Investor Lawyers Blog
Investors in securities sold by GWG Holdings (“GWGH”), including L Bonds, preferred stock, and common stock listed on Nasdaq under the ticker symbol GWGH, may have legal claims, including possible claims if their investment was recommended by a financial advisor who lacked a reasonable basis for the recommendation, or if the nature of the investment was misrepresented by the stockbroker or advisor.
GWGH L Bonds are high-yield life insurance bonds used to finance the purchase of life insurance on the secondary market. Any type of investment in the secondary life insurance market is an extremely risky investment. Further, default on the L Bonds seems to be imminent. According to its filings with the Securities and Exchange Commission (“SEC”), GWG has halted the sale of the L Bonds and failed to issue $10.35 million of interest payments and $3.25 million of principal payments to L Bond investors by the January 15, 2022 due date. If these payments are not made by February 14, 2022, GWG will be in default.
While GWCH reportedly has close to $1 billion in tangible assets, the company also has over $1.5 billion in outstanding L Bonds, plus $327.7 million in senior credit facilities. On August 1, 2021, GWG disclosed that its previous Annual and Quarterly reports for 2019 and 2020 were not reliable after consulting with the SEC’s Office of the Chief Accountant. GWGH also has announced that it would be late in completing and filing its Annual 10-K report with the SEC, which is due March 31, 2022.
GWGH is a Dallas-based financial services firm that offers a variety of ‘services including life insurance and alternative investments. GWGH sold millions of dollars’ worth of L Bonds over the past several years, including sales to public investors through brokerage firms. L Bonds are a financial product that purportedly offers higher yields than typical publicly traded bonds. L Bonds are sold by life insurance companies that buy back the policies from policyholders. The bonds are supposed to help finance the purchase of the policies. According to a prospectus published by GWGH for the offering of $2 billion of L Bonds, the bonds were sold with varying maturity terms ranging from 2 years to 7 years, with interest rates ranging from 5.50% to 8.50%.
In March 2021, GWGH notified the Securities and Exchange Commission (SEC) that it could not timely file its Forms 10-K and 10-Q, which are annual and quarterly financial reports and company disclosures. GWG said it needed additional time to complete these financial statements and related disclosures. This prompted a deficiency letter from Nasdaq in April 2021.
GWGH did not make the January 15, 2022 interest payment of approximately $10.35 million and principal payments of approximately $3.25 million with respect to its outstanding L Bonds.
Broker dealers are required to perform adequate due diligence on any investment they recommend. They must ensure that all recommendations are suitable for the investor. Recommendations should be in line with the investor’s age, risk tolerance, net worth, and investment experience. If brokerage firms fail to adequately disclose risks or make unsuitable investment recommendations can be held liable for investment losses.
Investors who wish to discuss a possible claim involving GWGH securities may contact a securities arbitration lawyer at Law Office of Christopher J. Gray, P.C. at (866) 966-9598 or via email at newcases@investorlawyers.net for a no-cost, confidential consultation. Attorneys at the firm are admitted in New York, Wisconsin and various federal courts around the country, and handle cases nationwide (in cooperation with attorneys located in those states if required by applicable rules).
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