Silver Law Group represents GWG L Bonds investors in FINRA arbitration claims to recover their investment losses. Contact us at 800-975-4345 for a no-cost, confidential consultation.
What Are GWG L-Bonds?
Since 2012, GWG Holdings created and sold more than $2 billion L-Bonds, based on the re-purchase of life insurance policies from their original policyholders. GWG Holdings offered cash to holders of life insurance policies at below face value but above surrender value, then continued to pay the premiums. The company then awaits the payout at the time of the original policyholder’s death, anticipating payouts greater than they paid for the policy. Depending on the policyholder, a purchaser may be waiting a long time for a return on investment.
Anyone buying L-Bonds would be required to hold the bonds until their “maturity.” There is no secondary market to sell them, making them illiquid. Therefore, the only way to cash out is to resell the L-Bonds back to the company minus a fee. But with the company’s bankruptcy earlier this year, that option is no longer available.
These bonds were not created for those with a conservative investor profile. Most of the investors were elderly, retired individuals with little to no investment experience. But that didn’t stop Dempsey Lord Smith and other broker-dealers from selling them to unsuitable customers, particularly retired and elderly investors, for commissions as much as 8%.
Not A Safe, Secure Alternative Investment
Broker-dealers are required to make investment recommendations that are suitable and in the best interest of their customers. They must thoroughly research and vet each investment before making recommendations. This is known as “due diligence.” Brokers and broker dealers are also required disclose all material facts and risks of any security when making recommendations to their clients. When a broker or broker-dealer fails in these requirements, they can be held liable for their clients’ losses.
GWG’s L-Bonds had several issues that rendered them wholly unsuitable for the investors who bought them. At the outset, GWG pooled their investors funds to purchase these life insurance policies on the secondary market and collect the payouts after the death of the original policyholders. That changed in 2018, when the company began using investor funds for investment into new business models. The investors were never notified of this change, making the investments increasingly risky. At this point, GWG also began using investor funds to pay distributions to other investors, like a Ponzi scheme.
Is Dempsey Lord Smith Liable?
It appears that Dempsey Lord Smith—like many other broker dealers who rushed into selling L-Bonds—may not have done proper due diligence on the investment prior to selling. They also misrepresented L-Bonds to older investors with no prior investment experience. Their customers went on their broker’s recommendations, assured that they had high returns and were safe.
GWG Holdings marketed their L-Bonds to retailers nationwide through a nationwide network of broker-dealers. Dempsey Lord Smith knew that L-Bonds were not suitable for the customers to whom they were recommending them.
Earlier this year, FINRA sanctioned the Rome, GA-based broker-dealer for its involvement in a different private placement that included fines and restitutions of $100,000.
FINRA requires brokers and broker-dealers to make suitable recommendations to clients based on their income and investment history. For clients who have experienced losses due to misrepresentation and unsuitable recommendations, filing a FINRA arbitration action may help recover some or all lost funds.
If you decide to file an arbitration action with FINRA, we strongly recommend working with a securities law attorney who has experience in arbitration with FINRA as well as lawsuits and other actions.
Silver Law Group represents investors in FINRA arbitration claims against Dempsey Lord Smith and other broker-dealers alleging that they did not perform reasonable due diligence into GWG L Bonds or that the bonds were unsuitable for their investment profile.
Silver Law Group Represents Investors On A Contingency Fee Basis
If you invested in L-Bonds from GWG Holdings from Dempsey Lord Smith, contact Silver Law Group at (800) 975-4345 or by email at ssilver@silverlaw.com.
Silver Law Group is a nationally recognized law firm with experience representing investors in securities arbitration and investment fraud cases. Scott Silver, Silver Law Group’s managing partner, is the chairman of the Securities and Financial Fraud Group of the American Association of Justice.
Our attorneys are admitted to practice in both New York and Florida and represent investors nationwide. Most cases are handled on a contingency fee basis, so nothing is owed unless we recover your money for you.