In a piece published yesterday on InvestmentNews.com, author Bruce Kelly argues that financial advisors and brokers persisted in selling GWG’s settlement-backed L bonds for years despite ominous accounting and reporting information coming from GWG Holdings.
Last month GWG Holdings filed chapter 11 bankruptcy. Up to that point the company had sold 1.6 billion worth of these L Bonds. Those sales were facilitated by a network of around 140 independent broker-dealers.
In the piece, Kelly attributes brokers’ persistence in selling these ill-fated bonds – despite clear red flags – to one of two things:
- Foolish optimism that the tanking bonds would somehow make an about-face and the broker would look like a hero, or;
- The opportunity to make an easy sale and cash-in on the handsome commissions from GWG.
The author then goes on to describe an email from a Centaurus Financial broker to a client in April 2020, in which the broker says that GWG has raised the maximum or “cap” on GWG sales. The prior maximum had been $100,000 or no more than 10% of the customer’s net worth, excluding primary residence, whichever was lower.
“The cap from GWG has been lifted to 150K,” the broker wrote. “Wanted to let you know if you would like to add funds from your money market.”
The author quotes a source who states that “according to my conversations with Centaurus Financial customers, brokers hounded their clients after the cap was raised to invest up to the new max,”.
Sonn Law Group is representing GWG bondholders who were sold these products by their financial advisor or broker. If this describes you, we invite you to contact us to discuss your options.
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