Hundreds of Broker-Dealers May Have Sold Up to $2B of High-Yield Junk Bonds
InvestmentNews reports that according to an industry insider, GWG Holdings may have issued up to $2B of high-yield junk bonds in recent years. While Emerson Equity is the managing broker-dealer for the GWG Issuer, there may have been hundreds of other broker-dealers that also sold L-Bonds to investors.
In a January 15, 2022 filing with the US Securities and Exchange Commission (SEC), GWG disclosed that it hasn’t been able to issue $13.6M in principal payments and interest that it owes to L Bond investors. The Dallas-based alternative asset manager has a 30-day grace period to complete the payments or risk default.
GWG Holdings is an investor in life settlements. It is under investigation in a non-public fact-finding probe involving the SEC’s Enforcement Division.
Our private placement lawyers at Shepherd Smith Edwards and Kantas (SSEK Law Firm at investorlawyers.com) are investigating claims of GWG Holdings junk bond losses by investors. Contact us today for your free, no-obligation case assessment.
What are L Bonds?
L bonds are private placements and high-yield junk bonds that were issued by GWG Holdings from 2012 to 2021. With an $8.5% yield, these 7-year bonds are considered very appealing to investors. Through money pooled from bond investors, the L bonds financed the purchase of life insurance policies.
These life insurance policies were found on the secondary market and paid policyholders more than the surrender value of the policies. Payouts from the policies were used to pay back investors.
GWG Holdings has been delayed in submitting financial statements to the SEC. In late December 2021, its auditor Grant Thornton resigned. Also, GWG’s stock price, which was at $10.55/share in November, was down to $3.81/share on the afternoon of January 26, 2022. That’s a 63.9% drop.
GWG Holdings “Pauses” Sales
In April 2021, GWG Holdings voluntarily suspended its L Bond offerings. This was after delaying the filing of its Form 10K due at the end of December 2020. This was while the firm worked to resolve accounting questions with the help of auditors and the SEC’s Chief Accountant.
GWG Holdings went on to submit that form in November 2021 and resumed selling its L Bonds in early December 2021.
It has since suspended its sale again, notifying investors of this in a letter to shareholders on January 26, 2022. This latest “pause” of GWG L Bond sales is retroactive to January 10, 2022. The Dallas-based firm also said that it was going to keep deferring redemption requests.
Emerson Equity and Other Broker-Dealers Sold GWG Private Placements to Investors
If you are an investor who has suffered losses in GWG Holding’s L Bond series, you may have grounds for a FINRA arbitration case. Broker-dealers and financial advisors are only supposed to recommend investments that have been fully vetted as safe for their customers. It is their duty to make sure investment portfolios reflect customers investing goals, risk tolerance levels, and other key factors.