Although the former chairman of the companies involved in the GWG L bonds debacle was found guilty in May of fraud, firms that sold the $1.8 billion of bonds are still living with the fallout; FINRA last week penalized a small broker-dealer in Los Angeles $520,000 for failing to meet the industry sales standard of Regulation Best Interest when selling the bonds to customers.
According to a FINRA settlement, WestPark Capital Inc., with 55 brokers, failed to reasonably supervise the “recommendations of GWG L bonds to 10 retail customers that were not in the best interests of or suitable for the customers.”
The firm violated Regulation Best Interest’s care obligations as well as other rules to supervise brokers and advisors.
WestPark Capital opened its doors in 1996; the firm consented to FINRA’s findings in the matter without admission or denial.
Richard Rappaport, the firm’s CEO, did not return a call Monday morning to comment. The firm’s violation of supervision and sales standards occurred from March 2019 to the present, according to FINRA.
The penalty is in two parts; a fine to the firm of $175,000 and restitution to clients of $345,000.
The GWG L bond debacle has been unwinding for several years.
Most recently, after a three-week trial this spring, a jury in Manhattan convicted Bradley Heppner, former chairman of GWG Holdings and Beneficient, of all charges federal prosecutors brought against him in a corporate blow up that has caused more than $1 billion in losses to retail investors.
The federal government’s charges against Heppner stemmed from a scheme to fraudulently extract more than $150 million from GWG, which collapsed into bankruptcy in 2022 and left thousands of Mom and Pop investors who bought more than $1 billion of GWG bonds from financial advisors holding the bag. GWG’s bonds, which were illiquid and did not trade, are now worthless.
According to FINRA, GWG had a history of net losses and had not generated sufficient operating and investing cash flows to fund its operations.
“In January 2022, after WestPark customers made investments in the L Bonds GWG defaulted on its obligations to L Bond investors and suspended further sales of L Bonds,” according to FINRA.
WestPark Capital is not the first firm to face scrutiny from regulators about GWG; FINRA has penalized other small to mid-sized broker-dealers that sold and marketed the GWG bonds.
According to a federal indictment from last October, Heppner, 60, received more than $150 million in payments through funneling money from GWG Holdings to a shell company, Highland, he controlled at the Dallas-based Beneficient.
Heppner was guilty of four charges: securities fraud, wire fraud, conspiracy to commit securities fraud and wire fraud, and false statements to auditors. His sentencing is in October.
He faces a maximum sentence of 20 years in prison on each of the counts of securities fraud, wire fraud, and false statements to auditors, and a maximum of five years in prison on the conspiracy count.
Chicago-based Mesirow Fiduciary Solutions adds flexPATH's plan-level outsourced fiduciary book, boosting its retirement market reach to $164 billion.
Also, Raymond James's employee advisor channel adds breakaways from Wells Fargo and Stifel, while UBS welcomes an ex-Morgan Stanley duo in Indiana.
It promised guaranteed principal and 10% monthly returns. The SEC says it invested nothing.
Ten years after entering the fee-based annuity market, MassMutual Ascend says nearly half its lifetime sales came in the past two years alone – but barriers remain among fee-only advisors.
Amplify, WealthReach, Zeplyn and Zocks have unveiled partnerships aimed at automating portfolio management, content creation, account opening, and client communication.
Northern Trust’s Ken Lassner shows advisors how to convert volatility into after-tax portfolio gains
Dan Biagini of American Equity says the steady decline of pensions, longer lifespans and a reset in interest rates are rewriting how advisors build retirement income
