Investments in GWG Holdings Threaten Savings

The Galbraith Law Firm is following closely events concerning GWG Holdings to determine how the investors who trusted assurances of high yields will be affected.

GWG finances its portfolio of life insurance assets by selling debentures and so-called “L-Bonds.” GWG’s pitch led investors to believe that these alternative assets would safely generate higher yields than other investments available.

While interest rates have recently begun creeping up and the consensus among economists is that they will continue to do so in the coming months (due in part to intentional actions taken by the Federal Reserve to try and tame inflation), the defining characteristic of the debt and capital markets over the past several years has been low interest rates. Those low interest rates drove many investors—especially retirees living on a fixed income—to seek yield (income) outside of traditional instruments such as CDs and municipal and high-grade corporate bonds.

For some of those yield-seeking investors, GWG’s sales pitch, made through financial advisors, was music to their ears. They trusted their brokers’ assurances that the GWG products were safe and secure, since they were backed by real assets with real value. So, when a cascading series of troubling events concerning GWG began to occur in 2020, investors began to wonder if they had been misled. It turns out they had.

First, back in October 2020, GWG was subpoenaed by the Securities and Exchange Commission’s Division of Enforcement, which sought information about its retail investment products. The company has since received additional subpoenas and claims that it is cooperating with the SEC’s investigation. Next, investors learned that GWG’s accounting firm chose not to continue working with GWG, a classic red flag that something is seriously amiss. Later, NASDAQ (the securities exchange on which GWG was traded) delisted GWG (which the company is appealing). Just this year, GWG has missed bond payments and has told investors it is exploring “restructuring” options.

All this noise leaves investors in a vulnerable position. They are already suffering from non-payment of interest income on which they relied. And now, they are on the precipice of experiencing actual capital losses on investments that were pitched as safe and secure.

Brokers and brokerage firms are required to perform adequate due diligence on any investment to determine if it is suitable for each individual client. Investment recommendations must be in line with the client’s age, investment experience, net worth, risk tolerance, investment objectives and income. And if the recommendation does not meet those criteria, they have broken the law and the broker and brokerage firm can be liable for the financial damage that their clients suffer.

The Galbraith Law firm represents investors from coast to coast who have suffered large losses due to the misconduct of their brokers and brokerage firms, and our attorneys have helped recover millions for our clients, in a variety of forums including FINRA, state and federal courts, mediation and pre-litigation direct settlement negotiations.

If you hold GWG in your investment portfolio because your financial advisor recommended it to you, please contact a securities attorney at the Galbraith Law Firm for a free, confidential consultation. You can email kevin@galbraithlawfirm.com or call 212.203.1249.