Maloney Securities GWG L Bond Sales

The Securities and Exchange Commission (SEC) reached a settlement of $437,900 in penalties with Maloney Securities Co. Inc. and three of its financial advisors, for violating Regulation Best Interest (Reg BI) in the sales of bonds issued by GWG Holdings Inc., which declared bankruptcy in April 2022, according to a recent article in InvestmentNews. Regulation Best Interest (Reg BI) is a rule from the Securities and Exchange Commission (SEC) that requires broker/dealers to act in the best interests of their clients when making recommendations for securities transactions or investment strategies.

InvestmentNews states that Maloney Securities, based in St. Louis, has 125 financial advisors, and agreed to pay disgorgement of $58,700; interest of $8,200; and a penalty or fine of $250,000, for a total of $316,900. The Maloney Securities financial advisors that were part of the settlement paid $121,000 in disgorgement, interest and penalties to resolve the matter. The advisors are: Donald R Hancock, a total of $58,300; David F La Grange, $35,700; and Laura B Barnes, $27,000.

Approximately $1.6 billion in GWG L bonds have been sold over the past ten years by over 40 broker/dealers.  Currently no one knows the value of the GWG bonds, most fearing they could be valued at pennies to the dollar.

According to the InvestmentNews article, the SEC alleged that the firm and its advisors failed to comply with Regulation Best Interest in connection with recommendations of corporate bonds, specifically “L Bonds,” offered by GWG Holdings Inc. to retail customers between June 30, 2020, the compliance date for Reg BI, and approximately January 15, 2022. Maloney Securities and the three financial advisors neither admitted nor denied the SEC’s findings in the matter, according to the settlement.

GWG Holdings, Inc. filed for Chapter 11 bankruptcy protection in the United States Bankruptcy Court on April 20, 2022. Due to the Chapter 11 bankruptcy filing, the payment obligations for the GWG L Bonds were stayed, which means that GWG L Bond investors will not receive any principal or interest payments until GWG Holdings, Inc. restructures its debt obligations and the court approves the distributions. The Chapter 11 Bankruptcy case could go on for years. 

GWG L Bonds are speculative, high-risk, and illiquid securities sold as private placement through broker/dealers nationwide. The L Bonds were not suitable for investors with a low-risk tolerance. GWG sold the L bonds through broker/dealers such as Maloney Securities, who sold the products to individual retail investors.

According to the SEC, Maloney Securities failed to exercise reasonable diligence, care, and skill to understand the potential risks, rewards, and costs associated with the recommendations.

To discuss this article or any other issues related to GWG L Bonds, contact Soreide Law Group and speak to an experienced securities lawyer regarding the possible recovery of your investment losses through a FINRA arbitration at:  888-760-6552.

Soreide Law Group represents our clients nationally before FINRA on a contingency fee basis.