Independent Broker-Dealer Had Partnered With Emerson Equity to Sell Risky Junk Bonds
Our experienced GWG Holdings L Bonds attorneys represent another investor in Financial Industry Regulatory Authority (FINRA) arbitration against Centaurus Financial. The claimant is a Houston retiree who entrusted his assets to the firm. Now, he is seeking up to six figures in damages.
Shepherd Smith Edwards and Kantas (SSEK Law Firm at investorlawyers.com) represent investors who a broker-dealer may have unsuitably sold GWG Holding L Bonds. Now that GWG Holdings, Inc. has filed for Chapter 11 Bankruptcy, L Bondholders are scrambling to recoup their losses from these high-yield bonds that may not be worth much, if anything at all, at this point.
Call SSEK Law Firm at (800) 259-9010 today to schedule your free, no-obligation case assessment.
Misrepresentations and Breach of Fiduciary Duty Alleged
The claimant contends that he made it clear to his Centaurus Financial broker from the start that he did not want to take on undue risk. He entrusted his financial advisor and the firm to look out for his best interests. Instead, the broker-dealer allegedly looked out for its interests by investing him in an untraded bond issued by the obscure entity GWG Holdings.
GWG’s business primarily involved:
- Purchasing life insurance policies from insured consumers.
- Paying a discounted rate on the face value.
- Hoping to profit upon the death of the policyholder.
While there are benefits to this kind of transaction, there are also risks. For example, if the insured outlives their life expectancy, the policy buyer may end up losing money. If the policy premiums stop being paid or the policy lapses, the entire investment may be lost. Not only that, but the majority of these policies are Universal Life policies with yearly premiums that go up over time.
In recent years, the Securities and Exchange Commission (SEC) has brought enforcement actions against entities and individuals alleging fraud involving life settlements. Misrepresentations about profitability and safety are a primary contention. In certain cases, the regulator also has made Ponzi fraud allegations involving the purported misappropriation or misuse of investors’ money to pay promised returns.
GWG began issuing L Bonds to deal with cash flow problems. Visit GWG Holdings L Bonds to learn more about this investment and the risks involved.
It was in a partnership deal between managing brokerage firm Emerson Equity that Centaurus Financial came to sell L Bonds to customers, including to this elderly Houston investor. Now, GWG Holdings has collapsed. To learn more about the missed regulatory filings, investigations, and debts owed to investors leading up to its bankruptcy, visit our GWG Holdings page.
Allegations Also Include Supervisory Failures and Omissions
Centaurus Financial is run as an office of supervisory jurisdiction, which means its agents usually operate their own offices out of strip malls or office parks with no onsite supervisor. The firm’s financial advisors usually get a 90% payout, which is an incentive to sell high commission products.
This claimant paid Centaurus Financial and Emerson Equity up to 8% in commissions. Not only that, but with their illiquidity, high risks, and the Ponzi-like nature of bond repayments coming from payments made by new bondholders, GWG Holdings L Bonds would never have been suitable for this retiree.
Centaurus’ alleged failure to supervise, which allowed for the sale of these high-yield bonds to this older customer, was simply inexcusable. Also, this Houston investor allegedly was never apprised of all the risks he was taking on. Now, he is claiming both negligence and gross negligence.
Skilled Securities Attorneys
SSEK Law Firm is pursuing the brokerage firms that sold L Bonds to its customers, many of whom were retirees, retail investors, conservative investors, and others who should never have been sold these speculative products. Already, we have filed GWG L Bonds arbitration claims on behalf of former customers of NI Advisors, Centaurus Financial, Center Street Securities, and others.