SEC Alleges Western International Securities and Its California Financial Advisors Committed Due Diligence Failures
The US Securities and Exchange Commission (SEC) has filed civil charges against Western International Securities and several of its registered representatives. The firm and its advisors allegedly violated Regulation Best Interest standards when they sold about $13.3M of GWG L Bonds to investors between July 2020 and April 2021.
The regulator contends that the broker-dealer neglected to conduct adequate due diligence when recommending and selling these unrated and speculative junk bonds. In February 2022, GWG Holdings, Inc. defaulted on $13.6M of payments and interest it owes L Bond investors. The Dallas-based alternative asset firm filed for bankruptcy protection in April 2022.
Western International Securities, owned by Atria Wealth Solutions, is one of more than 140 brokerage firms that sold L Bonds to customers and earned high commissions. The SEC contends in its complaint that GWG allegedly recommended and sold L Bonds to customers with fixed incomes and only moderate risk tolerance levels. This happened after the firm stated that these junk bonds were only suitable for those with “substantial” financial resources.
The majority of these clients appear to be older, inexperienced investors. Many of these clients should never have been sold these life insurance bonds, to begin with. Our seasoned GWG L Bond lawyers represent investors in Financial Industry Regulatory Authority (FINRA) arbitration against the brokerage firms that unsuitably recommended L Bonds to customers.
If you are someone who would like to explore your legal options, contact us at Shepherd Smith Edwards and Kantas (SSEK Law Firm at investorlawyers.com) today.
California-Based Western International Securities Brokers Appear to Have Sold L Bonds to Inexperienced, Older Investors
The SEC wants permanent injunctions, disgorgement with prejudgment interest, and civil penalties brought against Western International Securities and the following California-based registered representatives that purportedly sold L Bonds to customers:
- Nancy Ellen Cole in Sacramento, CA;
- Andy Ravi Gitipityapon, who is also President of AG Wealth Group in Pasadena;
- Patrick Michael Egan of Coordinated Wealth Management in Glendora, CA;
- Steven R. Graham in Valencia, CA, who may be affiliated locally with Primerica Financial Service;
- Thomas Brian Swan in Westlake Village, CA, may be affiliated locally with Adult Financial Education Services.
These Western International Securities brokers have more than two, if not three, decades of experience in the industry. According to the SEC, they purportedly sold L Bonds to customers resulting in $5400 and $32,500 in aggregate commissions each. Meanwhile, the broker-dealer earned $187K in commissions and additional fees from selling L Bonds.
What is Regulation BI?
Established under the Securities Exchange Act of 1934, the SEC’s Regulation Best Interest (Reg BI) set up a “best interest” standard of behavior for brokerage firms and their associated persons. This is related to when they make recommendations to retail customers, whether it be a type of securities transaction, financial product, or investing strategy. The Commission claims that Western International Securities and its brokers did not comply with Reg BI’s “Care Obligation” because they purportedly:
- Failed to conduct “reasonable diligence, care, and skill to understand the risks, rewards, and costs” involving L Bonds;
- Recommended these high-yield bonds to at least seven customers without having reasonable grounds for thinking these bonds were in their best interests;
- Failed to “adequately establish, maintain, and enforce written policies and procedures reasonably designed to achieve compliance with Reg BI.”
Skilled GWG L Bond Attorneys Representing Retail Investors, Including Retirees
If your Western International Securities broker recommended and sold you GWG L Bonds, you may have grounds for a FINRA arbitration claim. Contact our California securities attorneys at (619) 550-4847. Throughout the US, call SSEK Law Firm at (800) 259-9010.