GWG L Bond Investors May Have FINRA Arbitration Claims To Recover Their Losses
Giarrusso Law Group LLC continues its investigation into unsuitable recommendations by certain financial advisors to invest in “L Bonds” as issued by GWG Holdings, Inc. (GWG or the Company). You may be able to recover your losses through securities arbitration before the Financial Industry Regulatory Authority (FINRA) if you invested in L Bonds on the recommendation of a financial advisor who failed to inform you of the investment’s many risk components, or otherwise recommended the investment without a reasonable basis.
GWG is a financial services firm based in Dallas, Texas that owns and manages alternative assets through various subsidiaries. GWG’s primary business model in recent years has consisted of: (1) raising money via the issuance of L bonds to purchase life insurance policies (through secondary insurance markets), usually from elderly policyholders looking for immediate cash; and (2) collecting the life insurance policies’ payouts at some future date, for an anticipated profit.
Retail investors acquired their interest in GWG L Bonds through speculative and illiquid private placement offerings via a nationwide network of brokerage firms. Unfortunately for GWG’s retail investors, the Company has encountered recent regulatory and financial headwinds. The likelihood of recovery of significant investment principal is highly questionable. This is especially problematic for investors who were nearing or in retirement and seeking income, safety, and liquidity with respect to their retirement nest egg.
In October 2020, the U.S. Securities and Exchange Commission (SEC) began investigating GWG, including issuing a subpoena and submitting questions to the Company regarding its proprietary L Bonds. GWG later suspended L Bond sales for eight months in 2021 and again in January 2022.
On January 15, 2022, GWG defaulted on approximately $14 million in interest payments to its L Bond investors and, in lockstep with this, notified the SEC that the Company was retaining a restructuring advisor. A month later, in an investor communication dated February 14, 2022, GWG noted that sales, interest, maturity, dividend, and redemption payments would continue to remain paused.
GWG filed for Chapter 11 bankruptcy approximately two months later, on April 20, 2022.
Against this backdrop, GWG has failed to file certain SEC-required reports such as quarterly 10-Q and annual 10-K reports. The failure to file an annual report for 2021, in particular, triggered a violation of the listing rules of the NASDAQ Stock Market (NASDAQ). On May 18, 2022, NASDAQ announced that GWG’s common stock was being delisted from the exchange. GWG’s stock now trades in the Over the Counter (OTC) market, with a new ticker symbol of GWGHQ. As of this writing, GWGHQ trades for approximately $0.30 per share.
GWG’s NASDAQ delisting and distressed share price serve to underscore the inherently risky nature of GWG’s business model and, consequently, the inappropriate nature of L Bonds for many retail investors. Brokerage firms have a duty to perform adequate due diligence on any investment recommended to customers. Furthermore, financial advisors have a duty to disclose the risks associated with investment products, and to conduct a suitability analysis to determine if the investment meets an investor’s stated investment objectives and risk profile.
Investors who have suffered losses with a financial advisor who recommended GWG L Bonds may contact our office by telephone at (201) 771-1115 or by email at info@gialawgroup.com for a free, confidential consultation to learn more about their legal rights. The attorneys at Giarrusso Law Group LLC have extensive experience with handling all manner of claims on behalf of investors who have been solicited to invest in illiquid and speculative private placements including GWG L Bonds.