Two weeks after losing one investor lawsuit – for $134,000 - involving all but worthless bonds issued by GWG Holdings, a New York broker-dealer, LifeMark Securities Corp. on Wednesday lost a second investor claim linked to GWG bonds, this time for $89,000.
Based in Rochester, New York, LifeMark Securities has faced scrutiny in the past for its sales of GWG L bonds, so-called because they were backed by life insurance policies.
The Securities and Exchange Commission (SEC) and LifeMark Securities last summer reached a settlement for the firm’s violation of Regulation Best Interest in sales of bonds issued by GWG Holdings, which declared bankruptcy in April 2022.
About 40 broker-dealers over the past decade sold close to $1.6 billion in GWG L bonds.
Without admitting or denying the SEC's findings at the time, LifeMark agreed to a censure, disgorgement of $5,100, and a civil money penalty of $85,000.
LifeMark Securities is a mid-sized broker-dealer with around 175 registered reps.
“These two clams were unrelated to the SEC sanction,” said the firm’s CEO, James Prisco, in an interview with InvestmentNews Friday afternoon.
“What happened with GWG was unfortunate, and the firm received a number of claims from clients and resolved most of them,” Prisco said. “With the two that we took to FINRA arbitration hearings, the clients were aware of the risks and the rep limited their investments.”
“We don’t agree with the panels’ decisions at the time,” he said. “We thought these claims were worth defending. A fraction of our client bought the GWG L bonds, and I invested in it too. Remember, the market in 2020 was in turmoil, with investors looking for non-correlated investments like GWG.”
“We no longer sell complex or alternative products and focus on mutual funds, annuities and advisory,” Prisco added.
The clients in the first claim and award dated May 21, the Minasazi family, sued LifeMark Securities last year, alleging breach of contract, violations of federal securities laws, and other claims.
The three-person arbitration panel, under the aegis of FINRA Dispute Resolution, awarded the clients $88,000 in compensatory damages, plus interest, as well as $46,000 in costs and legal fees, according to the award.
The client of the second award, Donald Beddow, received $75,000 in compensatory damages plus $14,000 for the cost of expert witnesses, according to the award, which was dated June 4.
GWG Holdings filed for chapter 11 bankruptcy protection in 2022. In March, Beneficient, a platform for illiquid alternative investments that was spun off from GWG months before it went bankrupt, offered $50.5 million to settle claims related to lawsuits filed in federal court in Texas, including GWG’s bankruptcy proceeding, which commenced in April 2022.
The settlement is pending court approval.
Some senior Beneficient executives, including CEO Brad Heppner, had worked in senior positions at GWG prior to the companies separating.
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