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In October 2024, a FINRA arbitration panel ordered a former financial advisor to pay $91,800 in compensatory damages to an investor in GWG L Bonds. The advisor represented himself (pro se) and was also ordered to pay $2,540 in costs and $28,061 in attorneys’ fees under Michigan law. The award represents another recovery for investors through FINRA arbitration after the collapse of GWG Holdings.
How GWG Raised Billions Through L Bond Sales
To fund its operations, GWG Holdings raised more than $1.6 billion from investors through the sale of so-called “L Bonds.” The company claimed these bonds were secured by life insurance assets and offered attractive yields — typically between 5.5% and 8.5% — with maturities ranging from two to seven years. Investors who didn’t act before maturity saw their bonds automatically renewed.
In practice, the L Bonds were risky and difficult to exit. They lacked a secondary market and were callable by GWG without penalty. Over half of all outstanding bonds were rolled over, trapping many conservative investors in long-term, illiquid holdings.
After GWG redirected significant capital to its affiliate, Beneficient Company Group, L.P., regulators began scrutinizing the company’s disclosures and bond offerings. In October 2020, the SEC issued subpoenas concerning accounting practices and potential misrepresentations in L Bond sales, eventually extending its probe to certain broker-dealers involved in those transactions.
By late 2021, GWG Holdings’ financial instability had become undeniable. Its auditor’s resignation preceded a missed $3.25 million interest payment in January 2022. Just three months later, GWG filed for Chapter 11 bankruptcy. Current projections from the Wind Down Trust suggest bondholders may recover only 2–3% of what they invested, representing catastrophic losses for many retirees and conservative investors.
Panel Findings
The investor alleged violations of federal securities laws, breach of fiduciary duty, fraud, negligence, breach of contract, and violations of Michigan’s securities and consumer protection statutes.
The panel found the financial advisor liable, noting he failed to participate in discovery and claimed he had no documents in his possession. The award included compensatory damages, costs, and attorneys’ fees under Michigan law. The investor’s request for punitive damages was denied.
- Suitability (FINRA Rule 2111): Brokers must have a reasonable basis to believe an investment fits a client’s financial situation, objectives, and risk tolerance. GWG L Bonds often failed this test.
- Supervision (FINRA Rule 3110): Firms must supervise their brokers’ recommendations and sales. Panels regularly scrutinize firms that fail to monitor sales of complex and illiquid products.
The Award
The arbitration panel awarded the investor:
- $91,800 in compensatory damages
- $2,540 in costs
- $28,061 in attorneys’ fees under Michigan Comp. Laws § 451.2509(2)(a) and 445.911(2)
The panel denied punitive damages and all other relief not expressly granted.
Awards like this show that brokerage firms and individual advisors can be held liable for unsuitable sales of GWG L Bonds. Investors are recovering damages, costs, and attorneys’ fees through arbitration.
Why This Award Matters
This case is notable because the panel held an individual financial advisor, representing himself pro se, personally liable for GWG-related sales. The claim related to investments in GWG Redeemable Preferred Stock, GWG L Bonds, and GK Investments Holdings II, LLC.
It also underscores how state securities laws, such as Michigan’s, can provide investors with recovery of attorneys’ fees in addition to damages.
Even though GWG filed for bankruptcy, given the trustee’s projection that bondholders may recover only 2–3% of principal invested, investors can still pursue claims against the brokers and firms that sold the bonds. Arbitration panels have awarded compensatory damages, interest, costs, and attorneys’ fees in multiple cases. Read more about GWG L Bonds in our GWG L Bonds Claims page. GWG L Bonds are also one example of the risks associated with Alternative Investments, which are often complex and unsuitable for retail investors.
Key Takeaway for Investors
Awards like this show that brokerage firms and individual advisors can be held liable for unsuitable sales of GWG L Bonds. Investors are recovering damages, costs, and attorneys’ fees through arbitration.
The financial advisor’s decision to proceed pro se also illustrates the risks for investors who try to represent themselves without experienced counsel. FINRA arbitration is highly specialized, with strict deadlines and unique procedures in the arbitration selection process.
Contact Altamirano PLLC About GWG L Bond Claims Today
If you invested in GWG L Bonds and have losses, call Altamirano PLLC today. Our Principal, Jorge Altamirano, has handled more than 1,500 FINRA arbitration claims and continues to represent GWG investors nationwide in recovering their losses. Many investors were told these bonds were “safe” or “low-risk,” but in reality they were high-risk, complex, illiquid, and unsuitable for investors, including retirees and conservative investors.
Call us at (212) 220-6556 to discuss your options. We handle cases on a contingency fee basis, which means you do not owe us a legal fee unless we recover for you.
Contact Jorge Altamirano, Principal of Altamirano PLLC
One World Trade Center, 85th Floor
New York, NY 10007
(212) 220-6556
[email protected]
Securities claims are time-sensitive. Harmed investors are encouraged to act quickly and contact Altamirano PLLC to speak with an experienced securities arbitration lawyer.
