Investor Lawyers Blog
Investors in securities sold by GWG Holdings (“GWGH”), including L Bonds 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 recently failed to make a scheduled interest payment of over $10 million due on certain securities sold to investors known as “L Bonds”. GWGH’s common stock price has also plummeted by over half in 2022, from an opening price of $9.80 a share on January 3, 2022 to a closing price of $4.11 a share on January 25, 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.
Now, the Board of Directors of GWGH has reportedly authorized management to retain the services of a restructuring advisor, which the Company expects will be FTI Consulting, Inc., and Mayer Brown LLP as restructuring legal advisor to assist the Company’s Board of Directors and management in evaluating alternatives with respect to its capital structure and liquidity.
GWGH suspended its L Bonds sales effective as of January 10, 2022. GWG had previously suspended sales of L Bonds for eight months during 2021 due to the fact that it was unable to timely file its Annual Report with the SEC. GWG now says that its 2021 Annual Report also likely will not be filed on time.
GWGH’s independent accounting firm, Grant Thornton, has declined to stand for reappointment. Although it publicly stated that it did not have any disagreements during the year ended December 31, 2020 and through January 6, 2022 with GWGH concerning accounting principles or practices or financial statement disclosure, Grant Thornton also had previously stated as follows with respect to GWGH: “As of December 31, 2020, the design and operating effectiveness of controls over the selection, application and review of the implementation of accounting policies were not sufficient to ensure amounts recorded and disclosed were fairly stated in accordance with GAAP. This material weakness resulted in the Restatement.”
GWGH also 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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