An investor from California has filed a Financial Industry Regulatory Authority (FINRA) arbitration claim for recovery of investment losses on account of unsuitable recommendations made by broker Peter Po of NI Advisors.
The investment that led to losses for this investor was L Bonds of GWG Holdings (NASDAQ: GWGH), a known high-risk product considered unsuitable for inexperienced investors.
GWG Holdings filed for bankruptcy protection under Chapter 11 this past week.
Haselkorn & Thibaut (InvestmentFraudLawyers.com) is currently investigating GWG Holdings and broker-dealers that sold their products. For a free consultation about investment loss recovery options, including security fraud lawsuits or FINRA claims, investors can call 800-856-3352.
The GWG Holdings NI Advisor Complaint
NI Advisors was the financial firm that which the investor had entrusted his money. It was one of several firms having an arrangement with Emerson Equity, the managing broker-dealer, for selling GWG’s L Bonds for a commission. Cupertino, the CA-based broker Peter T. Po, who was advising this investor, persuaded him to invest his entire available liquidity into an L Bond.
Po assured the investor regarding the safety of the investment and of receiving returns on the principal invested. Viewed in the light of the investor’s lack of comfort with English, and inability to understand the written disclosures, the broker’s actions are difficult to justify. Unsurprisingly, the investor suffered significant losses as GWG unraveled.
Po, like many other brokers affiliated with NI Advisors, operated, without onsite supervision, out of a one-broker office. Recommending an investment that is illiquid, of dubious parentage, and from a not well-known company, was an irresponsible act. Additionally, the risks attendant with such an investment, with repayments being almost in the nature of a Ponzi-like scheme, were never shared with the customer. A responsible supervisor or company could not have been expected to approve the recommendations made by him to the investor.
Overview of L Bonds of GWG
Known as a speculative, risky investment, L Bonds issued by GWG Holdings were issued for varying maturities that were fixed when issuing, and at a fixed coupon rate. Some distinguishing features of L Bonds:
• They are issued for different maturities, varying between 6 months and 7 years.
• The longer the maturity period, the higher the rate of interest it pays.
• The right to repurchase without prior notice rests with GWG at all times, even if the transaction results in a loss to the investor.
• The investment is illiquid. It is not a traded security and hence cannot be sold in the market. Its value, therefore, is also not transparent, as there are no market transactions taking place.
Though apparently collateralized, when one considers that the collateral is merely GWG’s interest in subsidiary companies, the value of the collateral is questionable.
GWG Distress signals
Failure to file the annual report with the Securities Exchange Commission (SEC) was a sign of trouble for the beleaguered GWG Holdings since the end of 2020. This failure had come just a couple of months after the company was subpoenaed over concerns regarding some issues, such as accounting problems. GWG, without disclosing this development, had continued to sell L Bonds and managed to sell another $200 million of them.
GWG Holdings started emitting signals of distress when it stopped the issuance of fresh L Bonds, long before April 2021. Owing to investors’ $3.25 million in principal and $10.35 million in interest, GWG Holdings defaulted in February 2022.
The alternative asset firm had L Bonds outstanding to the tune of $1.6 billion on the 31st of December, 2020, apart from senior debt valued at $200 million. The amount owed to Bondholders increased 560 percent over a 4-year period. The amount of cash needed to service premium payments on policies had risen to $500 million annually during the same 4-year period. The company had far less cash than what was needed.
It notified the SEC on the 1st of April, 2022 that it had, even by that date been unable to file the required annual report for 2021, along with relevant financial statements.
Recourse for GWG L Bond investors
Haselkorn & Thibaut (InvestmentFraudLawyers.com) has been engaged with investors, helping them recover millions of dollars from financial advisors as well as broker-dealers, lost as a result of their fraudulent and negligent actions. They are engaged with several investors of L Bonds in the same capacity.
Our firm is investigating other claims of losses by investors. If you have lost money in L Bonds or know someone who has, we recommend you contact one of them L Bond attorneys for a case evaluation and to understand your legal options.
For a free consultation about investment loss recovery options, including investment fraud lawsuits or FINRA claims, investors can call 800-856-3352.