GWG L Bonds Investors Concerned After GWG Announcement
Investors who own GWG L Bonds have grown increasingly concerned after GWG announced, in a SEC form 8-K filing, it would not pay investors dividends owed for January 15, 2022.
The SEC is investigating GWG Holdings (GWGH), a Dallas, Texas-based financial services company that sells alternative investments and life insurance. GWG L Bonds may be in financial trouble, that could lead to investors losing a significant amount of their principal investment.
The company has been late on deadlines to file its annual report, which caused NASDAQ to threaten to delist the company. In April, 2021, the company paused sales of their L Bonds.
The recent 8-K stated that the GWG’s board of directors authorized management to retain the services of a restructuring advisor. GWG’s stock has plummeted on the bad news, trading as low as $2.36 after starting 2022 at $9.60.
Investor Claims Against GWG Holdings And L Bonds
An L Bond is a type of bond issued by a life insurance company, which buys back the policy from the policyholder to finance the policy. L Bonds are supposed to offer higher yield than standard fixed income, publicly-traded bonds. A prospectus from GWG claimed that investors in the bonds could earn 5.5%-8.5% APR. Though bonds are typically viewed as low-risk investments that pay a steady income stream, L Bonds involve considerable speculation and risk. Because they are illiquid, investors aren’t able to easily sell them for cash. L Bonds aren’t publicly-traded, and don’t have the same regulatory requirements as publicly-traded bonds.
GWG Holdings sold billions of dollars of L Bonds in recent years, and the company relies “to a significant extent” on sales of L Bonds to provide liquidity, according to their 8-K. GWG stopped selling L Bonds for most of 2021 due to the late filing of its annual report with the SEC. The company resumed selling L Bonds in November, 2021, but experienced low sales.
GWG has said that the decision of its independent public accounting firm to decline to stand for reappointment would likely cause its 10-K to be filed later than the March, 2022 due date, and would result in another suspension in the sale of L Bonds.
Some investors have already started to pursue arbitration claims against their financial advisor or broker, alleging that the brokerage firm failed to conduct reasonable due diligence into GWG L Bonds, or that the product was unsuitable for their investor profile. At least one broker-dealer, Emerson Equity, works closely with GWG to help sell the bonds to the retail public. Among other allegations, investors claim their advisor told them that these bonds were safe, would preserve their principal, and would provide a steady income stream.
Recovering GWG L Bonds Losses Through FINRA Arbitration
Broker-dealers and advisory firms are supposed to recommend only suitable investments to their clients and perform due diligence into the products they sell them. FINRA-registered brokers and firms are subject to arbitration to resolve disputes. Colling Gilbert Wright & Carter is a nationally-recognized law firm that represents investors who have been the victims of investment fraud and stockbroker misconduct. Our firm represents investors nationwide and abroad in securities investment fraud cases.
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