GWG Holdings and GWG L Bonds were unconventional investment products sold to retail investors throughout the country. Many senior citizens and conservative investors purchased GWG’s bonds because they believed they were a safe alternative to the stock market. These investors recently received unwelcome news. GWG recently announced it was pausing payments under its L bond program. The announcement came shortly after the company’s accountants resigned and it announced an investigation by the Securities and Exchange Commission. The announcements are extremely concerning to investors, many of whom were relying on the income from the bonds. Nervous investors in GWG L Bonds continue waiting for news about when payments may continue, but prospects are not good considering the news over the last few years.
For the last several years, GWG has been marketing investments in its L bonds to retail investors. The bonds were marketed to investors as a low-risk alternative to the stock market. They promised to pay guaranteed returns of as high as 8.5% per year. If it sounds too good to be true, it may just be. The company recently announced it would stop paying bondholders interest on its L Bonds. GWG Holdings has referred to its decision as a “pause,” but its actions are leaving many investors worried. Investors may have good reason to be worried given recent news.
In November 2021, GWG announced it received a subpoena from the Securities and Exchange Commission. The announcement came nearly a year after GWG received the actual subpoena. It is unclear why the company waited so long to inform investors about the SEC subpoena, but it has been in a downward spiral ever since. In December, its accountants resigned and in January the company made the announcement that it was “pausing” payments under its bond program. According to a letter posted on its website, the company is currently investigating restructuring alternatives and it cannot provide any answers about when L Bond payments would resume.
The bad news concerning GWG Holdings is particularly stinging for many Iranian-Americans. This is because the bonds were heavily marketed to conservative investors in the Iranian-American community. L bonds were sold through Persian-language radio advertising by Iranian financial advisors and countless senior citizens purchased them. Ironically, many of these investors sought out L Bonds because they wanted an investment that was more conservative than the stock market. Now, with the prospect of a near total loss, many of these investors are demanding answers from their financial advisors. Unfortunately, the sales people involved with GWG have been quiet – telling customers to wait it out.
Many investors can’t afford to wait. “Senior citizens were relying on this income to make ends meet,” explained securities lawyer Marc Fitapelli. Fitapelli’s firm, MDF Law, represents an Iranian American investor who lost money investing in L Bonds. Fitapelli argues that his client was lied to about the risks associated with the bonds and learned of the investment on Persian radio. Lured by the promise of guaranteed returns, investors in the L bond program are suffering and it may be a long time before they are compensated explained the attorney. These investors are turning to FINRA to help.
Investors who are interested in pursuing cases related to GWG L bonds can bring arbitrations against the salespeople who sold the investment to them. According to Marc Fitapelli, most investors who purchased L bonds agreed to arbitrate disputes before the Financial Industry Regulatory Authority, or FINRA. FINRA administers thousands of arbitrations each year between customers and broker-dealers. According to statistics from FINRA, FINRA arbitrations historically settle before reaching a final hearing. The average arbitration lasts about 1.5 years. Investors who are interested in finding out if they qualify should contact an attorney.
It is unclear how many FINRA arbitrations may ultimately be filed. It is equally unclear if investors will be paid anything after all the lawsuits conclude. Only time will tell.