Wholesalers at B-D that sold GWG bonds jump ship
When wholesalers leave a broker-dealer en masse, it's a signal that the firm's efforts to sell more product and generate more revenue could be greatly hampered.
Emerson Equity has seen a slew of the wholesalers who until recently pitched GWG Holdings Inc. L bonds to broker-dealers around the country bolt the firm since the start of the year, according to a review of BrokerCheck profiles.
Of 14 former wholesalers listed on a marketing document from 2020, titled “GWG: Liquidity for Life Changes,” only four remain registered with Emerson Equity. When wholesalers leave a broker-dealer en masse, it’s a signal that the firm’s efforts to sell more product and collect more commission will be greatly hampered or drastically changed.
GWG Holdings Inc., which sold $1.6 billion of bonds backed by life settlements through a network of about 140 independent broker-dealers, said in April that it had voluntarily filed for Chapter 11 bankruptcy protection, a move that was widely anticipated. There’s no way to immediately understand what value, if any, those bonds have.
From 2015 forward, GWG Holdings struggled to generate cash flow from its operations, according to company filings with the Securities and Exchange Commission. Over the winter, GWG defaulted on interest payments to investors.
Emerson Equity was the lead wholesaler for the GWG bonds, which were backed by life settlements. Dominic Baldini, president and owner of Emerson Equity in San Mateo, California, did not return messages on Thursday to comment.
The wholesalers were divided into seven national regions, with two per region.
Merriah Harkins, who formerly had the title of executive vice president and was the leader of the GWG bond wholesalers, is now registered with Ben Securities Co., which is owned by Beneficient Co. Holdings, which split from GWG Holdings last year. A spokesperson for Beneficient declined to comment.
In its annual audited financial statement filed earlier this year with the SEC, Emerson Equity reported that problems related to an unnamed offering potentially could harm the firm.
“In 2022, there was an offering that ceased distributions and redemptions and, as a result, this may have an adverse effect on the future financial condition or results of operations of the company,” according to the firm’s 2021 financial statement, which was filed March 2.
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