SEC Settles with Emerson Equity and Tony Barouti Over GWG L Bond Sales: What Investors Need to Know

The U.S. Securities and Exchange Commission (SEC) has announced significant settlements with Emerson Equity, LLC—the managing broker-dealer for the now-defunct GWG Holdings, Inc. (“GWG”) L Bond program. It also settled with Tony Barouti, one of the nation’s most prolific L Bond sales representatives. These enforcement actions provide further confirmation of what Iorio Law PLLC has been investigating and litigating for years: many GWG L Bond sales violated federal securities laws and broker-dealer obligations to investors.

For over three and a half years, Iorio Law PLLC has represented numerous GWG L Bond investors nationwide, recovering more than $3.5 million through FINRA arbitration against multiple brokerage firms. With the GWG bankruptcy leaving investors with mere pennies on the dollar—as little as $26.94 per $1,000 invested—these SEC settlements underscore the urgency for harmed investors to explore additional recovery through securities arbitration.

For more information, please visit our GWG L Bond Investor Recovery Center.

The SEC’s Findings Against Emerson Equity, LLC

According to the SEC’s settled order (SEC Release No. 34-103674), Emerson Equity, as GWG’s managing broker-dealer, played a central role in distributing nearly $2 billion in L Bonds to retail investors across the country. The SEC found that:

• Violated Reg BI’s Care Obligation: Emerson Equity willfully violated the customer-specific prong of Regulation Best Interest’s Care Obligation for selling GWG L Bonds to investors who had very little investment experience.
• Supervisory Failures: Emerson Equity approved the sale of GWG L Bonds, ignoring red flags, including that Tony Barouti was inputting the same information on investor suitability forms for each client regardless of their individual situations.
• Violated Reg BI’s Compliance Obligation: Emerson Equity willfully violated Regulation Best Interest’s Compliance Obligation by failing to adopt and implement written policies and procedures to comply with Regulation Best Interest. For example, Emerson Equity’s written policies and procedures relating to the Care Obligation did not provide any guidance for how to evaluate retail customers’ investment profiles.

As part of the settlement, Emerson agreed to a cease-and-desist order, a censure, and to pay civil penalties and disgorgement totaling millions of dollars.

In addition to these findings, Iorio Law PLLC is investigating Emerson Equity’s sales and supervisory practices and whether the brokerage firm breached its duties. The conduct in question, includes:

• Inadequate Due Diligence: Whether Emerson Equity failed to conduct reasonable due diligence into GWG and the L Bond offering, particularly after GWG materially changed its business model in 2018 by shifting from life settlements to alternative asset investments with The Beneficient Company Group.
• Misleading Sales Practices: Whether Emerson Equity allowed L Bond sales to continue despite red flags—including SEC investigations, multiple auditor resignations, and missed SEC filings—that signaled serious liquidity and solvency risks.
• Conflicts of Interest and Incentives: Whether Emerson Equity and its associated brokers prioritized commissions as high as 8% on L Bond sales over their customers’ best interests.
• Supervisory Failures: Whether Emerson Equity did not reasonably supervise its network of selling brokers to ensure compliance with suitability and Regulation Best Interest (Reg BI) obligations.

The SEC’s Findings Against Tony Barouti

In a separate settled order (SEC Release No. 34-103675), the SEC sanctioned Tony Barouti, a Los Angeles-based registered representative who was one of the top sellers of GWG L Bonds.

The SEC found that Barouti:

• Violated Reg BI’s Care Obligation: Willfully violated the customer-specific prong of Regulation Best Interest’s Care Obligation for selling GWG L Bonds to investors who had very little investment experience.
• Submitted Inaccurate Forms: Had a practice of completing inaccurate Investor Suitability Questionnaire forms for his clients, many of whom were at or near retirement age. The SEC found that the Investor Suitability Questionnaires for a sample of 10 customers each stated that the customer had “Extensive (10+ years)” of investment experience in all listed asset classes, including but not limited to “Options/Derivatives,” “Venture Capital,” and “Commodities.” These forms did not accurately represent the actual investment experience of these customers. At least four of the customers had very little investment experience and did not know what products constituted options, derivatives, or venture capital.

Barouti agreed to be barred from the securities industry for a period of time and to pay a combination of disgorgement, prejudgment interest, and civil penalties.

In addition to these findings, Iorio Law PLLC is investigating Tony Barouti’s sales practices. Based on conversations with dozens of Mr. Barouti’s clients, the law firm’s investigation has found that Barouti:

• Sold L Bonds Without a Reasonable Basis: Recommended GWG L Bonds to retail customers without conducting adequate due diligence into the product’s risks, liquidity constraints, and changes in GWG’s business model.
• Failed to Disclose Material Risks: Did not fully and fairly disclose the speculative nature of the bonds, the lack of direct collateralization by life insurance policies, and GWG’s deteriorating financial condition.
• Ignored Suitability Concerns: Sold L Bonds to investors—including seniors and retirees—whose investment objectives, risk tolerance, and liquidity needs were incompatible with the product.

How This Confirms What We’ve Been Saying for Years

Our GWG L Bond Investor Recovery Center has long documented how brokerage firms—including Emerson Equity—ignored glaring red flags when selling these high-risk, illiquid bonds:

• Business Model Shift: In 2018, GWG transformed into a risky alternative asset company by merging with and ceding control to The Beneficient Company Group. Many investors were never told this.
• Financial Distress: SEC filings from 2019 onward showed delayed reporting, accounting issues, and auditor resignations—warning signs any competent due diligence review would have caught.
• Ponzi-Like Use of Proceeds: GWG used investor capital to pay interest and redeem earlier bonds, masking liquidity problems.
• Default and Bankruptcy: GWG defaulted on its L Bond obligations in January 2022 and filed for Chapter 11 bankruptcy three months later.

The SEC’s findings against Emerson Equity and Barouti align directly with our own investigation and what our clients have experienced: unsuitable recommendations, material misrepresentations, and failures to supervise.

Why FINRA Arbitration Is Still the Best Path for Recovery

While the SEC’s settlements are important, they do not compensate all individual investors for their losses. Regulatory fines are paid to the government, not to the harmed customers. That’s why FINRA arbitration claims remain the most effective route to recover GWG L Bond losses.

Key points for investors:

• Separate from Bankruptcy: Arbitration claims target the brokerage firm that recommended and sold the L Bonds—not GWG Holdings itself—so they are not affected by the bankruptcy discharge.
• Strong Precedent: Iorio Law PLLC has already recovered over $3.5 million for GWG investors in arbitration claims against more than 25 different broker-dealers.
• High Win Rates: According to FINRA statistics, GWG L Bond cases have produced monetary awards in 85% of cases that went to a final hearing—nearly three times the average investor win rate.
• Time Limits Apply: FINRA claims generally must be filed within six years of the investment, and in some cases sooner.

Brokerage Firms That Sold GWG L Bonds

While Emerson Equity was the managing broker-dealer, it relied on a nationwide selling network, including:

• Centaurus Financial, Inc.
• Western International Securities, Inc.
• Aegis Capital Corp.
• Arete Wealth Management, LLC
• Lifemark Securities Corp.
• Moloney Securities Co., Inc.
• Newbridge Securities Corporation
• Coastal Equities, Inc. (now Realta Equities, Inc.)
• Cabot Lodge Securities LLC
• And many others

If your brokerage firm is on this list—or even if it is not—you may have a valid claim.

What Investors Should Do Now

If you purchased GWG L Bonds through Emerson Equity, Tony Barouti, or any other broker:

1. Gather Documentation: Collect account statements, trade confirmations, offering documents, and any written communications with your broker.
2. Act Quickly: The longer you wait, the greater the risk that your claim may be barred by time limits.
3. Get a Free Case Review: At Iorio Law PLLC, we offer free, confidential consultations and work on a contingency fee basis—no recovery, no fee.

About Iorio Law PLLC’s GWG L Bond Representation

• Experience: Representing GWG investors nationwide since 2022.
• Proven Results: Over $3.5 million recovered for GWG investors through FINRA arbitration.
• Customer Satisfaction: ★★★★★ “August represented my associate and me in the GWG arbitration and accomplished what we thought was impossible. He successfully tracked down the elusive owner of a firm—who had sold the company shortly after our issue arose—and secured a fair settlement for us. Another law firm had already told me the case would be a ‘waste of their time,’ but Attorney Iorio took it on and was a bulldog.” – Allan F.
• Leadership: Founder August M. Iorio is a Director on the Board of the Public Investors Advocate Bar Association (PIABA) and has handled more than 700 securities arbitration cases.
• Nationwide Reach: Based in New York City, representing clients in all 50 states.

Take Action

The SEC’s settlements with Emerson Equity and Tony Barouti confirm a disturbing truth: many GWG L Bond sales violated core investor protection rules. But investors will not receive compensation from these regulatory actions. To recover your losses, you must take action.

📞 Call: (646) 330-4624
📧 Email: info@iorio.law
📍 Location: One World Trade Center, 85th Floor, New York, NY 10007
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Your fight is our fight. We are committed to holding negligent brokers accountable and helping you reclaim your financial future.