Scott Silver Interviewed About Two Brokers’ TRO In A GWG L-Bonds FINRA Arbitration

Silver Law Group’s managing partner Scott Silver discussed a recent ruling from a California court that gave two brokers a temporary restraining order (TRO) against FINRA in arbitration over their sales of GWG Holdings’ illiquid L-Bonds.

“This appears to be a Hail Mary pass by two brokers who are taking a ‘never say die’ approach to arbitration,” Scott said in a recent AdvisorHub article. “In this case, FINRA’s position is correct, straightforward, and investor friendly.”

At issue is the suspension of the securities licenses for two North Carolina-based brokers, Michael S. Barrows (CRD# 2933260) and Eric J. Ludovico (CRD# 2932082.) The pair filed a complaint in California on November 13 that alleged FINRA had engaged in an “unjust and illogical misapplication of its own rules regarding suspension of its member’s license while a member’s action to vacate an adverse arbitration award is pending.”

The complaint refers to an arbitration order from October of 2023. A three-person FINRA arbitration panel issued an award of $1.03 million against both Barrows and Ludovico after they were found jointly liable for unsuitable sales recommendations of GWG L-Bonds to their customers. FINRA planned to suspend their licenses until the award is paid.

In their complaint, Barrows and Ludovico called FINRA’s attempt to suspend them “especially illogical” and that it “warrants injunctive relief.”  Because their attempt to vacate the award “remains pending and active,” the pair argued that they should “seek relief from FINRA’s threat to suspend their licenses.”  The brokers’ attorney, Seth Rubinson of Houston, argued that license suspension would cause “irreparable and catastrophic” harm to Barrows and Ludovico.

In an email, Rubinson wrote, “FINRA must treat licensure suspension with the utmost seriousness it deserves. My clients have an active vacatur case on appeal which should prevent licensure suspension contrary to FINRA’s position that only an appeal with supersedeas bond should do so.”

On Friday, November 15, Orange County Superior Court Judge David A. Hoffer issued the TRO that’s in effect until December 9. The hearing is scheduled on that date so that Judge Hoffer can hear both sides and decide on a permanent injunction.

In its answer, FINRA argued that both its own rules as well as California’s state law uphold the decision. A court order upholding the award would be a “final and enforceable” decision, with both brokers facing suspension if they fail to pay. “This action is simply an improper effort to stay a final judgment pending appeal, which is required as a matter of California law,” FINRA’s attorneys wrote in the opposition.

A separate Los Angeles court denied the brokers’ petition to vacate the award in October; the brokers have since filed a notice of intent to appeal that decision.

Did You Invest In GWG Holdings’ L-Bonds With Michael S. Barrows and Eric J. Ludovico?

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.