scheme whereby GWG, in conjunction with its broker-dealer network, sold hundreds of millions worth of L Bonds to retail investors even when it became clear that the only way to repay those investors was to sell yet more L Bonds to more retail investors.