GWG Managing Broker-Dealer Emerson Equity Reports Possible Financial Woes

Emerson Equity’s Audited Financial Statement With the SEC Reports Problems Involving Unnamed Offering

Emerson Equity disclosed problems involving an unnamed offering in its yearly audited financial statement with the US Securities and Exchange Commission (SEC). This unnamed offering could potentially cause financial harm to the brokerage firm. The full-service broker-dealer, which works with high net worth individual investors and institutional clients, is the lead seller and underwriter of the L Bonds issued by GWG Holdings, Inc. 

In April 2022, GWG Holdings, which sold $1.6B of L Bonds to investors, announced filing for Chapter 11 bankruptcy protection. Emerson Equity is the lead seller of these high-yield bonds. It partnered with more than 140 regional brokerage firms to sell these life settlement-backed bonds to customers. 

Our securities attorneys are representing investors seeking to recover losses. Many brokerage firm customers are saying they were never apprised of the risks. They are also discovering that these illiquid, high-risk investments were unsuitable and should never have been recommended to them by their Emerson Equity broker. Contact us today at Shepherd Smith Edwards and Kantas (SSEK Law Firm at investorlawyers.com). 

Emerson Equity Signed Agreement With GWG Holdings as Soliciting Dealer in 2020 

Emerson’s 2021 financial statement didn’t explicitly name L Bonds as the product causing its troubles. Yet, the company stated that there was an offering that had stopped distributions and redemptions and that this could have an “adverse” impact on its “future financial condition.” L Bonds are no longer offering redemptions or distributions. 

In February 2022, GWG defaulted on $13.6M of payments owed to L Bond investors. It also has been late in submitting year-end financial statements in recent years. This included the audit that was due to the SEC by March 31, 2022. Visit GWG Holdings, Inc. and GWG L Bonds for more information.

Reporting on Emerson Equity’s financial statement, InvestmentNews spoke with forensic accountant Gordon Yale who pointed out that Emerson Equity had said in its Focus report that 30% of its total revenue last year of $107M came from five customers. Its net income was $9.4M.

In 2020, Emerson Equity and GWG Holdings became involved in a Soliciting Dealer Agreement over the sale of L Bonds. In that agreement, the brokerage firm committed to do its best to solicit subscriptions for about 2 million L Bonds units in a public offering for a total principal of around $2B. Emerson has since partnered with many regional brokerage firms to sell these risky, illiquid, and speculative products.  

High Commissions For Selling L Bonds May Have Allegedly Motivated Emerson Equity Brokers

Reports indicate that the brokerage firms that sold GWG L Bonds purportedly made up to 5% in commissions for selling the bonds and another 8% compensation of the total proceeds from L Bond sales. Because of the high commissions, Emerson Equity brokers allegedly aggressively promoted GWG L Bonds to investors. 

For example, Emerson Equity registered representative Tony Barouti, also of Barouti Financial Services in Los Angeles, is currently facing more than $1.5M in Financial Industry Regulatory Authority (FINRA) arbitration claims bought by L Bond investors. The Southern California-based financial advisor is also accused of targeting customers of Iranian heritage through Persian language radio.

Knowledgeable GWG L Bond Lawyers

If you are an L Bond investor who suffered losses in these junk bonds, you may be able to obtain financial recovery from your broker-dealer for various types of securities fraud, including:

  • Due diligence failure
  • Concentration
  • Unsuitability
  • Failure to supervise
  • Negligence
  • Other grounds 

Our skilled securities attorneys can help you determine whether you should pursue a claim for damages. We have already brought FINRA arbitration cases against a number of the broker-dealers that sold these bonds to customers, including NI Advisors, Center Street Securities, Centaurus Financial, and others. 

In California, call SSEK Law Firm at (619) 550-4847. Nationwide, call us at (800) 259-9010 today.

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