Moloney Securities Co., a mid-sized broker-dealer based in suburban St. Louis, reported near the end of March it was facing inquiries from state securities regulators, although the firm did not disclose the reason for those questions.
Meanwhile, Moloney Securities, with close to 125 retail registered reps, has been the target of securities regulators recently for sales of high-risk alternative investment products, including bonds issued by GWG Holdings Inc., which declared bankruptcy in 2022.
“The firm is or was party to dozens of Finra customer arbitration matters, many of which have settled or are in progress of being settled,” according to Moloney Securities Focus report, or audited annual financial statement, filed March 27 with the Securities and Exchange Commission.
“The firm is also addressing inquiries initiated by state securities regulators which are in varying phases and some of which could be resolved in the near future,” according to the filing with the SEC.
It’s not clear which states are looking for answers from Moloney Securities. States do make group settlements with firms at times for sales violations, but those are generally much larger, national shops, not regional broker-dealer like Moloney Securities.
Ted Moloney, president, did not return a call Friday morning to comment.
But the firm has recently drawn the attention of securities regulators due to its sale of high risk, high cost private investments, including GWG bonds.
The SEC in September said it had reached a settlements with Moloney Securities, along with three advisors, totaling $437,900 in penalties for violating Regulation Best Interest in sales of bonds issued by GWG Holdings.
Under the SEC settlement, the firm agreed to pay disgorgement of $58,700; interest of $8,200; and a penalty or fine of $250,000, for a total of 316,900.
About 40 broker-dealers over the past decade sold close to $1.6 billion in GWG L bonds, so-called because they were backed by life settlements.
At the moment, no one knows what the GWG bonds are worth, with some executives and attorneys fearing they could be valued close to pennies on the dollar.
The three Maloney Securities financial advisors that were part of the settlement collectively paid $121,000 in disgorgement, interest and penalties to resolve the matter.
Maloney Securities and the three financial advisors neither admitted or denied the SEC’s findings in the matter, according to the settlement.
The SEC alleged that the firm and its advisors failure to comply with Regulation Best Interest in connection with recommendations of corporate bonds, specifically “L Bonds,” offered by GWG Holdings Inc. to retail customers between June 30, 2020, the compliance date for Regulation BI, and approximately January 15, 2022.
The bonds were high-risk, according to the Commission. According to GWG’s disclosures during the relevant period, L Bond investments involved a high degree of risk, including the risk of losing an investor’s entire investment, according to the SEC.
And at the end of 2022, Moloney Securities agreed to pay restitution of $268,000 to settle with the Financial Industry Regulatory Authority Inc. that GPB Capital Holdings had not submitted audited financial statements while the firm sold the high-risk securities to clients.
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