Securities Arbitration Lawyer Blog
What You Need to Know:
- On July 31, 2024, the SEC announced that it had reached an agreement with Western International Securities and five of its registered representatives to settle an ongoing lawsuit arising out of the sale of high-risk and speculative L Bonds issued by the now-bankrupt GWG Holdings, Inc.
- On July 28, 2024, the SEC fined broker-dealer LifeMark Securities Corp. for failing to comply with Regulation Best Interest connected with recommending GWG L Bonds to retail customers between July 2020 and January 2022 without exercising reasonable diligence, care, and skill to understand the potential risks, rewards, and costs associated with the recommendations.
- On July 29, 2024, the SEC filed a lawsuit against Garrett Moretz, a LifeMark Securities Corp. broker, alleging that he fraudulently sold high-risk and speculative GWG L Bonds to customers by misrepresenting them as “guaranteed.”
- Retail Investors who purchased GWG L Bonds are encouraged to contact the GWG L Bond lawyers at Iorio Altamirano LLP to review their legal rights to recover their investment losses.
Western International Securities Agrees to Settle Lawsuit with the SEC
On July 31, 2024, the SEC announced that it had reached an agreement with Western International Securities and five of its registered representatives to settle an ongoing lawsuit arising out of the sale of high-risk and speculative L Bonds issued by the now-bankrupt GWG Holdings, Inc.
The SEC filed its complaint on June 15, 2022, that the brokerage firm and several of its representatives violated Regulation Best Interest by failing to perform due diligence regarding the inherent risks associated with L Bonds issued by GWG Holdings, Inc. and recommending the L Bonds to its customers. The alleged violations were made in connection with the sale of approximately $13.3 million in L Bonds sold to retail customers.
To read more about the allegations, please see our previous blog post: Law Firm Investigating the Sale of GWG L Bonds to Retail Investors by Western International Securities, Inc.
As part of the settlement, which requires court approval, Western International agreed to disgorge $34,468 in commissions it received in connection with the transactions at issue. The brokerage firm also agreed to pay a civil fine of $160,000. The financial penalties represent a small portion of commissions that the firm and its brokers received in selling GWG L Bonds to retail investors. According to court records, Western International received at least $3 million in commissions from GWG Holdings for selling L Bonds to retail investors between April 2018 and April 2022.
Investors who purchased GWG L Bonds should know that they will not be receiving monetary compensation from the SEC’s settlement. Instead, they will need to file their own independent securities arbitration claim to seek recovery.
GWG L bond investors should contact our law firm to review their legal options. Customers may be entitled to compensation without paying any out-of-pocket fees or costs through a contingency fee arrangement with securities arbitration law firm Iorio Altamirano LLP.
SEC and LifeMark Securities Corp Settle GWG L Bond-Related Charges
Western International Securities is not the only broker-dealer to settle GWG L Bond-related charges with the SEC this week. On July 28, 2024, the SEC announced that it had reached a settlement with broker-dealer LifeMark Securities Corp. The settlement was reached in anticipation of the SEC initiating administrative and cease-and-desist proceedings connected with Regulation Best Interest violations arising out of the sale of GWG L Bonds.
According to the SEC, between July 2020 and January 2022, LifeMark Securities and one of its registered representatives failed to comply with Regulation Best Interest’s Care Obligation, Exchange Act Rule 15l-1(a)(2)(ii), when the registered representative recommended GWG L Bonds to retail customers without exercising reasonable diligence, care, and skill to understand the potential risks, rewards and costs associated with their recommendations.
Specifically, the SEC alleged that LifeMark Securities, through its broker, unreasonably disregarded, dismissed, misunderstood, or failed to take reasonable steps to understand significant disclosures and information regarding GWG and L Bonds contained in prospectuses and SEC filings. Instead, the broker allegedly relied on LifeMark Securities’ approval of L Bonds without question or inquiry. For example, according to the SEC, the broker did not know what was meant by GWG’s statement in the June 2020 Prospectus that L Bonds were only suitable for people with substantial financial resources and did nothing to find out prior to recommending L Bonds to retail customers.
The SEC also alleged that the broker failed to comply with the customer-specific prong of Regulation’s Best Interests Care Obligation by recommending investing $50,000 into an illiquid 5-year GWG L Bond to a 63-year-old semi-retiree with a moderate risk tolerance and a documented investment objective of preservation of capital. The broker supposedly did not know and could not explain how it was in the customer’s best interest to buy an illiquid 5-year L Bond when at the time he made the recommendation, there was “substantial doubt” about GWG’s ability to continue as a going concern for the next 12 months following the filing of its 2020 Form 10-K.
LifeMark Securities consented to a civil monetary penalty of $85,000 and a disgorgement of $4,410 in commissions.
Unfortunately, sanctions such as these do not put money back into the pockets of retail investors who lost money due to failures by firms and brokers in selling GWG L Bonds.
However, retail investors who purchased GWG L Bonds based on the recommendation of their brokers are not without recourse and should contact our GWG L Bond lawyers for a free and confidential consultation to review their legal rights.
SEC Charges LifeMark Securities Corp. Broker with Fraud Related to the Sale of GWG L Bonds
On July 29, 2021, the Securities and Exchange Commission filed a lawsuit against another LifeMark Securities Corp. broker related to the sale of GWG L Bonds. The complaint, filed in Federal Court in Charlotte, NC, alleged that broker Garrett Moretz fraudulently sold high-risk and speculative GWG L Bonds to customers by misrepresenting them as “guaranteed” from at least September 2019 until about August 2020.
For example, the SEC’s complaint alleges that the broker sent emails to customers that contained material misrepresentations, such as:
- “Are you looking for a great guaranteed rate of return and payout on your money?”
- “We have fully guaranteed investment/income options available in 2-, 3-, 5-, and 7-year terms.”
- “These are guaranteed to pay the specified rate of return MONTHLY for the predetermined period after which you get your full investment returned.”
- “These are all great opportunities for folks that want a steady rate of return and guaranteed payout.”
The complaint also alleges that Mr. Moretz represented to another customer that the bonds were “safe” and “guaranteed.’ GWG L Bonds were neither. Instead, they were speculative, high-risk, illiquid, high-commission, and unrated bonds.
Mr. Moretz is facing charges of violating Section 17(a) of the Exchange Act of 1933, Section 10(b) of the Securities Exchange Act of 1934, and Rule 10b-5 thereunder.
About the L Bonds
GWG L Bonds were speculative, high-risk, illiquid, and unrated alternative investments suitable only for customers with substantial resources.
Brokerage firms are required to make investment recommendations that are in the best interest of their customers. Financial advisors also have an obligation to be truthful and disclose all material facts and risks to customers when making investment recommendations. Firms and brokers must also conduct reasonable due diligence on the securities they offer before recommending them to customers. Iorio Altamirano LLP is investigating whether brokerage firms and their brokerages met these obligations connected with their sale of L Bonds to retail investors.
About Iorio Altamirano LLP
Iorio Altamirano LLP is a securities arbitration law firm in New York, NY. We represent investors nationwide and vigorously pursue FINRA arbitration claims on behalf of investors to recover investment losses.
Iorio Altamirano LLP was at the forefront of the investigation into the GWG L Bonds starting in late 2021 and has already helped investors recover over $2.3 million in losses.
GWG L Bond investors should contact securities arbitration law firm Iorio Altamirano LLP to review their legal options. The firm will review the terms of investors’ GWG L Bond investments at no cost and provide a free consultation. Customers may be entitled to compensation without paying any out-of-pocket fees or costs through a contingency fee arrangement with securities arbitration law firm Iorio Altamirano LLP. To set up an evaluation, email securities arbitration attorneys August Iorio at august@ia-law.com or Jorge Altamirano at jorge@ia-law.com. Alternatively, call the firm toll-free at (855) 430-4010.