Clients on Monday won another arbitration decision, this time for $246,000, stemming from a broker-dealer's sale of bonds from GWG Holdings Inc., a defunct life settlement business that is now in bankruptcy.
The arbitration award, under the aegis of Finra Dispute Resolution Inc., was lost by Ages Financial Services Ltd., a small broker-dealer in suburban Boston. The panel of three arbitrators reached its decision Friday.
Client lawsuits against broker-dealers and individuals who sold the GWG L bonds appear to be working their way through Finra's arbitration system. Just last week, a Southern California registered representative and a broker-dealer executive lost an arbitration claim of a little more than $1 million in damages to an investor who bought GWG Holdings L bonds in 2018.
About 40 broker-dealers sold close to $1.6 billion in GWG L bonds, so-called because they were backed by life settlements, before the firm declared bankruptcy last year, leaving investors in the lurch.
The arbitration panel split the award into two parts: $209,000 to Laurence Brown and various Brown family trusts, and $37,000 to Robert Mecca.
The arbitrators explained their decision by noting that "the investments were inappropriate for the Brown family," according to the award.
Ages Financial Services "did not properly inform Brown about the risks and did not discuss alternatives that would have better protected the trusts," according to the Finra arbitration panel. "Mecca stated that he was not properly informed about the degree of risk involved in the investment in GWG. The investments were not discussed in terms of quantitative suitability in relation to [the clients'] overall portfolios."
In September, Ages had won an arbitration claim involving the sale of GWG L bonds, its president, William H. McCance, said in an interview Tuesday. That resulted in no payment to clients who bought GWG bonds.
In the decision announced Monday, "the broker in the case left the industry and didn’t testify," McCance said. "The client signed documents that disclosed risks. We don’t agree with the decision but, with Finra arbitration, there is no appeal."
McCance said that the broker-dealer had sold GWG L bonds since 2012, and the company never missed a payment. But in 2019, when the Beneficient Company Group acquired GWG Holdings, Ages Financial Services stopped selling the product; Beneficient pitched itself as a liquidity provider to a variety of illiquid assets and alternative investments, not just life settlements.
With interest rates near zero for much of last decade, the firm went further on the risk spectrum to seek yield for clients, McCance said.
"We didn’t like the Beneficient model," McCance said. "We firmly believe we did the right thing when it was a company that only sold life settlements."
Scott Silver, the attorney for the plaintiffs in the matter, disagreed.
"We appreciate that the arbitration panel reached the same conclusion that we had, that GWG was a complex alternative investment that wasn’t suitable for a Mom and Pop investor who was retired or seeking a low-risk investment," Silver said. "GWG’s own marketing materials highlighted the risky nature of the business, and that was ignored by the handful of broker-dealers that put the product on their platform."
Relationships are key to our business but advisors are often slow to engage in specific activities designed to foster them.
Whichever path you go down, act now while you're still in control.
Pro-bitcoin professionals, however, say the cryptocurrency has ushered in change.
“LPL has evolved significantly over the last decade and still wants to scale up,” says one industry executive.
Survey findings from the Nationwide Retirement Institute offers pearls of planning wisdom from 60- to 65-year-olds, as well as insights into concerns.
Streamline your outreach with Aidentified's AI-driven solutions
This season’s market volatility: Positioning for rate relief, income growth and the AI rebound
