William King’s FINRA Sanction: A Closer Look

The Financial Industry Regulatory Authority (“FINRA”) has suspended former Merrill Lynch broker William King (CRD No. 1432593) for 30 days and assessed a $5,000 monetary fine. According to FINRA Letter of Acceptance, Waiver, and Consent No. 222077401201, between January 6, 2021, and January 5, 2023, William King exercised discretion over 204 trades across the accounts of four Merrill Lynch customers without prior written authorization. This conduct violated FINRA Rule 3260(b), which prohibits discretionary trading without explicit client consent, and Rule 2010, which mandates high standards of commercial honor.

FINRA and Mr. King entered into a Letter of Acceptance, Waiver, and Consent on March 3, 2025.

Unauthorized trading often occurs in non-discretionary accounts, where a customer retains discretion. In non-discretionary accounts, brokers must obtain a customer’s permission every time before placing a trade.

Unauthorized trading is an unethical and illegal practice. It is also a violation of securities rules and regulations and can cause enormous harm to customers.

Merrill Lynch terminated Mr. King in April 2026 following allegations of unsuitable and unauthorized trading. This came after he managed a reported $1.4 billion in client assets, raising questions about the firm’s oversight of such a high-profile broker.

A Troubling Pattern: Analyzing King’s Customer Disputes

A review of King’s FINRA BrokerCheck report reveals a staggering 29 customer disputes over his 30-year career, with 24 filed since 2022 alone. This surge in complaints coincides with his final years at Merrill Lynch and paints a troubling picture of systemic issues. Let’s break down the disputes and their outcomes:

• Total Disputes: Mr. King has been the subject of 29 customer complaints, with 24 initiated between 2022 and March 2025 (current date). These recent cases likely stem from the same period of unauthorized and unsuitable trading flagged by Merrill Lynch and FINRA.
• Settled Cases: 13 of the customer disputes have resulted in monetary settlements.
• Pending Cases: 1 dispute remains pending, where a customer has alleged an unsuitable investment strategy, unauthorized trading, misrepresentation, omission of material facts, and that the Financial Advisor was not acting in their best interest in 2020.
• Denied/Closed Without Action: 10 cases were denied or closed, often with no payout. Most of these complaints were direct written and verbal complaints made to Merrill Lynch, and no legal action was taken. These individuals may still be able to pursue recovery and should consult with an attorney.

Analysis of Settlements vs. Damages: In the settled cases with disclosed amounts, investors recovered an average of 28% to 30% of their requested damages. For example, the following settlements have been disclosed:

• • May 2023: Claimed damages of $300,000; settled for $85,000 (28% of requested).
  • August 2022: Claimed damages of $500,000; settled for $150,000 (30% of requested).
  • October 2022: Claimed damages of $1,000,000; settled for $275,000 (27.5% of requested).

What Went Wrong? The Role of Brokerage Oversight

King’s case raises red flags about Merrill Lynch’s supervision. How could a broker with a $1.4 billion book engage in 204 unauthorized trades across multiple accounts without detection? FINRA Rule 3110 requires firms to establish robust supervisory systems, yet King’s actions slipped through the cracks for two years. His resignation—framed as “voluntary” but tied to serious allegations—further suggests a pattern of firms distancing themselves from liability rather than addressing root causes.

The sheer volume of customer disputes since 2022 (24 in three years) is extraordinary, even for a seasoned broker. Compare this to the industry average: studies suggest only about 7-8% of brokers have misconduct disclosures over their careers. King’s record far exceeds this, signaling a chronic issue that Merrill Lynch arguably failed to curb.

Investor Takeaways: Protecting Your Portfolio

King’s case is a wake-up call for investors. Here’s how you can safeguard your financial future:

1. Vet Your Broker: Use FINRA’s BrokerCheck to review a broker’s history. King’s 29 disputes were public knowledge—red flags that savvy investors could have spotted.
2. Monitor Your Accounts: Unauthorized trading, like King’s 204 trades, often goes unnoticed without regular scrutiny. Demand written authorization for discretionary actions.
3. Know Your Rights: If you suspect misconduct, FINRA arbitration can recover losses from brokers and firms. Claims may include negligent supervision against firms like Merrill Lynch for failing to oversee their advisors.
4. Seek Legal Help: A securities arbitration attorney can analyze your case, quantify losses, and pursue maximum recovery—especially when settlements fall short, as seen in King’s disputes.

Holding Firms Accountable

Merrill Lynch’s role cannot be overlooked. Firms have a legal duty to supervise brokers and protect clients from harm. When they falter, investors can pursue claims for damages caused by inadequate oversight. King’s $5,000 fine and 30-day suspension may deter individual misconduct, but they do little to address systemic failures or compensate victims. Arbitration offers a path to hold both brokers and firms accountable, potentially yielding awards far exceeding FINRA’s sanctions.

Act Now: Don’t Let Misconduct Cost You

William King’s story—of unauthorized trades, a flood of customer disputes, and a quiet exit from Merrill Lynch—illustrates the risks of unchecked broker behavior. If you’ve worked with King or another advisor whose actions mirror this pattern, you may have a claim. At Iorio Law PLLC, we specialize in FINRA arbitration, fighting for investors against firms like Merrill Lynch. With 24 of King’s disputes arising since 2022 and settlements averaging just 28-30% of claimed damages, the need for skilled representation is clear.

Contact us today for a free consultation. Visit our website or call (646) 330-4624 to discuss how we can help you recover losses from broker misconduct. Don’t let your investments become another statistic—let us fight for the justice you deserve.

• On July 31, 2024, the SEC announced that it had reached an agreement with Western International Securities and five of its registered representatives to settle an ongoing lawsuit arising out of the sale of high-risk and speculative L Bonds issued by the now-bankrupt GWG Holdings, Inc.
• On July 28, 2024, the SEC fined broker-dealer LifeMark Securities Corp. for failing to comply with Regulation Best Interest connected with recommending GWG L Bonds to retail customers between July 2020 and January 2022 without exercising reasonable diligence, care, and skill to understand the potential risks, rewards, and costs associated with the recommendations.
• On July 29, 2024, the SEC filed a lawsuit against Garrett Moretz, a LifeMark Securities Corp. broker, alleging that he fraudulently sold high-risk and speculative GWG L Bonds to customers by misrepresenting them as “guaranteed.”
• Retail Investors who purchased GWG L Bonds are encouraged to contact the GWG L Bond lawyers at Iorio Altamirano LLP to review their legal rights to recover their investment losses.

Western International Securities Agrees to Settle Lawsuit with the SEC

On July 31, 2024, the SEC announced that it had reached an agreement with Western International Securities and five of its registered representatives to settle an ongoing lawsuit arising out of the sale of high-risk and speculative L Bonds issued by the now-bankrupt GWG Holdings, Inc.

The SEC filed its complaint on June 15, 2022, that the brokerage firm and several of its representatives violated Regulation Best Interest by failing to perform due diligence regarding the inherent risks associated with L Bonds issued by GWG Holdings, Inc. and recommending the L Bonds to its customers. The alleged violations were made in connection with the sale of approximately $13.3 million in L Bonds sold to retail customers.

To read more about the allegations, please see our previous blog post: Law Firm Investigating the Sale of GWG L Bonds to Retail Investors by Western International Securities, Inc.

As part of the settlement, which requires court approval, Western International agreed to disgorge $34,468 in commissions it received in connection with the transactions at issue. The brokerage firm also agreed to pay a civil fine of $160,000. The financial penalties represent a small portion of commissions that the firm and its brokers received in selling GWG L Bonds to retail investors. According to court records, Western International received at least $3 million in commissions from GWG Holdings for selling L Bonds to retail investors between April 2018 and April 2022.

Investors who purchased GWG L Bonds should know that they will not be receiving monetary compensation from the SEC’s settlement. Instead, they will need to file their own independent securities arbitration claim to seek recovery.

GWG L bond investors should contact our law firm to review their legal options. Customers may be entitled to compensation without paying any out-of-pocket fees or costs through a contingency fee arrangement with securities arbitration law firm Iorio Altamirano LLP.

SEC and LifeMark Securities Corp Settle GWG L Bond-Related Charges

Western International Securities is not the only broker-dealer to settle GWG L Bond-related charges with the SEC this week. On July 28, 2024, the SEC announced that it had reached a settlement with broker-dealer LifeMark Securities Corp. The settlement was reached in anticipation of the SEC initiating administrative and cease-and-desist proceedings connected with Regulation Best Interest violations arising out of the sale of GWG L Bonds.

According to the SEC, between July 2020 and January 2022, LifeMark Securities and one of its registered representatives failed to comply with Regulation Best Interest’s Care Obligation, Exchange Act Rule 15l-1(a)(2)(ii), when the registered representative recommended GWG L Bonds to retail customers without exercising reasonable diligence, care, and skill to understand the potential risks, rewards and costs associated with their recommendations.

Specifically, the SEC alleged that LifeMark Securities, through its broker, unreasonably disregarded, dismissed, misunderstood, or failed to take reasonable steps to understand significant disclosures and information regarding GWG and L Bonds contained in prospectuses and SEC filings. Instead, the broker allegedly relied on LifeMark Securities’ approval of L Bonds without question or inquiry. For example, according to the SEC, the broker did not know what was meant by GWG’s statement in the June 2020 Prospectus that L Bonds were only suitable for people with substantial financial resources and did nothing to find out prior to recommending L Bonds to retail customers.

The SEC also alleged that the broker failed to comply with the customer-specific prong of Regulation’s Best Interests Care Obligation by recommending investing $50,000 into an illiquid 5-year GWG L Bond to a 63-year-old semi-retiree with a moderate risk tolerance and a documented investment objective of preservation of capital. The broker supposedly did not know and could not explain how it was in the customer’s best interest to buy an illiquid 5-year L Bond when at the time he made the recommendation, there was “substantial doubt” about GWG’s ability to continue as a going concern for the next 12 months following the filing of its 2020 Form 10-K.

LifeMark Securities consented to a civil monetary penalty of $85,000 and a disgorgement of $4,410 in commissions.

Unfortunately, sanctions such as these do not put money back into the pockets of retail investors who lost money due to failures by firms and brokers in selling GWG L Bonds.

However, retail investors who purchased GWG L Bonds based on the recommendation of their brokers are not without recourse and should contact our GWG L Bond lawyers for a free and confidential consultation to review their legal rights.

SEC Charges LifeMark Securities Corp. Broker with Fraud Related to the Sale of GWG L Bonds

On July 29, 2021, the Securities and Exchange Commission filed a lawsuit against another LifeMark Securities Corp. broker related to the sale of GWG L Bonds. The complaint, filed in Federal Court in Charlotte, NC, alleged that broker Garrett Moretz fraudulently sold high-risk and speculative GWG L Bonds to customers by misrepresenting them as “guaranteed” from at least September 2019 until about August 2020.

For example, the SEC’s complaint alleges that the broker sent emails to customers that contained material misrepresentations, such as:

• “Are you looking for a great guaranteed rate of return and payout on your money?”
• “We have fully guaranteed investment/income options available in 2-, 3-, 5-, and 7-year terms.”
• “These are guaranteed to pay the specified rate of return MONTHLY for the predetermined period after which you get your full investment returned.”
• “These are all great opportunities for folks that want a steady rate of return and guaranteed payout.”

The complaint also alleges that Mr. Moretz represented to another customer that the bonds were “safe” and “guaranteed.’ GWG L Bonds were neither. Instead, they were speculative, high-risk, illiquid, high-commission, and unrated bonds.

Mr. Moretz is facing charges of violating Section 17(a) of the Exchange Act of 1933, Section 10(b) of the Securities Exchange Act of 1934, and Rule 10b-5 thereunder.

About the L Bonds

GWG L Bonds were speculative, high-risk, illiquid, and unrated alternative investments suitable only for customers with substantial resources.

Brokerage firms are required to make investment recommendations that are in the best interest of their customers. Financial advisors also have an obligation to be truthful and disclose all material facts and risks to customers when making investment recommendations. Firms and brokers must also conduct reasonable due diligence on the securities they offer before recommending them to customers. Iorio Law PLLC is investigating whether brokerage firms and their brokerages met these obligations connected with their sale of L Bonds to retail investors.

About Iorio Law PLLC

Iorio Law PLLC is a securities arbitration law firm in New York, NY. We represent investors nationwide and vigorously pursue FINRA arbitration claims on behalf of investors to recover investment losses.

August M. Iorio, managing attorney of Iorio Law PLLC, was at the forefront of the investigation into the GWG L Bonds starting in late 2021 and has already helped investors recover over $3.5 million in losses.

GWG L Bond investors should contact securities arbitration law firm Iorio Altamirano LLP to review their legal options. The firm will review the terms of investors’ GWG L Bond investments at no cost and provide a free consultation. Customers may be entitled to compensation without paying any out-of-pocket fees or costs through a contingency fee arrangement with securities arbitration law firm Iorio Altamirano LLP. To set up an evaluation, email securities arbitration attorneys August Iorio at august@ia-law.com or Jorge Altamirano at jorge@ia-law.com. Alternatively, call the firm toll-free at (646) 330-4624.

The customer complaints are primarily FINRA securities arbitration complaints that were brought by GWG L Bond investors who were sold speculative, high-risk, illiquid, high-commission, and unrated GWG L Bonds by the firm’s brokers, including Tony Barouti. More than half of Emerson Equity’s GWG L Bond-related customer disputes arise out of recommendations made by Mr. Barouti.

Although Emerson Equity’s legal fees and settlements have surpassed $6 million, the cost represents less than one-third of the $20.1 million that the firm received from GWG Holdings Inc. for brokerage services from June 2018 through June 2022.

Iorio Law PLLC, a securities arbitration law firm that represents investors, continues to investigate potential claims against Emerson Equity for its role in selling the highly speculative and risky GWG L Bonds to retail investors.

The law firm’s investigation is ongoing after three separate arbitration panels awarded investors damages in connection with the sale of L Bonds by their financial advisors and firms.

Iorio Law PLLC represents numerous GWG L Bond investors across the country and encourages investors who are taking a “wait and see approach” to act now. As the GWG Wind Trustee continues to liquidate GWG’s assets, it is becoming more evident that the GWG L Bonds, now the New Series A1 WDT Interests, are nearly worthless.

Iorio Law PLLC continues to believe that GWG L Bonds investors’ best avenue for potential recovery of losses is to file a separate FINRA arbitration claim against their brokerage firms. Iorio Law PLLC has already helped GWG L Bond investors recover nearly $2 million in losses. These claims are separate and in addition to the liquidation of GWG through the GWG Wind Down Trust.

Investors who purchased GWG L Bonds through Emerson Equity LLC or any other broker-dealer are encouraged to contact Iorio Law PLLC (www.gwglawyer.com) for a free and confidential consultation and to review their legal rights. We can review and analyze potential claims and advise individuals of their legal rights without obligation or cost.

To read more about GWG L Bonds and the alleged misconduct, please visit our investigation page: Iorio Law PLLC’s GWG L Bonds Investor Recovery Center.

Emerson Equity LLC (CRD No. 130032)

Emerson Equity LLC is a dually registered investment adviser and broker-dealer headquartered in San Mateo, CA. The firm is registered in 53 U.S. states and territories and has approximately 206 registered representatives nationwide.

GWG Holdings, Inc. sold the GWG L Bonds through Emerson Equity, its dealer-manager, and a network of regional broker-dealers, who pitched the products to individual retail investors. Emerson Equity and selling agents received up to 5% of the principal amount of the GWG L Bonds sold. The selling brokerage firms also received additional compensation and commissions, up to 8% of the aggregate gross proceeds from the sale of GWG L Bonds.

Emerson Equity was the largest seller of the GWG L Bonds to retail customers. Between 2018 and 2022, GWG paid Emerson Equity approximately $20.1 million in commissions for brokerage services to sell its securities.

Upon information and belief, GWG L Bonds were sold by the following brokers who were associated with Centaurus Financial:

• Tony Barouti, Los Angeles, CA (CRD No. 3031995).
• Scott Blackman, San Mateo, CA (CRD No. 4684484).
• Darrach Bourke, Mill Valley, CA, (CRD No. 5255413).
• Timothy Brown, San Mateo, CA, (CRD No. 1663519).
• Fred Chen, Irvine, CA, (CRD No. 5766069).
• Eric Dec, San Mateo, CA, (CRD No. 2185598).
• Raymond DesRosiers, Richmond, VA, (CRD No. 4621826).
• James Kent, JR., San Mateo, CA & Pinellas Park, FL, (CRD No. 2255753).
• Robert Melberth, Sarasota, FL, (CRD No. 4775230).
• Daniel Pikula, Wellington, FL, (CRD No. 2563165).
• Jason Plucinak, San Mateo, CA & Minneapolis, MN, (CRD No. 4889443).
• Ryan Sherer, Reno, NV, (CRD No. 5952617).
• Tim Sherer, Reno, NV, (CRD No. 833618).

Attention Investors: Did Emerson Equity recommend unsuitable investments, leaving you facing losses? Investors trust brokers and advisors to prioritize their financial well-being. However, when brokers like Emerson Equity fail to conduct proper due diligence, make suitable recommendations, or disclose crucial risks, investors suffer. You have rights! Brokerage firms and advisors are legally obligated to act in your best interest, which includes thorough product evaluation, transparent risk disclosure, and aligning recommendations with your specific financial goals. Breach of these obligations can lead to legal repercussions for the firm or advisor. If you suspect Emerson Equity misled you or recommended unsuitable investments, seek legal counsel to explore your options and potentially recover your losses.

About Iorio Law PLLC

Iorio Law PLLC is a securities arbitration law firm located in New York, NY. We represent investors nationwide and vigorously pursue FINRA arbitration claims on behalf of investors to recover investment losses.

We have nearly 15 years of experience as securities arbitration lawyers and have helped investors recover investment losses in over 700 cases. Our firm will file a FINRA securities arbitration claim on your behalf on a contingency fee basis to try to recover your losses. If we do not obtain a recovery, you do not owe us a legal fee.

If you have invested in L Bonds offered by GWG Holdings, contact securities arbitration lawyers August Iorio at info@iorio.law. Alternatively, call the firm toll-free at (646) 330-4624.

The law firm’s investigation is ongoing after three separate arbitration panels awarded investors damages in connection with the sale of L Bonds by their financial advisors and firms.

In addition to these arbitration awards, brokerage firms have settled cases with investors who have filed arbitration claims. According to our law firm’s review of public disclosure reports of individual brokers, Ausdal Financial Partners and/or its brokers have been the subject of at least 26 customer disputes connected with its sale of GWG L Bonds to retail investors. Of the 26 disclosed disputes, 12 are still pending, and 14 have been settled. The cases that have been settled have recovered an average of approximately 41% of the alleged damages, with a range of recoveries primarily between 30 and 70%. Some of these matters involved a variety of securities in addition to GWG L Bonds.

We represent dozens of GWG L Bond investors across the country and encourages investors who are taking a “wait and see approach” to act now. As the GWG Wind Trustee continues to liquidate GWG’s assets, it is becoming more evident that the GWG L Bonds, now the New Series A1 WDT Interests, are nearly worthless.

Our law firm continues to believe that GWG L Bonds investors’ best avenue for potential recovery of losses is to file a separate FINRA arbitration claim against their brokerage firms. We have already helped GWG L Bond investors recover nearly $2 million in losses. These claims are separate and in addition to the liquidation of GWG through the GWG Wind Down Trust.

Investors who purchased GWG L Bonds through Ausdal Financial Partners or any other broker-dealer are encouraged to contact Iorio Law PLLC (www.gwglawyer.com) for a free and confidential consultation and to review their legal rights. We can review and analyze potential claims and advise individuals of their legal rights without obligation or cost.

To read more about GWG L Bonds and the alleged misconduct, please visit our investigation page: Iorio Altamirano LLP’s Investigation of GWG L Bonds.

Ausdal Financial Partners, Inc. (CRD No. 7995)

Ausdal Financial Partners, Inc. is a dually registered investment adviser and broker-dealer headquartered in Davenport, Iowa. The firm is registered in 52 U.S. states and territories and has approximately 200 registered representatives nationwide.

GWG Holdings, Inc. sold the GWG L Bonds through a dealer-manager and a network of regional broker-dealers, including Ausdal Financial Partners, Inc., who pitched the products to individual retail investors. GWG’s dealer-manager and selling agents, such as Ausdal Financial Partners, Inc., received up to 5% of the principal amount of the GWG L Bonds sold. The selling brokerage firms also received additional compensation and commissions, up to 8% of the aggregate gross proceeds from the sale of GWG L Bonds.

Ausdal Financial Partners, Inc. was one of the largest sellers of the GWG L Bonds to retail customers between 2018 and 2022, receiving at least $1.1 million in commissions from GWG Holdings for brokerage services. Accordingly, we believe that Ausdal Financial Partners, Inc. sold approximately $20 million in GWG L Bonds during this time period.

Upon information and belief, GWG L Bonds were sold by the following brokers who were associated with Ausdal Financial Partners:

• David Geake, Northbrook, IL (CRD No. 3088891) – Barred from the securities industry.
• Andrew McCausland, Northbrook, IL (CRD No. 1595011).
• John DeWitt, Moline, IL (CRD No. 1999161).
• Samuel Julian, Carmel, IN (CRD No. 4488869).
• Scott Lee, Cold Spring, MN (CRD No. 4409541).
• Travis Wolfe, Downers Grove, IL (CRD No. 5851265).
• Max Birkinbine, North Oaks, MN (CRD No. 6836583).
• Randy Birkinbine, North Oaks, MN (CRD No. 2008599).
• David Frohlichstein, St. Charles, IL (CRD No. 1582362).
• John Lancaster III, Glen Ellyn, IL (CRD No. 1293652).
• David Lundquist, Elgin, IL (CRD No. 2784929).
• Randall McGill, Homer Glen, IL (CRD No. 1309727).
• Wilfredo Miranda, Oakbrook Terrace, IL (CRD No. 3273284).
• Walter Nagle, Orland Park, IL (CRD No. 2208043).
• Brian Napier, Greenwood, IN (CRD No. 4555202).
• Jeffrey Peters, Bettendorf, IA (CRD No. 2580603).
• Merriam Rink, Bettendorf, IA (CRD No. 1380705).
• Robert Barghini, Jr., Maple Grove, MN (CRD No. 3141715).

Brokers and brokerage firms like Ausdal Financial Partners, Inc. are required to make investment recommendations that are suitable and in the best interest of their customers. Brokerage firms and financial advisors must also be truthful and disclose all material information and risks of a security when making a recommendation. Retail investors have the right to make an informed decision about whether they are willing to accept the risk of a security. Firms and brokers must also conduct reasonable due diligence on products they offer before recommending them to any clients. When a firm or advisor fails to meet these standards of conduct, they can be held liable for damages.

August 2025 Update: Millions Recovered for GWG L Bond Investors

A Comprehensive Guide for GWG L Bond Investors

Iorio Law PLLC, led by GWG recovery attorney August M. Iorio, has already recovered over $3.5 million for GWG L Bond investors nationwide. We represent clients on a contingency-fee basis, so there’s no fee unless we achieve a recovery.

Attorney August M. Iorio has been investigating the sale of GWG L Bonds for years and has prepared a comprehensive guide to help investors understand what happened and their options: GWG L Bond Investor Recovery Center

Key Information for GWG L Bond Investors:

• Time-Limits: Investors generally have six years from their purchase date to file an arbitration claim. Don’t wait—delaying action could lead to your claim being dismissed for timeliness.

• Minimal Recovery Bankruptcy: Investors can only expect to receive an estimated 2.7% – 3.45% of their original investment through the GWG bankruptcy liquidation and Wind Down Trust.

• Investor Success: FINRA Arbitration Awards: Despite GWG’s dismal liquidation outcomes, investors have a viable path to recovery through FINRA arbitration claims against brokerage firms that sold these risky securities. As of August 14, 2025, investors have won monetary awards in 18 of 20 (90%) of FINRA arbitration trials.

• Broker-Dealer Misconduct & Regulatory Action: FINRA has sanctioned over a dozen brokers and brokerage firms who sold GWG L Bonds to retail investors. The SEC has recently settled with Emerson Equity and Tony Barouti and Western International Securities.

Don’t delay. The longer you wait, the greater the risk that your claim may be barred by time limits. If you’ve invested in GWG L Bonds, contact us for a free, confidential case evaluation.

If you have invested in L Bonds offered by GWG Holdings, contact us for a free, confidential case evaluation.

📞 Call: (646) 330-4624
📧 Email: info@iorio.law
📍 Location: One World Trade Center, 85th Floor, New York, NY 10007
🖊️ Free Case Review: Contact Form

We are committed to holding brokerage firms accountable and helping investors recover their GWG L Bond losses.

About Iorio Law PLLC

Iorio Law PLLC is a securities arbitration law firm located in New York, NY. We represent investors nationwide and vigorously pursue FINRA arbitration claims on behalf of investors to recover investment losses.

With 15 years of combined experience, our securities arbitration lawyers have helped investors recover nearly $100 million in over 700 cases. We will file a FINRA securities arbitration claim on your behalf on a contingency fee basis. If we do not obtain a recovery, you pay no legal fee.

• The GWG Wind Down Trust has sold two of its three tangible assets for a total of approximately $10.58 million.
• The sale of its life insurance policy portfolio generated $10 million in cash.
• The sale of shares in FOXO stock generated $586,942.
• The GWG Wind Down Trust settled a dispute with Fifth Season Investments, LLC for $8 million. Thus far, the Trust has paid $1,848,738 in cash to Fifth Season, still owing $6,151,262. The GWG Wind Down Trust previously set aside a reserve of 20 million shares of BENF. Those shares currently have a book value of $5.12 million. Accordingly, there is currently a $1 million shortfall, which the GWG Wind Down Trust will need to pay out of its cash holdings, presumably diminishing the cash it received from the sale of two of its three tangible assets.
• The $10.5 million in cash proceeds represents approximately .0065% of the 1,618,517,956 in Series A1 (formerly L Bonds) WDT Interests.
• The third tangible asset owned by the GWG Wind Down Trust is 169,701,487 shares of Beneficient (NASDAQ:BENF).
• The Beneficient share price has dropped significantly since going public at $15 per share. On June 20, 2023, the share price closed at $4.57. By August 1, 2023, the share price closed at $2.00. On February 15, 2024, the share price closed at $0.2561.
• The GWG Wind Down Trust is finding it difficult to sell its shares in Beneficient. There appears to be little to no interest on behalf of investors in purchasing shares of BENF, with shares trading in a very thinly traded market.

We believe that there is no obvious or foreseeable path to monetization for the GWG Wind Down Trust. Beneficient has made the following disclosures since August 2023:

• On June 29, 2023, Beneficient received a “Wells Notice” from the SEC’s Division of Enforcement, stating that the SEC has made a preliminary determination to recommend that the SEC file a civil enforcement action against the company alleging violations of certain provisions of the Securities Act and the Securities Exchange Act relating to the Company’s association with GWG Holdings. In addition, the company’s Founder, CEO, and Chairman, Brad Heppner, also received Wells Notices related to the investigation of GWG Holdings.
• Beneficient sustained an operating loss of $2.45 billion between April 1, 2023, and December 31, 2023.
• As of December 31, 2023, Beneficient only had $11.2 million in unrestricted cash. In mid-2023, Beneficient disclosed that it would meet its ongoing obligations by furloughing and potentially laying off employees.
• As of December 31, 2023, Beneficient’s assets were approximately $500 million, down from $2.9 billion as of 3/31/2023, driven by a goodwill impairment of $2.28 billion.

The only other asset owned by the Wind Down Trust is a beneficial interest in the GWG Litigation Trust. However, the Litigation Trust is only in an information-gathering phase.

When Can GWG L Bond Investors Expect to Receive a Payment (Distribution) from the GWG Wind Down Trust?

The GWG Wind Down Trust has not determined when a distribution will be paid. Distributions can only be paid upon receipt of sufficient cash proceeds from the assets to be able to make a distribution. The sale of the life insurance portfolio and FOXO shares, which generated only $10.5 million in cash, is below the minimal threshold needed for the GWG Wind Down Trust to make a distribution.

The GWG Wind Down Trust has only two more ways to generate cash: (1) the sale of its stock in Beneficient and (2) receiving proceeds from the GWG Litigation Trust. Whether the GWG Wind Down Trust will be able to monetize these two assets remains unknown, and some believe it is doubtful.

However, that has not appeared to stop some brokers from still telling investors that they will receive most or all of their invested capital back. We believe that these assurances are not only false but irresponsible. The GWG Litigation Trustee recently published a letter to GWG Investors where he addressed these unsupported assurances:

Over the past few months, numerous investors have reached out to me inquiring when they will receive their money back because their brokers have assured them they will receive all their money back. To be completely candid, I simply don’t understand how anyone can make any such assurances at this point in time.

To that end, I strongly encourage all GWG investors to consult their own independent counsel to discuss any potential claims they may have against any third parties who may have recommended this investment to them.

To put it simply, no one knows when or if the GWG Wind Down Trust will be able to make any distributions, but the outlook gets bleaker with every update.

How Else Can GWG L Bond Investors Recover Their Investment Losses?

Many GWG L Bond investors have retained securities arbitration law firm Iorio Altamirano LLP to file FINRA arbitration claims against brokerage firms that sold these speculative, high-risk, and illiquid financial products to recover their investment losses. These claims are separate and in addition to the liquidation of GWG through the GWG Wind Down Trust.

We continue to believe that GWG L Bonds investors’ best avenue for potential recovery of losses is to file a separate FINRA arbitration claim against their brokerage firms. Iorio Altamirano LLP has already helped GWG L Bond investors recover nearly $2 million in losses.

If you would like more information about how to file a claim, please respond to this email to schedule a free and confidential consultation.

To read more about our investigation into the sale of GWG L Bonds to retail investors and to watch videos of our GWG Panel Discussions, please visit our investigation page: www.gwglawyer.com

About Iorio Altamirano LLP

Iorio Altamirano LLP is a securities arbitration law firm located in New York, NY. We represent investors nationwide and vigorously pursue FINRA arbitration claims on behalf of investors to recover investment losses.

We have over 20 years of combined experience as securities arbitration lawyers and have helped investors recover investment losses in over 1,000 cases. Our firm will file a FINRA securities arbitration claim on your behalf on a contingency fee basis to try to recover your losses. If we do not obtain a recovery, you do not owe us a legal fee.

If you have invested in L Bonds offered by GWG Holdings, contact securities arbitration lawyers August Iorio at august@ia-law.com or Jorge Altamirano at jorge@ia-law.com. Alternatively, call the firm toll-free at (646) 330-4624.

The law firm’s investigation is ongoing after two separate FINRA arbitration panels awarded investors damages in connection with the sale of L Bonds by their brokers and brokerage firms. In the first case, an arbitration panel in Los Angeles, California, held two brokers liable for their negligence in selling GWG L Bonds to an investor and awarded over $1 million in damages. In the second case, a FINRA arbitration panel in Boston, Massachusetts, awarded an investor $280,000 in damages, finding that brokerage firm Ages Financial Services, LTD was liable for not properly informing the investor about the risks of GWG L Bonds.

Iorio Altamirano LLP represents dozens of GWG L Bond investors across the country and encourages investors who are taking a “wait and see approach” to act now. As the GWG Wind Trustee begins to liquidate GWG’s assets, it is becoming more evident that the GWG L Bonds, now the New Series A1 WDT Interests, are nearly worthless.

In 2020, notwithstanding GWG’s financial challenges and change in business strategy, Centaurus Financial actually increased the amount of GWG L Bonds that it would allow retail investors to purchase. After the cap was raised, many brokers aggressively sold more L Bonds to their clients and encouraged them to invest up to the new maximum limits.

Iorio Altamirano LLP continues to believe that GWG L Bonds investors’ best avenue for potential recovery of losses is to file a separate FINRA arbitration claim against their brokerage firms. Iorio Altamirano LLP has already helped GWG L Bond investors recover over $1.4 million in losses.

Investors who purchased GWG L Bonds through Centaurus Financial or any other broker-dealer are encouraged to contact Iorio Altamirano LLP (www.gwglawyer.com) for a free and confidential consultation and to review their legal rights. We can review and analyze potential claims and advise individuals of their legal rights without obligation or cost.

To read more about GWG L Bonds and the alleged misconduct, please visit our investigation page: Iorio Altamirano LLP’s Investigation of GWG L Bonds.

Centaurus Financial (CRD No. 30833)

Centaurus Financial is a dually registered investment adviser and broker-dealer headquartered in Anaheim, California. The firm is registered in 53 U.S. states and territories and has nearly 600 registered representatives nationwide.

GWG Holdings, Inc. sold the GWG L Bonds through a dealer-manager and a network of regional broker-dealers, including Centaurus Financial, who pitched the products to individual retail investors. GWG’s dealer-manager and selling agents, such as Centaurus Financial, received up to 5% of the principal amount of the GWG L Bonds sold. The selling brokerage firms also received additional compensation and commissions, up to 8% of the aggregate gross proceeds from the sale of GWG L Bonds.

Centaurus Financial was one of the largest sellers of the GWG L Bonds to retail customers between 2018 and 2022, receiving at least $3.6 million in commissions from GWG Holdings for brokerage services. Only Emerson Equity LLC, the dealer-manager, sold more L Bonds to retail investors than Centaurus Financial during this period. Accordingly, we believe that Centaurus Financial sold approximately $70 million in GWG L Bonds during this time period.

Upon information and belief, GWG L Bonds were sold by the following brokers who were associated with Centaurus Financial:

• Marc Korsch, Sarasota, FL (CRD No. 5525226) – Barred from the securities industry.
• Tony Kassaei, Irvine, CA (CRD No. 4375259) – Barred from the securities industry.
• Cindy Lucille Porto Chiellini, Lexington, SC (CRD No. 1015592)
• Katherine Nishnic, Lexington, SC (CRD No. 2499553)
• Atul Makharia, Lexington, SC (CRD No. 5070762)
• Otoo Ramon Bohon, Jr., Tucson, AZ (CRD No. 5677597)
• Gregory Richards, Scottsdale, AZ (CRD No. 288898)
• Steven Nielsen, Gilbert, AZ (CRD No. 4184826)
• George Howard, Germantown, TN (CRD No. 2958866)
• Eric Kuchherzki, Burlingame, CA (CRD No. 2529623)
• Valentino Scott, West Hills, CA (CRD No. 1497615)
• Mark Williams, Carmel, CA (CRD No. 4061842)
• Nicholas Ellis, Tustin, CA (CRD No. 1082891)
• David J. Segarra, Las Vegas, NV (CRD No. 4482059)
• Atul Makharia, Lexington, SC (CRD No. 5070762)
• Donna Payne (Donna Klink), Summerland, CA (CRD No. 1007323)
• William Fuentes, Simi Valley, CA (CRD No. 1330327)
• Dick Coppin, Twain Harte, CA (CRD No. 865875)

Brokers and brokerage firms like Centaurus Financial are required to make investment recommendations that are suitable and in the best interest of their customers. Brokerage firms and financial advisors must also be truthful and disclose all material information and risks of a security when making a recommendation. Retail investors have the right to make an informed decision about whether they are willing to accept the risk of a security. Firms and brokers must also conduct reasonable due diligence on products they offer before recommending them to any clients. When a firm or advisor fails to meet these standards of conduct, they can be held liable for damages.

Trouble with Regulators

Centaurus Financial has repeatedly been sanctioned for running afoul of securities and FINRA rules.

In February 2023, Centaurus Financial agreed to pay a $750,000 civil penalty after the SEC charged the firm in connection with the unsuitable recommendation of variable interest rate structured products to retail customers. The SEC’s order found that Centaurus failed to implement, and its branch manager failed to follow, Centaurus’ customer-specific suitability procedures and that Centaurus violated the broker-dealer books and records provisions of the federal securities laws. The SEC’s order found that Centaurus violated Sections 17(a)(2) and 17(a)(3) of the Securities Act of 1933 (“Securities Act”) and Section 17(a) of the Securities Exchange Act of 1934 (“Exchange Act”) and Rules 17a-4(e)(5), 17a-4(f)(2), and 17a-3(a)(17)(i)(B)(3) thereunder. The SEC concluded that Centaurus failed reasonably to supervise the firm’s brokers.

See: Centaurus Financial Sanctioned and Fined by Regulators for Supervisory Failures for the Second Time in Three Months.

In September 2022, FINRA’s Department of Enforcement filed a civil complaint against Centaurus Financial and one of its brokers. The complaint alleges that the broker sold Unit Investment Trusts (UITs), non-traded real estate investment trusts (REITs), and non-traded business development companies (BDCs) to customers, causing fees and commissions that could have been avoided if the broker, who was also a registered investment advisor, had taken advantage of his investment advisory relationship with the customers. The broker’s conduct allowed him and Centaurus to share in the selling commissions that his customers incurred while providing his customers with no additional benefits. The complaint alleges that the recommendations were unsuitable because there were lower-cost UITS, REITs, and BDCs available. The broker and Centaurus allegedly put their own financial interests ahead of their customers.

In June 2021, the SEC ordered Centaurus Financial to pay $1.2 million over disclosure failures and misleading statements to clients regarding investment advice it gave about mutual funds and cash sweep money market funds. The SEC’s order found that Centaurus Financial engaged in practices that violated its fiduciary duty to its advisory clients, including making misleading statements and providing inadequate disclosures regarding its receipt of 12b-1 fees from client investments, and although Centaurus was eligible to self-report to the SEC, it did not do so. Centaurus Financial consented to a cease-and-desist order and a censure, and agreed to pay disgorgement of $907,377, prejudgment interest of $124,019, and a civil penalty of $250,000. The firm also agreed to distribute funds to harmed clients and comply with certain undertakings.

About Iorio Altamirano LLP

Iorio Altamirano LLP is a securities arbitration law firm located in New York, NY. We represent investors nationwide and vigorously pursue FINRA arbitration claims on behalf of investors to recover investment losses.

We have over 20 years of combined experience as securities arbitration lawyers and have helped investors recover investment losses in over 1,000 cases. Our firm will file a FINRA securities arbitration claim on your behalf on a contingency fee basis to try to recover your losses. If we do not obtain a recovery, you do not owe us a legal fee.

If you have invested in L Bonds offered by GWG Holdings, contact securities arbitration lawyers August Iorio at august@ia-law.com or Jorge Altamirano at jorge@ia-law.com. Alternatively, call the firm toll-free at (646) 330-4624.

Further, over the past month, the share price of Beneficent has continued to fall and is currently trading at approximately $0.60 per share.

We continue to believe that GWG L Bonds investors’ best avenue for potential recovery of losses is to file a separate FINRA arbitration claim against their brokerage firms. Iorio Altamirano LLP has already helped GWG L Bond investors recover over $1.4 million in losses.

If you would like more information about how to file a claim, please contact our firm to schedule a free and confidential consultation.

Original Post:

On October 3, 2023, Liz Freeman, the Trustee of the GWG Wind Down Trust, received approval from the United States Bankruptcy Court for the Southern District of Texas to sell the portfolio of life insurance policies for only $10 million in cash.

The purchaser will also assume the Vida Exit Facility, which has a balance of approximately $605 million. Of the $10 million, $2.9 million will likely be held in Trust for up to three years. There is also ongoing litigation about whether GWG and the Wind Down Trust owe $18 million to a previous debtor-in-possession lender. If the Bankruptcy Court determines that it does, then L bondholders will get nothing from the sale of the portfolio of life insurance policies. At best, though, L Bondholders will collectively receive at most $7 million. That’s only 0.5% of the $1.3 billion in outstanding L bond obligations.

These realities likely led United States Bankruptcy Judge Marin Isgur to conclude that “there is no material recovery that will go out on percentage basis out of the liquidation of this portfolio [of life insurance policies].”

He also stated that he continues “to believe that the [GWG] L Bondholders will lose a very large percentage of their investments.”

That’s likely because the only other two assets held by the GWG Wind Down Trust to be liquidated are (1) 4.6 million shares of common stock in FOXO and (2) 169.7 million shares of common stock in Beneficent, which are close to worthless.

FOXO currently trades around $0.12 per share (giving the shares a book value of $552,000). However, Ms. Freeman testified at the hearing that the “securities are not marketable” and that the company “is evaluating its options, not doing well, and may file for bankruptcy itself.” Stated another way, the asset is nearly worthless at this time.

Beneficent is currently trading at around $1.29 per share. However, the shares have not been marketable. Beneficent’s S1 was approved last week by the SEC, so some restrictions are being lifted. Still, there is no reason to believe that the GWG Wind Down Trust will be able to liquidate its shares for any substantial value. Mr. Freeman testified that there are problems associated with liquidating the shares, including the fact that trading volume has been very low. There does not appear to be a market for 169.7 million shares. Further, many believe that dumping that kind of position onto the market would likely drive Beneficent’s share price to $0.

The only other asset that the GWG Wind Down Trust owns is a beneficiary interest in the GWG Litigation Trust. The GWG Litigation Trust is pursuing legal causes of action against companies and individuals that may have violated laws prior to GWG’s bankruptcy filing. However, any recovery from these legal causes of actions remains unknown and speculative.

The following is a summary of the GWG Wind Down Trust’s Assets:

We continue to believe that GWG L Bonds investors’ best avenue for potential recovery of losses is to file a separate FINRA arbitration claim against their brokerage firms. Iorio Altamirano LLP has already helped GWG L Bond investors recover over $1.4 million in losses.

If you would like more information about how to file a claim, please contact our firm to schedule a free and confidential consultation.

To read more about GWG L Bonds and the alleged misconduct, please visit our other blog posts:

GWG’s Bankruptcy Plan Goes into Effect; GWG L Bonds Canceled

What L Bondholders Need to Know About GWG Holdings, Inc.’s Chapter 11 Plan

Broker-Dealers Sold GWG L Bonds Using Aggressive and Misleading Marketing

“GWG Was a Classic Ponzi Scheme” – Official Committee of Bondholders of GWG Holdings, Inc.

Iorio Altamirano LLP (gwglawyer.com), a law firm that represents retail investors, is representing many GWG L Bond investors against brokerage firms across the country to recover investment losses and damages sustained by those firms’ recommendations to invest in GWG L Bonds. Based on the law firm’s investigation, there appears to have been widespread negligence and misconduct by many brokers and broker-dealers across the country.

For the latest on Iorio Altamirano LLP’s investigation of GWG L Bonds, including a key event timeline, visit our firm’s investigation page: Iorio Altamirano LLP’s Investigation of GWG L Bonds.

About Iorio Altamirano LLP

Iorio Altamirano LLP is a securities arbitration law firm located in New York, NY. We represent investors nationwide and vigorously pursue FINRA arbitration claims on behalf of investors to recover investment losses.

We have over 20 years of combined experience as securities arbitration lawyers and have helped investors recover investment losses in over 1,000 cases. Our firm will file a FINRA securities arbitration claim on your behalf on a contingency fee basis to try to recover your losses. If we do not obtain a recovery, you do not owe us a legal fee.

If you have invested in L Bonds offered by GWG Holdings, contact securities arbitration lawyers August Iorio at august@ia-law.com or Jorge Altamirano at jorge@ia-law.com. Alternatively, call the firm toll-free at (646) 330-4624.

The arbitration claim also alleges that David Lerner Associates and its broker, Robert Rasbach, misrepresented and omitted material information about the investment strategy and the energy investments, including:

• That investing in Energy 11 and Energy 12 involved a “high degree of risk” and was only appropriate for investors willing and able to assume the risk of a “speculative, illiquid, and long-term investment.”
• Energy 11 and Energy 12 were risky energy start-ups that were run by individuals with no experience in the oil and gas industry who were “wildcatting,” or drilling for oil and natural gas in unproven areas that have no concrete historical production, with its success tied to the energy industry and the ability of the partnerships to engage in a “liquidity event.”
• Energy 11 and Energy 12 were “blind pool” investment vehicles that put very few restrictions on what and how they could invest.
• The risks related to concentrating a significant portion of their portfolios into the volatile and risky energy sector.

Customers of David Lerner Associates, Inc. that have purchased proprietary energy-related securities from David Lerner, including Energy 11 and SOAEX, should contact New York securities arbitration law firm Iorio Altamirano LLP for a free and confidential consultation and review of their legal rights.

Iorio Altamirano LLP represents investors that have disputes with their financial advisors or brokerage firms, such as David Lerner Associates, Inc.

Energy 11, Energy 12, and SOAEX

Energy 11 and Energy 12 are illiquid and high-risk limited partnerships that were sold exclusively by David Lerner Associates. Each limited partnership was formed to acquire and develop oil and gas properties. The partnerships were “blind pools,” meaning at the time of the initial offering, the partnership had not identified any properties for acquisition.

Additionally, the partnerships’ objectives included making distributions to investors and, five to seven years after the termination of the offering, engaging in a liquidity event. Each limited partnership’s ability to make a return of capital distributions to its partners and to engage in a liquidity event was substantially dependent on the performance of the oil and gas properties in which the partnerships invested.

According to the Energy 11 and Energy 12 prospectuses, investments in the partnerships involve a “high degree of risk,” and these limited partnership interests were appropriate only for investors willing and able to assume the risk of a “speculative, illiquid, and long-term investment.”

Energy 11 suspended distributions to its limited partners in March 2020 before resuming them at a reduced rate in late 2021. Energy 11 accumulates unpaid distributions based on an annualized return of seven percent (7%), and all accumulated unpaid distributions are required to be paid before a final payout can occur. As of December 31, 2022, the unpaid payout accrual for the period from March 2020 through November 2021 totaled $2.387671 per common unit, or approximately $45 million.

In addition, as of Energy 11’s most recent 10-Q filing with the SEC, the limited partnership had $20.38 million in total liabilities for the quarter ended June 30, 2023.

The following is a summary of Energy 11’s current liabilities, including accrued unpaid distributions:

• Total Liabilities: $20.38 million
• Unpaid Accrued Distributions: $45 million
• Total Liabilities 45+ Unpaid Accrued Distributions: $65.38 million.

The Spirit of America Energy Fund (SOAEX) is a mutual fund created for customers of David Lerner Associates that invests 80% of its net assets in energy and energy-related companies. The Spirit of America Energy Fund primarily invests in energy-related entities such as exploration, production, and transmission companies, as well as Master Limited Partnerships (“MLPs”). The fund’s investment objective is to provide investors with long-term capital appreciation and current income. SOAEX’s stock price has plummeted since 2015.

David Lerner Associates, Inc.

David Lerner Associates, Inc. is an SEC-registered broker-dealer and FINRA member with six branch offices in New York, Connecticut, New Jersey, and Florida. David Lerner is notorious in the securities industry and has been sanctioned numerous times by securities regulators, including censures, injunctions, monetary fines, and restitution orders.

David Lerner Associates was the exclusive dealer-manager for Energy 11 and received 6% in selling commissions. David Lerner Associates is also entitled to a contingent incentive fee of up to an amount equal to 4% of gross proceeds of units sold. Based on public disclosures, it appears that David Lerner Associates has received over $22 million in seller commissions for selling Energy 11 to its customers and is potentially entitled to an additional $15 million in contingent incentive fees.

FINRA has brought numerous actions against brokers and supervisors who sold or supervised the sale of David Lerner Associates’ proprietary energy-sector securities. Those include:

• FINRA v. Abbe Jan Wollins, AWC No. 2019063686205 (June 20, 2023)
  • “Between August 2015 and April 2018, while associated with [David Lerner Associates], Willins recommended that two customer accounts invest in limited partnerships formed to acquire and develop oil and gas properties without having a reasonable basis to believe those illiquid investments were suitable for the customers. Therefore, Wollins violated FINRA Rules 2111 and 2010.”
  • “Customers A and B were a retired married couple who held an investment account with DLA. In August 2015, when Wollins recommended that they invest in an illiquid limited partnership, Customers A and B were approximately 82, retired, and receiving pension and social security benefits and savings. Between August 2015 and December 2016, at Wollins’ recommendation, Customers A and B invested a total of $128,907 in one of the limited partnerships. Wollins also recommended that senior Customer C invest $25,000 in one of the limited partnerships. At the time of his investment, Customer C was 93 and, received social security benefits, and took required withdrawals from an IRA. Customer C understood that his investment in the limited partnership would supplement his monthly income with these returns. Wollins’ recommendations that Customers A, B, and C invest in the energy partnerships were not suitable given their investment profiles. Wollins received $2,448.30 in commissions from these investments.”
• FINRA v. Rande Aaronson, AWC No. 2019063686204 (May 30, 2023)
  • “From January 2015 through October 2019, branch manager Aaronson failed to reasonably supervise sales of two illiquid oil and gas limited partnerships, Energy 11, L.P. (E11) and Energy Resources 12, L.P. (E12), to ensure that the sales were suitable for customers given their investment profiles, as required by FINRA Rule 2111 and the firm’s policies and written supervisory procedures (WSPs). Therefore, Aaronson violated FINRA Rules 3110 and 2010.”
  • “E11 and E12 are illiquid limited partnerships that registered representatives at DLA sold to their customers. Each limited partnership was formed to acquire and develop oil and gas properties. Additionally, the partnerships’ objectives included making distributions to investors and, five to seven years after the termination of the offering, engaging in a liquidity event. Each limited partnership’s ability to make a return of capital distributions to its partners and to engage in a liquidity event was substantially dependent on the performance of the oil and gas properties in which the partnerships invested. According to the E11 and E12 prospectuses, investments in the partnerships involve a “high degree of risk,” and these limited partnership interests were appropriate only for investors willing and able to assume the risk of a “speculative, illiquid, and long-term investment” (emphasis added).
  • “The firm’s WSPs also included a policy specific to a customer’s change of their risk tolerance, as reflected on each customer’s Suitability Profile. The policy prohibited changes to a customer’s risk tolerance solely for the purpose of qualifying the account to engage in a certain transaction. Branch managers had the supervisory responsibility to review Suitability Profiles, to assess the appropriateness of any risk tolerance changes on Suitability Profiles, and to accept and sign Suitability Profiles.”
• FINRA v. Russ Kory, AWC No. 2019063686203 (September 2, 2022)
  • “Between August 2015 and September 20 19, while associated with David Lerner Associates, Kory recommended that three firm customers invest in the firm’s proprietary limited partnerships formed to acquire and develop oil and gas properties without having a reasonable basis to believe those illiquid investments were suitable for the customers. Therefore, Kory violated FINRA Rules 2111 and 2010.”
  • “Each limited partnership was formed to acquire and develop oil and gas properties located onshore in the United States. The partnerships were “blind pools,” meaning at the time of the initial offering, the partnership had not identified any properties for acquisition. The partnerships’ objectives included making distributions to investors and, five to seven years after the termination of the offering, to engage in a liquidity event. Each limited partnership’s ability to make return of capital distributions to its partners and to engage in a liquidity event was substantially dependent on the performance of the properties in which the partnerships invested. Additionally, according to the prospectuses, investments in the partnerships involve a “high degree of risk” (emphasis added).
• FINRA v. Jeffrey D. Basford, AWC No. 2019063686202 (August 15, 2022)
  • “During the course of a FINRA investigation into potential unsuitable sales of proprietary energy products at the firm, Basford declined to appear for on-the-record testimony requested pursuant to FINRA Rule 8210.”
• FINRA v. Charles Bonilla, AWC No. 2020067626001 (February 8, 2021)
  • “Between December 2015 and December 2017, while associated with David Lerner Associates, Bonilla recommended that his customers invest in energy sector securities without having a reasonable basis to believe those investments were suitable. Due to Bonilla’s failure to conduct reasonable diligence, there were potential risks and costs of the investments, among other things, that Bonilla did not adequately understand. Accordingly, Bonilla violated FINRA Rules 2111 and 2010.”
  • “The fund’s holdings are concentrated in energy-related securities, and the fund’s performance is largely dependent on the condition of the energy industry.”

About Iorio Altamirano LLP

Iorio Altamirano LLP is investigating claims on behalf of David Lerner Associates’ customers who purchased Energy 11 and SOAEX.

To read more about the investigation, please click on the following links:

Energy 11, L.P. and Energy Resources 12 L.P.: How to Recover Investment Losses from David Lerner Associates, Inc.

Investor Update: Energy 11, L.P.’s Substantial Debt and Missed Accrued Distributions Could Take Years to Pay Off

Iorio Altamirano LLP is a securities arbitration law firm located in New York, NY. We represent investors nationwide and vigorously pursue FINRA arbitration claims on behalf of investors to recover investment losses.

We have over 20 years of combined experience as securities arbitration lawyers and have helped investors recover investment losses in over 1,000 cases. Our firm will file a FINRA securities arbitration claim on your behalf on a contingency fee basis to try to recover your losses. If we do not obtain a recovery, you do not owe us a legal fee.

If you have suffered investment losses, contact securities arbitration lawyers August Iorio at august@ia-law.com or Jorge Altamirano at jorge@ia-law.com. Alternatively, call the firm toll-free at (646) 330-4624.

When disputes arise between investors and brokerage firms, they are usually resolved through arbitration. The Financial Industry Regulatory Authority (FINRA) offers a streamlined and cost-effective dispute resolution forum for resolving disputes in the securities industry. In this blog post, we’ll take a deep dive into FINRA arbitration, its key features, benefits, and what you should know if you find yourself involved in a securities-related dispute.

Understanding FINRA Arbitration

What is FINRA?

The Financial Industry Regulatory Authority (FINRA) is a self-regulatory organization authorized by the United States Congress to oversee and regulate the securities industry. One of FINRA’s essential functions is to provide a forum for resolving disputes between investors, brokerage firms, and individual brokers.

Arbitration vs. Lawsuits: The Key Differences

Unlike traditional litigation, where disputes are resolved through the court system, FINRA arbitration is a private, alternative dispute resolution process. There are several key differences:

1. • Speed and Efficiency: FINRA arbitration typically resolves disputes more quickly than litigation, which can drag on for years. Arbitration cases often conclude within 12-18 months, allowing parties to move on with their lives and investments more quickly.
   • Cost-Effective: Litigation can be expensive due to legal fees, court costs, and other expenses. In contrast, FINRA arbitration tends to be more cost-effective, as it has lower filing fees and streamlined procedures.
   • Less Burdensome Discovery: Discovery is the exchange of relevant documents and information. In a lawsuit, discovery consists of depositions, interrogatories, and the exchange of documents. In FINRA arbitrations, depositions and interrogatories are generally not allowed. As a result, the discovery process is more streamlined, less burdensome, and less costly.
   • Confidentiality: FINRA arbitration proceedings are generally confidential, whereas court proceedings are a matter of public record.

Who Can Initiate FINRA Arbitration?

Parties who can initiate FINRA arbitration include investors, brokerage firms, and individual brokers. Many arbitrations arise over investment losses. Investors often file arbitration claims against their brokerage firms when the firm or its agent broker recommends investments that are not suitable and in the best interest of the investor. Investors also file arbitration claims when their brokers misrepresent or omit material information at the time of the recommendation. Common claims brought by investors include unsuitability, violation of Regulation Best Interest (RegBI), misrepresentation or omission of material information, unauthorized trading, churning, breach of fiduciary duty, and financial elder abuse.

The FINRA Arbitration Process

1. Filing a Claim – The process begins with the filing of a Statement of Claim by the aggrieved party. The respondent (the party against whom the claim is filed) is then given the opportunity to respond
2. Arbitrator Selection – The parties select arbitrators from FINRA’s roster of arbitrators using a strike and rank system. The number of arbitrators that serve on an arbitration panel varies depending on the size of the complaint.
3. Discovery – The exchange of relevant documents and information.
4. Hearing – A hearing is held where both parties present their cases, including evidence and witnesses. The arbitrators evaluate the evidence and arguments presented.
5. Award – The arbitrators deliberate and issue a written decision. This decision is final and binding. Parties are generally required to abide by the decision, and there is limited scope for appeal.

Settlement

At any time during the arbitration process, the parties can resolve their dispute by entering into a settlement. Approximately 69 – 70% of all FINRA arbitrations are resolved through settlement instead of a hearing.

Conclusion

Investors who have suffered investment losses should be aware of their rights to pursue arbitration when disputes arise. Legal representation is often advisable to navigate the complexities of the process effectively.

Investors involved in a securities-related dispute are encouraged to consult with attorneys who have vast experience in FINRA arbitration to help them navigate the process and ensure that their rights and interests are protected throughout the proceedings.

About Iorio Altamirano LLP

Iorio Altamirano LLP is a securities arbitration law firm located in New York, NY. We represent investors nationwide and vigorously pursue FINRA arbitration claims on behalf of investors to recover investment losses.

We have over 20 years of combined experience as securities arbitration lawyers and have helped investors recover investment losses in over 1,000 cases. Our firm will file a FINRA securities arbitration claim on your behalf on a contingency fee basis to try to recover your losses. If we do not obtain a recovery, you do not owe us a legal fee.

If you have suffered investment losses, contact securities arbitration lawyers August Iorio at august@ia-law.com or Jorge Altamirano at jorge@ia-law.com. Alternatively, call the firm toll-free at (646) 330-4624.

As part of the Plan, GWG will be liquidated, and two liquidating trusts have been created: (i) the Wind Down Trust and (ii) the Litigation Trust.

As a result of the Plan going into effect, all securities issued by GWG, including GWG L Bonds, were canceled. L Bondholders received “New Series A1 WDT Interests” in the Wind Down Trusts.

For GWG L Bondholders whose L Bonds were held of record in the name of a bank, broker, or other holder of record through the facilities of the Depository Trust Company), the New WDT Interests will continue to be held in the same manner. GWG recommends that investors contact their bank, broker, or other record holder for further information.

For GWG L Bondholders whose L Bonds were held directly, the New WDT Interests will continue to be held directly. Computershare Trust Company, N.A. (“Computershare”) has been appointed as the transfer agent and registrar for New WDT Interests, and direct holders may access further information with respect to their New WDT Interests as described below:

• If a direct GWG L Bondholder already has an existing Computershare account under the same name and Tax ID as shown on the statement mailed to the bondholder by Computershare, the units of New Series WDT Interests will be automatically added to that bondholders’ account on Investor Center, Computershare’s online and mobile portal to your portfolio.
• If a direct GWG L Bondholder does not have an existing Computershare account, they should register for an account at www.computershare.com/investor. These bondholders will need their “Account Number,” which can be found on the statement mailed to you by Computershare. and direct holders may access further information with respect to their New WDT Interests as described below.

What are GWG’s Assets?

GWG has only four primary assets: (1) its portfolio of life insurance policies; (2) equity interest in FOXO, (3) equity interest in Beneficient; and (4) potential legal actions against third parties, primarily Beneficent.

The Wind Down Trust will hold the portfolio of life insurance policies and the company’s equity interests in FOXO and Beneficent and make efforts to monetize those assets over time. The sale of these assets may take several years, and the amount that GWG will recover remains uncertain.

According to GWG’s analysis in the bankruptcy proceedings, the projected net residual value from the sale of the life insurance policies is projected to be $0 to $78 million, and the equity interest in FOXO is nominal, $3.3 million.

With over $1.3 billion owed to L Bondholders, for the L Bonds (now New Series A1 WDT Interests) to have any significant residual value, GWG must monetize its equity interest in Beneficient or its legal claims against third parties.

How and when GWG will be able to monetize its equity interest in Beneficient remains uncertain and speculative.

Since going public on June 8, 2023, and opening at $15 on the first day the new BENF traded, the stock price has plummeted to under $2 per share.

To read more about the residual value of the L Bonds, please see our blog post from mid-July: GWG Bankruptcy Update (July 14, 2023): The Residual Value of the GWG L Bonds Remain Suspect as Beneficient Receives a Wells Notice from the SEC.

We continue to believe that GWG L Bonds investors’ best avenue for potential recovery of losses is to file a separate FINRA arbitration claim against their brokerage firms. If you would like more information about how to file a claim, please respond to this email to schedule a free and confidential consultation.

To read more about the alleged misconduct, please visit our other blog posts:

What L Bondholders Need to Know About GWG Holdings, Inc.’s Chapter 11 Plan

Broker-Dealers Sold GWG L Bonds Using Aggressive and Misleading Marketing

“GWG Was a Classic Ponzi Scheme” – Official Committee of Bondholders of GWG Holdings, Inc.

Iorio Altamirano LLP (gwglawyer.com), a law firm that represents retail investors, is representing many GWG L Bond investors against brokerage firms across the country to recover investment losses and damages sustained by those firms’ recommendations to invest in GWG L Bonds. Based on the law firm’s investigation, there appears to have been widespread negligence and misconduct by many brokers and broker-dealers across the country. Iorio Altamirano LLP has already helped GWG L Bond investors recover nearly $1 million in losses.

For the latest on Iorio Altamirano LLP’s investigation of GWG L Bonds, including a key event timeline, visit our firm’s investigation page: Iorio Altamirano LLP’s Investigation of GWG L Bonds.

About Iorio Altamirano LLP

Iorio Altamirano LLP is a securities arbitration law firm located in New York, NY. We represent investors nationwide and vigorously pursue FINRA arbitration claims on behalf of investors to recover investment losses.

We have over 20 years of combined experience as securities arbitration lawyers and have helped investors recover investment losses in over 1,000 cases. Our firm will file a FINRA securities arbitration claim on your behalf on a contingency fee basis to try to recover your losses. If we do not obtain a recovery, you do not owe us a legal fee.

If you have invested in L Bonds offered by GWG Holdings, contact securities arbitration lawyers August Iorio at august@ia-law.com or Jorge Altamirano at jorge@ia-law.com. Alternatively, call the firm toll-free at (646) 330-4624.

GWG has disclosed that they are targeting July 31, 2023, as the effective date for the Plan.

As part of the Chapter 11 Plan, GWG will no longer operate as an ongoing concern. Instead, the Chapter 11 Plan provides that the GWG will be liquidated, and two liquidating trusts will be created: (i) the Wind Down Trust and (ii) the Litigation Trust.

The Wind Down Trust will take all necessary steps to wind down the business affairs of the Debtors and liquidate the Wind Down Trust Assets. Both the Wind Down Trust and the Litigation Trust have initial three-year terms, which can be extended an additional two years.

While the L Bondholders are going to receive “New Series A1 WDT Interests” in the Wind Down Trusts, the primary issue is that GWG’s current tangible assets are dwarfed by outstanding L Bond obligations, and GWG’s remaining assets are going to take some time to monetize, if ever.

GWG has only four assets: (1) its portfolio of life insurance policies; (2) equity interest in FOXO, (3) equity interest in Beneficient; and (4) potential legal actions against third parties, primarily Beneficent.

According to GWG’s analysis in the bankruptcy proceeding, the projected net residual value from the sale of the life insurance policies is projected to be $0 to $78 million, and the equity interest in FOXO is nominal, $3.3 million.

For L Bonds to have any significant residual value, GWG must monetize its equity interest in Beneficient or its legal claims against third parties. It is very likely and possible that L bondholders receive nothing from GWG’s interests in Beneficent or its retained causes of action, and if they do, it will likely take several years to result in cash distributions.

How and when GWG will be able to monetize its equity interest in Beneficient remains uncertain and speculative.

Since going public on June 8, 2023, and opening at $15 on the first day the new BENF traded, the stock price has plummeted.

BENF ended the trading day with a closing price of $2.87 on July 13, 2023.

Based on historical trading volume data, it would take 3.5 years to sell the bondholders’ approximately 155 million to 165 million shares.

According to at least one expert, BNEF is likely worth $0 as a result of its poor fundamentals:

• Beneficient values its portfolio of private equity investments at $547.8 million and has $21.8 million in restricted cash as of December 31, 2022. It has $242.6 million in liabilities, so it has tangible net assets of $327 million.
• There are $684 million in non-controlling interests and $251 million in redeemable non-controlling interests on BENF’s balance sheet.
• The tangible net assets available to non-controlling interests and common stockholders is $1.727 per share of common stock, although some or all of the tangible net assets would be payable to the non-controlling interests. If the non-controlling interests are senior to common stockholders, the tangible net assets available to common stockholders is -$3.212 per share.
• BENF reports 80% of its total assets are goodwill. The only way BENF can be worth some positive value after things settle down is if BENF’s $2.37 billion accounting goodwill reflects a substantial market valuation of BENF’s intellectual property.

Since this report, Beneficient has filed its 10-K annual report with the SEC disclosing additional worrisome news:

• For Year-End March 31, 2023, Beneficent had a net operating loss of $253 million.
• A substantial amount of Beneficient’s assets is comprised of goodwill and intangible assets. The sustained decline in the price of BNF since going public on June 8, 2023, is an indicator that impairment is present and may require assessment. In plain English, BENF will likely need to reduce the amount of its goodwill early next year, possibly significantly, thus reducing the amount of assets held by the company.
• On June 29, 2023, Beneficient received a “Wells Notice” from the SEC’s Division of Enforcement, stating that the SEC has made a preliminary determination to recommend that the SEC file a civil enforcement action against the company alleging violations of certain provisions of the Securities Act and the Securities Exchange Act relating to the Company’s association with GWG Holdings. In addition, the company’s Founder, CEO, and Chairman, Brad Heppner, also received Wells Notices related to the investigation of GWG Holdings.

Based on historical trading volume and pricing data and the recent news, BENF stock price could continue to drop o, and any attempt by the L Bondholders’ trust to sell millions of GWG’s shares could drive the price close to $0.

According to the expert, ultimately, bondholders will likely receive negligible amounts – perhaps $1 per share – for their GWG common stock. Even this amount cannot be achieved in open market transactions when the market is not absorbing total sales of 100,000 to 200,000 shares per day. Only through a bulk sale of a large controlling interest can the bondholders’ trust hope to realize even $150 million. Moreover, based on the projections provided in GWG’s Chapter 11 Plan, a recovery of $150 million through block stock sales pays bondholders 9 cents on the dollar.

Based on the information outlined above, we believe it is highly unlikely that they will obtain a quick and full recovery through the bankruptcy process.

We also continue to believe that GWG L Bonds investors’ best avenue for potential recovery of losses is to file a separate FINRA arbitration claim against their brokerage firms. If you would like more information about how to file a claim, please contact our firm to schedule a free and confidential consultation.

To read more about the alleged misconduct, please visit our other blog posts:

What L Bondholders Need to Know About GWG Holdings, Inc.’s Chapter 11 Plan

Broker-Dealers Sold GWG L Bonds Using Aggressive and Misleading Marketing

“GWG Was a Classic Ponzi Scheme” – Official Committee of Bondholders of GWG Holdings, Inc.

Iorio Altamirano LLP (gwglawyer.com), a law firm that represents retail investors, is representing many GWG L Bond investors against brokerage firms across the country to recover investment losses and damages sustained by those firms’ recommendations to invest in GWG L Bonds. Based on the law firm’s investigation, there appears to have been widespread negligence and misconduct by many brokers and broker-dealers across the country.

For the latest on Iorio Altamirano LLP’s investigation of GWG L Bonds, including a key event timeline, visit our firm’s investigation page: Iorio Altamirano LLP’s Investigation of GWG L Bonds.

About Iorio Altamirano LLP

Iorio Altamirano LLP is a securities arbitration law firm located in New York, NY. We represent investors nationwide and vigorously pursue FINRA arbitration claims on behalf of investors to recover investment losses.

We have over 20 years of combined experience as securities arbitration lawyers and have helped investors recover investment losses in over 1,000 cases. Our firm will file a FINRA securities arbitration claim on your behalf on a contingency fee basis to try to recover your losses. If we do not obtain a recovery, you do not owe us a legal fee.

If you have invested in L Bonds offered by GWG Holdings, contact securities arbitration lawyers August Iorio at august@ia-law.com or Jorge Altamirano at jorge@ia-law.com. Alternatively, call the firm toll-free at (646) 330-4624.

In 2021, a federal grand jury brought criminal charges against Lash, David Gentile (founder and owner of GPB Capital), and a third individual, Jeffry Schneider. The charges are related to their management of the company, which has been described as a “Ponzi-like scheme.” In February 2021, the SEC also charged GPB Capital, Ascendant Capital, and Ascendant Alternative Strategies with running a Ponzi-like scheme that raised roughly $1.7 billion from over 17,000 investors, many of whom were retirees.

The criminal complaint alleged that Mr. Gentile, Mr. Lash, and Mr. Schneider used new money invested by retail investors to cover the promised 8% returns to prior investors, yet failed to disclose the source of the distributions to investors.

Mr. Lash could face more than 15 years in prison as a result of the guilty plea for his alleged role in the Ponzi-like scheme. Sentencing is scheduled for October 4, 2023.

A trial for Mr. Gentile and Mr. Schneider is scheduled to begin in June 2024.

Since February 2021, GPB Capital has been operating under the supervision of a court-appointed monitor. Despite liquidating a significant portion of the firm’s assets, the company’s managers have struggled to devise a plan for distributing the cash at their disposal to investors and other claimants.

The court-appointed monitor and the United States Securities and Exchange Commission have recommended putting GPB Capital into receivership, a court-appointed tool that would put the entire company, its assets, and all financial and operating decisions under the control of a single court-appointed receiver. The proposal has been contested by the company’s owner, David Gentile. The Court has yet to act on the receivership proposal.

GPB Capital had stated on its website in April 2023 that it could not come up with a distribution plan or make any distributions to investors until the court rules on a receivership. Limited partners have not received distributions since 2018, while their invested capital remains in limbo.

According to the recent regulatory filings, it appears that GPB Capital is holding back a significant reserve to cover potential liabilities arising out of numerous regulatory, ligation, arbitration, and other proceedings. The company disclosed that any liability originating from such actions could result in an outflow of cash, which would most likely not occur until 2024 at the earliest.

Further, GPB Capital’s partnerships, such as GPB Automotive, GPB Holdings, GPB Holdings II, GPB Waste Management, or GPB Cold Storage, are setting aside a large amount of money to cover the legal expenses of its current and former officers, directors, principals, representatives, and affiliates, for any legal expenses and costs they are incurring connected within the numerous litigations and disputes that are currently pending. GPB Capital has disclosed in regulatory filings that distributions may be delayed or withheld until such reserves are no longer needed or the escrow period expires.

GPB Fraud and Brokerage Firms’ Liability

GPB Capital Holdings LLC, a private-equity firm based in New York, was established in 2013. It acted as the primary partner of several investment funds, including GPB Holdings, LP, GPB Holdings II, LP, GPB Automotive Portfolio, LP, GPB Waste Management, LP, and GPB Cold Storage, LP.

In February 2021, the SEC accused GPB Capital, Ascendant Capital, and Ascendant Alternative Strategies of orchestrating a Ponzi-like scheme, defrauding nearly 17,000 retail investors across the nation and gathering approximately $1.7 billion via securities issued by GPB Capital.

GPB Capital solicited capital from private retail investors via private placement offerings, which were sold by nearly sixty broker-dealers and investment advisory firms across the country. However, significant concerns have been raised regarding the broker-dealers’ failure to conduct proper due diligence regarding GPB Capital and the GPB funds.

The Financial Industry Regulatory Authority (FINRA) mandates that “reasonable diligence” provides the firm or associated person with a clear understanding of the potential risks and rewards of the recommended security or strategy. Brokerage firms may have neglected to conduct sufficient due diligence into GPB Capital and its funds before selling the private placement offerings to their clients, possibly overlooking numerous red flags, including detecting whether distributions were being paid out from operating revenue or from invested capital. In the case of GPB Capital, the operating revenues of its partnerships were not sufficient to cover the company’s promised 8% distributions, yet the payouts continued. Brokerage firms either failed to detect these discrepancies or ignored them.

Investors may have legal recourse against brokerage firms or investment advisory firms due to such due diligence failures or other sales practice violations. It’s important to note that filing an arbitration claim does not prevent an investor from receiving potential future distributions from the GPB funds.

Investors can potentially recover investment losses by filing claims against broker-dealers or investment-advisory firms that sold GPB private placement offerings for large commissions.

Through 2021, GPB Capital investors have won over $2.4 million in monetary awards in 10 out of 12 (over 83%) arbitration claims that have proceeded to a final hearing.

What Can GPB Investors Do?

Iorio Altamirano LLP, a leading securities arbitration law firm based in New York, NY, is investigating claims on behalf of defrauded investors who were victims in the GPB funds scheme. Investors who have purchased GPB Automotive, GPB Holdings, GPB Holdings II, or GPB Waste Management through a broker or brokerage firm have successfully recovered investment losses by filing securities arbitration claims.

Our law firm pursues FINRA arbitration claims nationwide on behalf of investors to recover financial losses arising out of wrongful conduct by financial advisors and brokerage firms.

Iorio Altamirano LLP is actively investigating claims on behalf of GPB investors who purchased the security through a broker-dealer or registered investment advisor, including:

• Aegis Capital Corp.
• Aeon Capital Inc.
• American Capital Partners
• Arkadios Capital
• Ausdal Financial Partners, Inc.
• Avere Financial Group, LLC
• Axiom Capital Management, Inc
• BCG Securities, Inc.
• Cabot Lodge Securities LLC
• Calton & Associates, Inc.
• Capital Financial Services, Inc
• Capital Investment Group, Inc.
• Cascade Financial Management, Inc.
• Crystal Bay Securities, Inc.
• David A. Noyes & Company
• Dempsey Lord Smith, LLC
• Detalus Securities, LLC
• DFPG Investments, Inc.
• DH Hill Securities, LLLP
• Dinosaur Financial Group, L.L.C.
• Geneos Wealth Management, Inc.
• Emerson Equity LLC
• Financial West Group
• Great Point Capital LLC
• HighTower Securities, LLC
• IBN Financial Services, Inc.
• Innovation Partners, LLC
• International Assets Advisory, LLC
• Investment Architects, Inc.
• Kingsbury Capital, Inc.
• Landolt Securities, Inc.
• Lion Street Financial, LLC
• Lowell & Company, Inc.
• McDonald Partners LLC
• MML Investor Services
• Moloney Securities Co., Inc.
• Money Concepts Capital Corp
• MSC – BD, LLC
• National Securities Corporation
• Newbridge Securities Corporation
• Orchard Securities, LLC
• Pariter Securities, LLC
• Purshe Kaplan Sterling Investments
• Private Client Services, LLC
• Royal Alliance Associates, Inc.
• SagePoint Financial, Inc.
• Sandlapper Securities, LLC
• Silber Bennett Financial, Inc.
• Stephen A. Kohn & Associates, Ltd.
• Uhlmann Price Securities, LLC
• United Planners Financial Services
• Vanderbilt Securities, LLC
• Vestech Securities, Inc.
• Western International Securities, Inc.
• WestPark Capital, Inc.
• Whitehall-Parker Securities, Inc.
• Wilmington Capital Securities, LLC
• Woodbury Financial Services, Inc.

About Iorio Altamirano LLP

Iorio Altamirano LLP is a securities arbitration law firm located in New York, NY. We represent investors nationwide and vigorously pursue FINRA arbitration claims on behalf of investors to recover investment losses. Our law firm has helped GPB investors recover hundreds of thousands of dollars in losses.

We have over 20 years of combined experience as securities arbitration lawyers and have helped investors recover investment losses in over 1,000 cases. Our firm will file a FINRA securities arbitration claim on your behalf on a contingency fee basis to try to recover your losses. If we do not obtain a recovery, you do not owe us a legal fee.

If you have lost money on the GPB funds, contact securities arbitration lawyers August Iorio and Jorge Altamirano of Iorio Altamirano LLP at august@ia-law.com, jorge@ia-law.com, or toll-free at (646) 330-4624 for a free and confidential consultation and review of your legal rights.

Origination of the Matter

This case originated from FINRA’s review of the Form U5 (Uniform Termination Notice for Securities Industry Registration) that was filed by Morgan Stanley after it terminated Mr. Neill.

Background of Neill’s Actions

FINRA Rule 4511 requires member firms and associated persons to “make and preserve books and records as required under the FINRA rules, the Exchange Act, and the applicable Exchange Act rules.” Exchange Act Rule 17a-3(a)(8) obligates member firms to make and keep “copies of confirmations of all purchases and sales of securities.” Implicit in the requirement to make and preserve books and records is the need for accurate information. An associated person who enters inaccurate information in a firm’s books and records violates both FINRA Rule 4511 and FINRA Rule 2010, which requires members and their associated persons to “observe high standards of commercial honor and just and equitable principles of trade.”

In approximately March 2013, Neill entered into an agreement through which he agreed to service certain customer accounts, including executing trades for those accounts, under a joint representative code (also known as a joint production number) that he shared with the estate of a retired representative. The agreement set forth the percentages of the commissions the estate of the retired representative and Neill would earn on trades placed using the joint representative code.

From January 2014 through March 2018, Neill placed a total of 219 trades in accounts covered by the agreement using his own personal representative code. Despite the firm’s system correctly prepopulating the trades with the applicable joint representative code, Neill altered the code for the 219 trades to his personal representative code. Neill did so under the mistaken belief that his agreement with the estate of the retired representative did not apply to new assets added to accounts subject to the agreement and that he was thus authorized to enter the 219 trades using his personal representative code. The firm’s trade confirmations for the 219 trades inaccurately reflected Neill’s personal representative code.

Impact of Neill’s Actions

Neill’s actions led to him receiving higher commissions from the 219 trades than he was entitled to receive according to the agreement. In August 2022, Morgan Stanley reimbursed the estate of the retired representative.

Violations and Settlement

By causing Morgan Stanley to maintain inaccurate trade confirmations, Neill violated FINRA Rules 4511 and 2010.

In response, FINRA imposed a one-month suspension from associating with any FINRA member in all capacities and a $5,000 fine.

About Iorio Altamirano LLP

Iorio Altamirano LLP is a securities arbitration law firm based in New York, NY. Iorio Altamirano LLP pursues FINRA claims nationwide on behalf of investors to recover financial losses arising out of wrongful conduct by stockbrokers and brokerage firms.

We have over 20 years of combined experience as securities arbitration lawyers and have helped investors recover investment losses in over 1,000 cases.

If you have suffered investment losses as a result of broker negligence or misconduct, contact securities arbitration attorneys August Iorio (august@ia-law.com) or Jorge Altamirano (jorge@ia-law.com) of Iorio Altamirano LLP. Alternatively, please call us toll-free at (646) 330-4624 for a free and confidential review of your legal rights.

Earlier this year, in February 2023, Centaurus Financial also agreed to pay a $750,000 civil penalty after the SEC charged the firm in connection with the unsuitable recommendation of variable interest rate structured products to retail customers. The SEC’s order found that Centaurus failed to implement, and its branch manager failed to follow, Centaurus’ customer-specific suitability procedures and that Centaurus violated the broker-dealer books and records provisions of the federal securities laws. The SEC’s order found that Centaurus violated Sections 17(a)(2) and 17(a)(3) of the Securities Act of 1933 (“Securities Act”) and Section 17(a) of the Securities Exchange Act of 1934 (“Exchange Act”) and Rules 17a-4(e)(5), 17a-4(f)(2), and 17a-3(a)(17)(i)(B)(3) thereunder. The SEC concluded that Centaurus failed reasonably to supervise the firm’s brokers.

Financial institutions like Centaurus Financial, Inc. must properly supervise financial advisors and customer accounts. Brokerage firms must establish and maintain a reasonably designed system to oversee account activity, such as recommendations to purchase alternative investments, such as GWG L Bonds, UITs, and REITS, to ensure compliance with securities laws and industry regulations. When a brokerage firm fails to supervise its financial advisors or the investment account activity sufficiently, it may be liable for investment losses sustained by customers.

Customers of Centaurus Financial or Donnie Ingram are encouraged to contact Iorio Altamirano LLP, a securities arbitration law firm that represents investors, for a free and confidential consultation and to review their legal rights.

Iorio Altamirano LLP has also been investigating Centaurus Financial, Inc. for its sales practices related to GWG L Bonds. For the latest on the law firm’s investigation, please visit the following blog posts:

What L Bondholders Need to Know About GWG Holdings, Inc.’s Chapter 11 Plan

Broker-Dealers Sold GWG L Bonds Using Aggressive and Misleading Marketing

FINRA Disciplinary Proceeding No. 2018057298701

According to the complaint filed by FINRA’s Department of Enforcement, between September 2016 and September 2018, Donnie Ingram, a registered representative with Centaurus Financial and an investment advisor through his own SEC-registered investment advisory firm, Ingram Advisory Services, LLC (Ingram Advisory), made unsuitable recommendations to 81 customer accounts. Ingram’s recommendations caused his customers to incur unnecessary expenses of more than $300,000, providing no additional benefits to them while directly benefiting Centaurus and himself.

Ingram regularly recommended that his customers purchase “standard version” Unit Investment Trusts (UITs) instead of equivalent, lower-cost “fee-based” UITs. As a result, his customers incurred initial and deferred sales charges. These charges would have been waived if Ingram had recommended the fee-based UITs.

Other than causing the customer to incur the full transactional sales charges by purchasing the standard version UIT, there was no difference between the standard version UIT that Ingram recommended and purchased for his customers and the fee-based UIT.

According to the complaint, Ingram understood at the time he made these recommendations that he could have recommended and purchased the lower-cost fee-based UIT for his customers’ brokerage accounts. However, he recommended the higher-cost standard version UIT because it allowed him to receive as compensation a percentage of the transactional sales charge that the customer paid to the UIT sponsor, which the sponsor then paid to Centaurus as a dealer concession.

Additionally, Ingram recommended that his customers purchase Bluerock Residential Growth REIT Inc. (BRG) and MacKenzie Realty Capital, Inc. (MAC) through Centaurus instead of through Ingram Advisory, causing his customers to pay selling commissions that could have been avoided. Other than the selling commission that Ingram and Centaurus received, the underlying securities had the same features and benefits.

Ingram’s conduct violated the reasonable-basis suitability obligation in FINRA Rule 2111(a) and FINRA Rule 2010. Furthermore, Centaurus Financial failed to reasonably supervise Ingram’s recommendations of UITs, BRG, and MAC, violating FINRA Rules 3110(a), 3110(b), and 2010.

Centaurus Financial Inc.’s Supervisory System and Its Shortcomings

Centaurus Financial employed a multi-level supervisory system, which included assigned branch managers, trading principals, and Regional Compliance Supervisors (RCSs). The first level of supervision and oversight belonged to the branch manager, who was responsible for reviewing and processing orders and ensuring the suitability of recommended transactions.

During the relevant period between September 2016 and September 2018, the branch manager for Centaurus’ branch in Winter Park, Florida, was Ingram’s direct supervisor. In that capacity, the Centaurus branch manager was responsible for supervising Ingram and reviewing the suitability of his recommended transactions, including UITs, BRG, and MAC. However, the Centaurus branch manager failed to conduct a suitability review of Ingram’s investment recommendations, as he did not understand that it was his responsibility to do so. Furthermore, the Centaurus branch manager was allegedly aware of Ingram’s practice of recommending more expensive standard version UITs, BRG, and MAC through Centaurus due to the transactional sales charges and admitted that Ingram recommended the higher-cost UITs for “the compensation.”

In addition to the branch manager’s responsibilities, Centaurus’s Written Supervisory Procedures (WSPs) required a trading principal to carefully review UIT order forms for potential violations, unsuitable transactions, and other potential infractions. During the relevant period, no trading principal at Centaurus conducted any suitability review of Ingram’s UIT recommendations. The WSPs also mandated a Regional Compliance Supervisor (RCS) to review the suitability of Ingram’s investment recommendations of alternative investments or non-conventional investments (NCIs), such as BRG and MAC. The RCS responsible for Ingram’s recommendations, however, failed to consider the costs of his recommendations as part of the review.

About Iorio Altamirano LLP

Iorio Altamirano LLP is a securities arbitration law firm located in New York, NY. We represent investors nationwide and vigorously pursue FINRA arbitration claims on behalf of investors to recover investment losses.

We have over 20 years of combined experience as securities arbitration lawyers and have helped investors recover investment losses in over 1,000 cases. Our firm will file a FINRA securities arbitration claim on your behalf on a contingency fee basis to try to recover your losses. If we do not obtain a recovery, you do not owe us a legal fee.

If you have invested in alternative investments such as GWG L Bonds, REITS, or UITs through Centaurus Financial, Inc., contact securities arbitration lawyers August Iorio at august@ia-law.com or Jorge Altamirano at jorge@ia-law.com. Alternatively, you may reach the firm by phone toll-free at (646) 330-4624.