The recent GWG Holdings FINRA Arbitration case of Michael Lombardi vs. Greenberg Financial Group and David Sherwood is a sobering reminder of how negligent and improper investment recommendations in GWG L bonds have really impacted some investors.
“The hallmark of investment fraud is making unsuitable recommendations that enrich the advisor at the client’s expense. Financial advisors must always prioritize their clients’ interests, not their own pocketbooks at the expense of the clients.” Matthew Thibaut, InvestmentFraudLawyers.com.
Let me walk you through the crux of this matter and what it means for you as an investor.
GWG L Bond Case
Table of Contents
The allegations against Greenberg Financial Group (GFG) and David Sherwood are pretty straightforward.
The investor, Lombardi accused them of professional negligence, breach of fiduciary duty, fraud in providing investment advisory services, and breach of contract, among other claims. Lombardi’s investment in the ill-fated L Bonds issued by GWG Holdings, Inc. (GWG) is at the heart of the dispute.
Now, let’s delve into the nitty-gritty of this case. Lombardi had been a client of GFG since 2009. In 2018, GFG recommended GWG L Bond investments in one of Lombardi’s accounts, and these initial bond investments paid interest in a timely manner and were redeemed/matured without issue. However, in 2020, when Lombardi was directed to invest $80,000 into GWG L Bonds – that is where the trouble in this case appears to begin.
By 2020, GWG had disclosed financial records showing years of losses and negative cash flows, yet GFG and Sherwood continued to invest Lombardi’s money in GWG L Bonds, ignoring what were alleged to be glaring red flags.
The deteriorating GWG financials and unsustainable business model made the GWG L Bonds apotentially risky and/or potentially unsuitable investment for some investors.
The FINRA Arbitration Award reflects a finding that GFG and Sherwood breached their fiduciary duties to Lombardi by placing him in unsuitable investments, given GWG’s precarious financial condition. This breach resulted in Lombardi’s losses of $70,058.66 on the GWG L Bonds, a sum awarded to the Claimant, along with interest, costs, and attorney’s fees.
According to a study by the University of Chicago and FINRA, around 7% of financial advisors have a misconduct record, have you checked the record of your Financial Advisor recently?
Demystifying FINRA’s Role and Rules
Now, let’s shed some light on the role of FINRA (Financial Industry Regulatory Authority) and the rules that govern financial advisors. FINRA is a self-regulatory organization that oversees the conduct of brokers and brokerage firms in the United States. Some brokers use the title stockbroker, and others use the term financial consultant or financial adviser. Regardless of title, if they are registered with a FINRA broker-dealer firm, they are subject to FINRA jurisdiction. If you want to determine if your financial advisor was FINRA registered or if you have claims related to GWG L bond investments, call an experienced securities arbitration attorney. One such law firm is Haselkorn & Thibaut, P.A., and they have set up a nationwide hotline to assist GWG investors.
One of the primary functions of FINRA’s Office of Dispute Resolution is to provide an independent arbitration forum for resolving disputes between investors and their financial advisors or brokerage firms.
In this case, the arbitration was conducted through FINRA’s Office of Dispute Resolution, and the Arbitration Award is more than likely binding on all parties involved. There are narrow bases available to challenge such awards. For that reason, having the assistance of an experienced securities arbitration attorney can prove crucial for investors. Drafting the claim, presenting the claim, conducting discovery and evaluating the evidence are important, but so is the arbitrator selection process, as those are the individuals who ultimately decide the outcome of these cases.
FINRA’s regulatory rules are one source of of the myriad of laws, rules, regulations and policies that apply to financial advisors and firms, and how those rules apply and how they are designed to protect investors and what if any evidence needs to be presented to the arbitrators are all crucial factors as well in these claims. The common misconception is that as an investor in GWG you merely “show up” and tell your story. That rarely (if ever) works out well for the investors.
One of the critical rules at play here is the suitability rule, which requires financial advisors to recommend suitable investments for their clients based on factors such as investment objectives, risk tolerance, economic situation, and other potential factors.
Lessons Learned
The consequences of this case could be significant. While Arbitration Awards do not generally have no precedential weight of authority, but this Award could have a more far-reaching impact as it explains some of the analysis of the case and the claims as well as the defenses. Those types of details are often not included in an Arbitration Award, but that added insight in this case could prove instructive to future arbitrators.
One of the lessons is the importance of understanding the investments you’re being recommended and the financial health of the companies behind those investments. You trust your financial advisor to be the expert with experience to analyze those details before making an investment recommendation, and you expect them to do a reasonable job.
Another lesson is that the primary defense argument here appears to involve an attempt to shift the responsibility for the financial analysis and red flags back to the investor. The Arbitration Award suggests that would infer that the investor somehow knew more than the purported experts and professionals.
Final Thoughts:
In conclusion, the case of Michael Lombardi vs. Greenberg Financial Group and David Sherwood is a stark reminder to financial advisors and firms that sold GWG L Bond investments that if they acted negligently or improperly in the course of recommending the investments, there is a process by which investors can hold them accountable.
By learning from cases like this, we can become more informed and empowered investors, better equipped to navigate the complexities of the financial world.
Recourse for Investors: Recovering Losses from GWG Holdings
You may have legal recourse if you’re an investor who has suffered losses due to your investment in GWG Holdings’ L Bonds. The case of Michael Lombardi vs. Greenberg Financial Group and David Sherwood demonstrates that investors can successfully recover their losses through FINRA arbitration.
Investors misled or placed into unsuitable investments by their financial advisors can file a claim with FINRA. This self-regulatory organization provides a forum for resolving disputes between investors and their brokers or financial advisors. It is important that investors rely upon the assistance of an experienced securities FINRA arbitration attorney, as the industry is both complex and highly regulated, and it is very much a specialized area of the law as well as the legal process.
“Investors who have lost money due to the negligence or misconduct of their financial advisors in relation to GWG Holdings’ L Bonds may have a case that is ripe for FINRA arbitration,” says Matthew Thibaut, a partner at Haselkorn & Thibaut, P.A.
“Our flaw irm has extensive experience in representing investors in these types of cases and an excellent track record in helping investors ecover their losses.”
It’s important to note that there are time limitations for filing a FINRA claim, so investors should not delay seeking legal advice. “If you believe you have a claim, it’s crucial to act promptly,” advises Matthew Thibaut, another partner at the firm.
Our attorneys offer free consultations to help investors assess their options and determine the best action.” Call our nationwide hotline for GWG investors and speak with one of our attorneys today at 1-800-856-3352. The initial consultation is free, and cases taken on a contingency fee basis are no recovery/no fee.
In conclusion, investors who have suffered losses due to their investment in GWG Holdings L Bonds may have a path to recovery through FINRA arbitration. Working with experienced investment fraud lawyers like Haselkorn & Thibaut can help investors navigate this process and seek the compensation they deserve.
