In an article in Investment News, Silver Law Group founder Scott Silver weighed in on a FINRA arbitration action involving a broker-dealer and financial advisor who sold a client GWG Holdings’ illiquid L-Bonds.
“The arbitrators in these FINRA claims over the past decade have been seeing cases around product suitability for the clients,” Scott said. “A lot of them involve these illiquid alternative investments like GWG bonds.”
Mr. Silver continued, “The question is why anyone would recommend this product to a client. This case is not about the customer, it’s about the product. The arbitrators appear shocked to hear billions of dollars of this stuff is sold.”
These investments were never suitable for individual investors, but that didn’t stop brokers and broker-dealers from selling them. In the continuing fallout over L-Bonds, investors have been filing FINRA arbitration claims against the broker-dealers who sold the L-Bonds to them. FINRA arbitrator Richard Kent Mahrle commented that based on the company’s shaky financial situation, L-Bonds were “not a suitable investment for the [client,] or perhaps anyone.”
Silver Law Group Recovers GWG Losses
Silver Law Group tried one of the first cases in the country to obtain a substantial recovery for a GWG investor against a brokerage firm. As top securities and investment fraud attorneys, Silver Law Group advocated on behaf of a victim who was assured that GWG was a safe and secure investment. After 30 years representing investors, Scott Silver highlighted that if due diligence was reasonably conducted, any brokerage firm would have concluded that “GWG bonds are not suitable for anybody.”
In the GWG arbitration highlighted in the article, the arbitration involved broker-dealer Greenberg Financial Group and the financial advisor David Sherwood, who ignored GWG red flags and neglected their fiduciary duty to their client.
Mahrle awarded nearly $100,000 to the client, Michael Lombardi, who first bought $80,000 of GWG L bonds in 2018. Two years later, he rolled them over and was supposed to be paid 5.5% interest. The principal was to be paid at the end of the period.
“By the time [Greenberg Financial] procured L Bonds for claimant’s account in 2020, GWG had shown years of losses and large negative cash flows,” Mahrle wrote in his decision. “It was also in the process of joining with another company with the goal of diversifying its business and bringing in resources.”
Lombardi’s award was $102,000 in damages plus fees, along with interest, which included:
- $70,000 in compensatory damages
- $25,000 in attorney’s fees
- $7,500 in costs
Mahrle agreed that both Greenberg and Sherwood owed a fiduciary duty and one of loyalty to the client. However, Mahrle did not award punitive damages to Lombardi against Greenberg and Sherwood, claiming there was no factual basis for doing so.
The collapse of GWG Holdings and their L-Bonds has led to many FINRA arbitration claims filed by investors. As a result, some broker-dealers have been forced to close their doors because they could not pay judgments, leaving clients with no way to recover their losses.
Did You Invest In GWG L Bonds?
Silver Law Group represents investors in securities and investment fraud cases. Our lawyers are admitted to practice in New York and Florida and represent investors nationwide to help recover investment losses due to stockbroker misconduct. If you have any questions about how your account has been handled, call to speak with an experienced securities attorney. Most cases are handled on a contingent fee basis, meaning that you won’t owe us until we recover your money for you. Contact us today at (800) 975-4345 and let us know how we can help.