Law Firm Investigating the Sale of GWG L Bonds to Retail Investors by Western International Securities, Inc.

**Update: June 16, 2022** On June 15, 2022, the United States Securities and Exchange Commission filed a lawsuit against Western International Securities, Inc., and several of its brokers, in California Central District Court in connection with approximately $13.3 million in L bonds sold to retail customers. The firm is accused of failing to perform due diligence regarding the inherent risks associated with L Bonds. The brokers included in the suit are Steven Graham, Andy Gitipityapon, Thomas Swan, Nancy Cole, and Patrick Egan.

The complaint alleges that although the prospectus for the June 2020 offering stated that L Bonds were only suitable for customers with “substantial financial resources,” Western International did not set any criteria or thresholds for its customers to invest in L Bonds. Western International Securities also did not restrict the sale of L Bonds to customers with certain risk profiles or investment objectives.

The complaint also alleges that the named brokers misunderstood important issues regarding GWG Holdings, Inc. and the GWG L Bonds, including that GWG significantly changed its business model beginning in 2018 and that GWG L Bonds were not directly collateralized by life insurance policies. As a result, the brokers recommended GWG L Bonds to retail customers without a reasonable basis to believe that the investments were in the customers’ best interest.

Iorio Altamirano LLP, a law firm that represents GWG L Bond investors in filing individual claims to recover investment losses, encourages all investors who purchased L Bonds through Western International Securities, Inc. to contact the law firm for a free consultation to evaluate their options. Collectively, Iorio Altamirano LLP has filed claims seeking to recover over $2.5 million in losses and damages from brokerage firms for the improper sale of GWG L Bonds.

Original Post:

Law Firm Investigating the Sale of GWG L Bonds to Retail Investors by Western International Securities, Inc.

Iorio Altamirano LLP, a securities arbitration law firm based in New York, NY, is investigating potential securities arbitration claims against Western International Securities, Inc. for its sale of L Bonds issued by GWG Holdings, Inc. Upon information and belief, Western International Securities, Inc. was a part of Emerson Equity LLC’s network of broker-dealers who sold the speculative, high-risk, and illiquid GWG L Bonds. Iorio Altamirano LLP has spoken to several retail investors who purchased GWG L Bonds through the recommendation of broker Dan Beech, who was registered with Western International Securities in Westlake Village, CA, from May 10, 2016, until March 9, 2022.

On April 20, 2022, GWG Holdings, Inc. filed for Chapter 11 bankruptcy, allowing GWG Holdings to propose a reorganization plan. However, many GWG L Bond investors, who have not received interest or maturity payments since January 2022, are skeptical that they will see a return of their invested capital. Investment News has reported that one anonymous GWG L bond investor estimates that the GWG L Bonds may now be worth 20 to 30 cents on the dollar.

According to the bankruptcy filings, the SEC has been investigating the sales practices related to GWG L Bonds. We believe that this investigation includes the sales practices of Emerson Equity and its regional broker-dealers, such as Western International Securities, Inc.

Brokerage firms like Western International Securities, Inc. are required to make investment recommendations that are suitable and in the best interest of their customers. Brokerage firms and financial advisors must also disclose all material facts and risks of a security when making a recommendation. Firms and brokers must also conduct reasonable due diligence on products they offer before recommending them to any clients. When a firm or advisor fails to meet these standards of conduct, they can be held liable for damages.

Investors who purchased the L Bonds offered by GWG Holdings are encouraged to contact Iorio Altamirano LLP for a free and confidential consultation and to review their legal rights. We can review and analyze potential claims and advise individuals of their legal rights without obligation or cost.

For the latest on Iorio Altamirano LLP’s investigation of GWG L Bonds, visit our firm’s investigation page: Iorio Altamirano LLP’s Investigation of GWG L Bonds.

About GWG L Bonds

An L bond is a financial product created by GWG. Initially, GWG pooled money from bond investors to purchase life insurance policies on the secondary market, pay the policy premiums, and then collect the death benefit when the insured individual passed away. However, beginning in 2018, GWG used the investor capital to invest in a new business model, which exposed the company to much risker alternative assets. Many GWG L Bond investors were utterly unaware that GWG materially reoriented its business model, which, in our view, made it a much bigger credit risk. Additionally, many GWG L bond investors were not told by their financial advisors that GWG used investor capital to pay out the high distributions owed to other GWG L Bond investors in a Ponzi-like scheme.

GWG Holdings offered the L Bonds with a maturity ranging from 2 to 7 years and paying an interest rate of 5.50% to 8.50%.

The L Bonds are speculative, high-risk, and illiquid private placement offerings. They are secured by the assets of GWG Holdings and a pledge of all of the common stock by its largest stockholders.

GWG L Bonds were likely not suitable for investors with a low-to-moderate risk tolerance or investors who had liquidity needs.

Investors who purchased GWG L Bonds should contact New York Securities arbitration law firm Iorio Altamirano LLP for a free and confidential consultation to review their legal rights.

Western International Securities, Inc. (CRD No. 39262)

Western International Securities, Inc. is an SEC-registered broker-dealer and investment advisor based in Pasadena, CA. The firm was founded in Colorado in April 1995 and has been a FINRA member since November 1995.

Western International Securities, Inc., which is currently licensed to sell securities in 53 U.S. states and territories, currently has a roster of approximately 456 registered brokers and investment advisors across the country.

According to the firm’s public disclosure report, it has been sanctioned 11 times by regulators for alleged misconduct. The most recent sanction was settled in 2021.

Steven R. Graham (CRD No. 1977736)

Steven Graham has been a dually registered broker and registered investment advisor with Western International Securities, Inc. in Valencia, CA, since September 4, 2020. Mr. Graham has 32 years of experience in the securities industry and has been associated with six different firms.

According to the SEC’s complaint against Western International and Mr. Graham (the “Complaint”), Mr. Graham recommended and sold over $1 million worth of GWG L Bonds to retail investors between July 2020 and April 2021, which generated approximately $32,500 in commissions. The Complaint alleges that Mr. Graham failed to comply with Regulation Best Interest’s Care Obligation and constitutes violations of Regulation Best Interest’s General Obligation. Accordingly, according to the Complaint, Mr. Graham violated Rule 15l-1(a)(1) of the Exchange Act, 17 CFR § 240.15l-1(a)(1).

The Complaint details Mr. Graham’s recommendations to two retail customers:

In or around November 2020, Mr. Graham recommended that a 79-year-old retired truck driver purchase $100,000 in a two-year GWG L Bond. The customer had a moderate risk tolerance and investment objectives that did not include speculation. The customer had limited general investment knowledge and limited knowledge of bonds. At the time of his GWG L Bond purchase, the customer’s annual income was $35,000, and his liquid net worth was $300,000. The GWG L Bonds comprised of 10% of the customer’s net worth and 33% of his liquid net worth. The GWG L Bond was held in the customer’s individual account. In the “rationale” section of the firm’s disclosure forms, Mr. Graham wrote in full: “Customer is seeking a high rate of interest from funds sitting in a bank savings at .05%. They will utilize the interest for supplemental income each month. The Complaint alleges that Mr. Graham did not specify why he believed that the GWG L Bonds were in the customer’s best interest, as opposed to many other investments that offered greater than .05% interest rates. The SEC contends that Mr. Graham’s bases for believing that the $100,000 GWG L Bond investment was in the customer’s best interest were unreasonable, vague, and generic. The Complaint alleges that Mr. Graham did not exercise reasonable diligence, care, and skill to have a reasonable basis to believe his recommendation of the GWG L Bonds was in the customer’s best interest. The Complaint also alleges that Mr. Graham’s supervisor and Western International’s compliance department failed to raise questions or concerns regarding the customer’s bond investment.
In or around January 2021, Mr. Graham recommended that a 65-year-old retiree purchase $100,000 in a 3-year GWG L Bond. The customer had a moderate risk tolerance and investment objectives that did not include speculation. The customer’s investor profile with the firm represented that he had no general investment knowledge and limited knowledge of bonds. The customer had an annual income of $85,000, a net worth of $1.1 million, and a liquid net worth of $500,000. The GWG L Bonds constituted 9% of the customer’s net worth and 20% of his liquid net worth. The GWG L Bond was held in the customer’s individual retirement account. In the “rationale” section of the firm’s disclosure forms, Mr. Graham wrote that the customer was “seeking an additional income stream to supplement his retirement income” and that he wanted to “leverage a small portion of his IRA portfolio to accomplish this.” However, as pointed out in the SEC’s Complaint, the GWG L Bond was not a “small portion” of the customer’s IRA portfolio. In actuality, the $100,000 GWG L Bond investment constituted 50% of the IRA held at Western International. Mr. Graham’s supervisor and Western International’s compliance department failed to identify the discrepancy. The Complaint alleges that Mr. Graham’s bases for believing that the $100,000 GWG L Bond purchase was in the customer’s best interest were unreasonable, vague, generic, and premised on an erroneous assumption. The SEC contends that Mr. Graham did not exercise reasonable diligence, care, and skill to have a reasonable basis to believe his recommendation was in the customer’s best interest. The Complaint also alleges that Mr. Graham’s supervisor and Western International’s compliance department failed to raise questions or concerns regarding the customer’s bond investment.

Finally, the Complaint alleges that although Mr. Graham understood that there had been a change in GWG’s business, he failed to take the necessary actions to understand the company’s new business model or assets.

Andy Ravi Gitipityapon (CRD No. 4092978)

Andy Gitipityapon has been a dually registered broker and registered investment advisor with Western International Securities, Inc. in Northridge, CA, since April 9, 2018. Mr. Gitipityapon has 22 years of experience in the securities industry and has been associated with five different firms.

According to the SEC’s complaint against Western International and Mr. Gitipityapon (the “Complaint”), Mr. Gitipityapon recommended and sold approximately $330,000 worth of GWG L Bonds to retail investors between July 2020 and April 2021, which generated approximately nearly $10,000 in commissions. The Complaint alleges that Mr. Gitipityapon failed to comply with Regulation Best Interest’s Care Obligation and constitutes violations of Regulation Best Interest’s General Obligation. Accordingly, according to the Complaint, Mr. Gitipityapon violated Rule 15l-1(a)(1) of the Exchange Act, 17 CFR § 240.15l-1(a)(1).

Specifically, with respect to Mr. Gitipityapon, the Complaint made the following allegations:

Mr. Gitipityapon took a training course on GWG L Bonds prior to the issuance of L Bonds in June 2020, which may have been the basis for his misunderstanding of important issues regarding GWG and the GWG L Bonds that were disclosed by GWG in the 2020 Prospectus and subsequent public filings.
Mr. Gitipityapon did not understand the nature of the collateral for GWG L Bonds and failed to appreciate that the life insurance policies themselves did not collateralize the GWG L Bonds.
Mr. Gitipityapon did not know how GWG, after it became entangled with Beneficient, made its money or whether Beneficient generated revenues.

The Complaint details one of the recommendations made by Mr. Gitipityapon. In or around August 2020, Mr. Gitipityapon recommended that a 54-year-old restaurant server invest $30,000 into a two-year GWG L Bond. The customer had a moderate risk tolerance, and her investment objectives did not include speculation. She had an annual income of $75,000, a net worth of $400,000, and a liquid net worth of $150,000. The customer’s $30,000 GWG L Bond represented 7.5% of her net worth and 20% of her liquid net worth. The GWG L Bond was purchased in her individual account. In the “rationale” section of the firm’s disclosure forms, Mr. Gitipityapon wrote in full: ” Client had a CD that came due and does not need the funds for a few years. She likes the interest rate of the bond and understands the risk of the GWG bond. This bond meets all of her need and objectives.” The SEC contends that Mr. Gitipityapon’s bases for believing that the GWG L Bond purchase was in the customer’s best interest were unreasonable, vague, and generic. Accordingly, Mr. Gitipityapon did not exercise reasonable diligence, care, and skill to have a reasonable basis to believe his recommendation of the GWG L Bonds was in the customer’s best interest. The Complaint also alleges that Mr. Gitipityapon’s supervisor and Western International’s compliance department failed to raise questions or concerns regarding the customer’s bond investment.

Thomas Brian Swan (CRD No. 1698430)

Thomas Swan has been a registered broker with Western International Securities, Inc. in Westlake Village, CA, since May 27, 2008. Since October 14, 2014, he has also been an SEC-registered investment advisor with the firm. Mr. Graham has 33 years of experience in the securities industry and has been associated with nine different firms.

According to Mr. Swan’s public disclosure report with FINRA, he has been the subject of at least two customer complaints. In addition, in 2005, the California Department of Insurance alleged that Mr. Swan breached his fiduciary responsibility. The matter was settled, and Mr. Swan paid a fine of $20,000.

According to the SEC’s complaint against Western International and Mr. Swan (the “Complaint”), Mr. Swan, a resident of Acme, Washington, recommended and sold approximately $297,000 worth of GWG L Bonds to retail investors between July 2020 and April 2021, which generated approximately $12,500 in commissions. The Complaint alleges that Mr. Swan failed to comply with Regulation Best Interest’s Care Obligation and constitutes violations of Regulation Best Interest’s General Obligation. Accordingly, according to the Complaint, Mr. Swan violated Rule 15l-1(a)(1) of the Exchange Act, 17 CFR § 240.15l-1(a)(1).

Specifically, with respect to Mr. Swan, the Complaint made the following allegations:

Mr. Swan took a training course on GWG L Bonds prior to the issuance of L Bonds in June 2020, which may have been the basis for his misunderstanding of important issues regarding GWG and the GWG L Bonds that were disclosed by GWG in the 2020 Prospectus and subsequent public filings.
Mr. Swan erroneously bellied that GWG was continuing to invest in life insurance policies after 2018.
Mr. Swan did not understand the risks of the GWG L Bonds. He erroneously described the L Bones as relatively safe when in fact, they contained a “high degree of risk.”
Mr. Swan did not understand the nature of the collateral for GWG L Bonds and failed to appreciate that the life insurance policies themselves did not collateralize the GWG L Bonds.

The Complaint details two of Mr. Swan’s GWG L Bond recommendations:

In or around August 2020, Mr. Swan recommended that a 66-year-old retiree invest $55,000 into a seven-year GWG L Bond. The customer had an annual income of $30,000, and her investment objectives did not include speculation. The GWG L Bonds comprised of 10% of the customer’s liquid net worth. She had previously informed Mr. Swan that she did not want any capital risk to the money that provides the income portion of her retirement savings. In the Client Disclosure Form that accompanied the customer’s GWG L Bond purchase, Mr. Swan described her as “a conservative investor.” Neither Mr. Swan’s supervisor nor Western International Securitas’s compliance department identified this discrepancy. During a previous review of her IRA investments with Mr. Swan, the customer had told him she wanted to earn income safely without risking her principal. The SEC contends that Mr. Swan’s bases for believing that the $55,000 GWG L Bond investment was in the customer’s best interest were unreasonable, vague, and unsupported. The Complaint alleges that Mr. Swan did not exercise reasonable diligence, care, and skill to have a reasonable basis to believe his recommendation of the GWG L Bonds was in the customer’s best interest. The Complaint also alleges that Mr. Swan’s supervisor and Western International’s compliance department failed to raise questions or concerns regarding the customer’s bond investment.
In or around August 2020, Mr. Swan recommended that another 66-year-old retiree invest $80,000 into a seven-year GWG L Bond. The customer had a moderate-conservatives risk tolerance and identified preservation of capital as one of her investment objectives, but not speculation. The customer had an annual income of $75,000, a net worth of $1.5 million, and a liquid net worth of $900,000. She had limited general knowledge about investments and limited knowledge of bonds. The GWG L Bonds were purchased in her individual account. The SEC contends that Mr. Swan’s bases for believing that the $80,000 GWG L Bond investment was in the customer’s best interest were unreasonable, vague, and unsupported. Accordingly, the Complaint alleges that Mr. Swan did not exercise reasonable diligence, care, and skill to have a reasonable basis to believe his recommendation of the GWG L Bonds was in the customer’s best interest. The Complaint also alleges that Mr. Swan’s supervisor and Western International’s compliance department failed to raise questions or concerns regarding the customer’s bond investment.

Nancy Ellen Cole (CRD No. 2900724)

Nancy Cole has been a dually registered broker and investment advisor with Western International Securities, Inc. in Sacramento, CA, since August 29, 2008. Ms. Cole has 24 years of experience in the securities industry and has been associated with five different firms, including one firm that has since been expelled from the industry by FINRA.

According to Ms. Cole’s public disclosure report with FINRA, she has been the subject of at least one customer complaint.

According to the SEC’s complaint against Western International and Mr. Swan (the “Complaint”), Ms. Cole recommended and sold approximately $250,000 worth of GWG L Bonds to retail investors between July 2020 and April 2021, which generated approximately $10,000 in commissions. The Complaint alleges that Ms. Cole failed to comply with Regulation Best Interest’s Care Obligation and constitutes violations of Regulation Best Interest’s General Obligation. Accordingly, according to the Complaint, Ms. Cole violated Rule 15l-1(a)(1) of the Exchange Act, 17 CFR § 240.15l-1(a)(1).

Specifically, with respect to Ms. Cole, the Complaint made the following allegations:

Ms. Cole took a training course on GWG L Bonds prior to the issuance of L Bonds in June 2020, which may have been the basis for her misunderstanding of important issues regarding GWG and the GWG L Bonds that were disclosed by GWG in the 2020 Prospectus and subsequent public filings.
Ms. Cole did not know about GWG’s business combination with Beneficent until several months after she had recommended GWG L Bonds to customers. At the time that she had sold $250,000 worth of GWG L Bonds to two customers, she erroneously believed GWG was continuing to invest in life insurance policies.
Ms. Cole did not understand the risks of the GWG L Bonds. She erroneously described the L Bones as relatively safe when in fact, they contained a “high degree of risk.”

The Complaint details Ms. Cole’s GWG L Bond recommendations to a married couple. In or around December 2020, Ms. Cole recommended that a married couple purchase $250,00 worth of two-, three-, five-, and seven-year GWG L Bonds. At the time of the recommendations, the customers were 67 and 61 years old. The 67-year-old customer was retired. Ms. Cole described the customers as “not risk-takers” and “relatively conservative.” Their investment objectives did not include speculation. They had limited general knowledge about investments and limited knowledge of bonds. Collectively, the married couple had an annual income of $106,000 and a liquid net worth of $760,000. The GWG L Bonds, which were held in personal retirement accounts and a joint investment account, comprised 33% of their liquid net worth. The SEC contends that Ms. Cole’s bases for believing that the $250,000 GWG L Bond investment was in the customers’ best interest were unreasonable. Accordingly, the Complaint alleges that Ms. Cole did not exercise reasonable diligence, care, and skill to have a reasonable basis to believe her recommendations of the GWG L Bonds were in the customers’ best interest.

Patrick Michael Egan (CRD No. 2973478)

Patrick Egan has been a registered broker with Western International Securities, Inc. in Pasadena, CA, and Glendora, CA, since January 22, 1998. Since July 30, 2007, he has also been an SEC-registered investment advisor with the firm. Mr. Egan has 24 years of experience in the securities industry and has been associated with two different firms.

According to the SEC’s complaint against Western International and Mr. Egan (the “Complaint”), Mr. Egan recommended and sold approximately $184,500 worth of GWG L Bonds to retail investors between July 2020 and April 2021, which generated at least $5,397 in commissions. The Complaint alleges that Mr. Egan failed to comply with Regulation Best Interest’s Care Obligation and constitutes violations of Regulation Best Interest’s General Obligation. Accordingly, according to the Complaint, Mr. Egan violated Rule 15l-1(a)(1) of the Exchange Act, 17 CFR § 240.15l-1(a)(1).

Specifically, with respect to Mr. Egan, the Complaint made the following allegations:

Mr. Egan took a training course on GWG L Bonds prior to the issuance of L Bonds in June 2020, which may have been the basis for his misunderstanding of important issues regarding GWG and the GWG L Bonds that were disclosed by GWG in the 2020 Prospectus and subsequent public filings.
Mr. Egan erroneously believed that GWG’s transactions with Beneficient were not significant.
Mr. Egan acknowledged that the 2020 Prospectus described the GWG L Bonds as high risk but disregarded that disclosure.
Mr. Egan did not understand the nature of the collateral for GWG L Bonds and failed to appreciate that the life insurance policies themselves did not collateralize the GWG L Bonds.
Mr. Egan acknowledged that he should have reviewed Beneficient’s financial statements and admitted he did not do so but rather erroneously assumed that Beneficient was profitable.

The Complaint details one of Mr. Egan’s GWG L Bond recommendations. In or around August 2020, Mr. Egan recommended that a 75-year-old retiree with a moderate-conservative risk profile invest $20,000 into a 3-year GWG L Bond. The customer had an annual income of $50,000, a net worth of $250,000, and a liquid net worth of $250,000. He did not include speculation as an investment objective and had limited knowledge of investments in general and of bonds in particular. The GWG L Bonds, which were held in the customer’s individual account, represented 8% of both his liquid and total net worth. In the “rationale” section of the firm’s disclosure forms, Mr. Egan wrote in full: “Client had extra cash in the bank and wanted to earn more interest than can be done in his bank. Client will also have a large cash balance in his bank account in addition to the $20,000 at GWG.” According to the Complaint, besides the rationale section of the Client Disclosure Form, Mr. Egan did not document anywhere his bases for believing that the $20,000 GWG L Bond purchase was in the customer’s best interest. In addition, Mr. Egan did not document why he chose to recommend the GWG L Bonds to the customer as opposed to many other investments that offered higher interest rates than a bank account. The SEC contends that Mr. Egan’s bases for believing that the $20,000 GWG L Bond investment was in the customer’s best interest were unreasonable and not supported by the facts. Accordingly, the Complaint alleges that Mr. Egan did not exercise reasonable diligence, care, and skill to have a reasonable basis to believe his recommendation of the GWG L Bonds was in the customer’s best interest. The Complaint also alleges that Mr. Egan’s supervisor and Western International’s compliance department failed to raise questions or concerns regarding the customer’s bond investment.

Dan Beech (CRD No. 6169844)

Dan Beech is a stockbroker registered with Western International Securities, Inc. in Westlake Village, CA, from May 10, 2016, to March 9, 2022.

Upon information and belief, while registered as a broker with Western International Securities, Inc., Mr. Beech recommended and sold GWG L Bonds to retail investors. Iorio Altamirano LLP is investigating potential securities arbitration claims arising out of Mr. Beech’s sales practices and Western International Securities, Inc.’s supervision of those sales practices.

Mr. Beech has eight years of experience in the securities industry and has been registered with five different firms. He is currently registered with Innovation Partners LLC.

According to Mr. Beech’s public disclosure report, he has had at least two customer complaints. In August 2021, a customer filed a written complaint alleging $62,500 in damages. Mr. Beech settled the matter for the total amount of the alleged damages. In 2019, a customer filed a lawsuit alleging that Mr. Beech made an unsuitable recommendation related to a Real Estate Investment Trust (“REIT”). The dispute was settled for monetary compensation by Western International Securities, Inc.

About Iorio Altamirano LLP

Iorio Altamirano LLP is a securities arbitration law firm located in New York, NY. We represent investors nationwide and vigorously pursue FINRA arbitration claims on behalf of investors to recover investment losses.

We have nearly 20 years of combined experience as securities arbitration lawyers and have helped investors recover investment losses in over 1,000 cases. Our firm will file a FINRA securities arbitration claim on your behalf on a contingency fee basis to try to recover your losses. If we do not obtain a recovery, you do not owe us a legal fee.

If you have invested in L Bonds offered by GWG Holdings through Western International Securities, Inc., contact securities arbitration lawyers August Iorio at august@ia-law.com or Jorge Altamirano at jorge@ia-law.com. Alternatively, you may call the firm toll-free at (855) 430-4010.

**Updates: June 16, 2021** This blog post has been modified from the original post to include individual sections on brokers Steven Graham, Andy Gitipityapon, Thomas Swan, Nancy Cole, and Patrick Egan.