Western International & 5 Brokers Charged in Sales of L Bonds

In a recent press release, it was announced that the Securities and Exchange Commission (SEC) charged registered broker/dealer, Western International Securities, Inc. (Western) and five of their registered representatives, Nancy Cole, Patrick Egan, Andy Gitipityapon, Steven Graham, and Thomas Swan, with violating Best Interest Obligation regulations (also referred to as Regulation Best Interest or Reg BI) when they recommended and sold unrated, high-risk debt security known as L Bonds to retirees and other retail investors. From July 2020 through April 2021, Western sold $13.3 million of L Bonds, according to the June 16, 2022, SEC press release.

The SEC’s complaint alleges that, between July 2020 and April 2021, Western and the five brokers recommended and sold GWG L Bonds to retail customers, many of whom were on fixed incomes and had moderate risk tolerances. The SEC complaint said that GWG Holdings, Inc., states the L bonds were high risk, illiquid, and only suitable for customers with substantial financial resources.

In a recent article from InvestmentNews, they stated that brokers sold the bonds to many clients who had moderate risk tolerances, little investment experience, a limited liquid net worth, and were on fixed incomes or retired.

The SEC alleges the defendants failed to comply with Reg BI’s “Care Obligation.” The SEC said they did not exercise reasonable diligence, care, and skill to understand the risks, rewards, and costs associated with L Bonds. Also, they allegedly recommended L Bonds to at least seven clients without a reasonable basis to believe the bonds were in their clients’ best interests.

The SEC complaint also alleges Western failed to comply with Reg BI’s “Compliance Obligation.” The SEC alleges they did not adequately establish, maintain, and enforce written policies and procedures designed to achieve compliance with Reg BI.

“Reg BI is clear: broker/dealers must act in the best interest of their customers,” said Gurbir S. Grewal, Director of the SEC’s Division of Enforcement. “When they fail to do so, as we allege happened here, they put retail investors at risk and we’ll hold them accountable.”

According to the InvestmentNews article, the SEC is seeking an injunction, disgorgement, interest and civil penalties against the brokerage.

Western International Securities claims they did nothing wrong and said they will fight the SEC’s charges.

On April 20^th, 2022, GWG Holdings filed Chapter 11 bankruptcy. Investors have until July 29^th, 2022 to file a proof of claim form. Currently, Soreide Law Group, has filed several claims against various brokerage firms who sold GWG Investments. Investors should pursue all avenues to attempt a recovery of their GWG L Bond losses.

If you've suffered losses in GWG L Bonds through Western International Securities, Inc. and/or their registered representatives, Nancy Cole, Patrick Egan, Andy Gitipityapon, Steven Graham, and Thomas Swan, or any other broker/dealer, contact Soreide Law Group and speak to an experienced securities lawyer at no cost regarding the possible recovery of your investment losses through a FINRA arbitration at: 888-760-6552.

Soreide Law Group works on a contingency fee and represents our clients nationwide before FINRA.