The Financial Industry Regulatory Authority Inc. on Friday said it had suspended for four months and penalized a California broker, Linda J. Wimsatt, $31,000, plus interest, for violating Regulation Best Interest in sales of bonds issued by GWG Holdings Inc., which declared bankruptcy in April 2022.
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.
Wimsatt sold the GWG bonds to clients both before and after Regulation Best Interest, or Reg BI, went live in June 2020, according to the Finra settlement.
Finra claims she violated the industry’s suitability standard first and then Reg BI in the sales of the GWG bonds.
"Wimsatt recommended that four retail customers invest in GWG L Bonds, which were speculative, unrated corporate bonds,” Finra stated, and her sales recommendations to two customers January 2020 and two more in April 2020 were unsuitable for the customers based on their investment profiles, in violation of industry rules.
Her recommendations to three clients in August and September 2020 “were not in the customers' best interests based on their investment profiles” and in violation of Reg BI as well as Finra rules, according to the settlement.
Wimsatt, a 33-years veteran of the securities industry, did not return a call Monday to comment. Her firm, Coast Capital Management, is based in Carlsbad, Calif.
In her settlement with Finra, she was fined $10,000 and ordered to pay restitution of close to $21,000 plus interest.
Wimsatt has seven pending customer complaints and disputes, according to her BrokerCheck profile. All seven claim that the product involved in the customer complaint is GWG bonds.
She was registered at the Los Angeles broker-dealer WestPark Capital Inc. from November 2017 to October 2020, or the time she sold the GWG bonds cited in the Finra settlement.
GWG had a history of net losses and had not generated sufficient operating and investing cash flows to fund its operations, according to Finra.
“To finance its operations, GWG offered L Bonds to investors with varying maturity periods and interest rates,” Finra stated. “L Bonds were not directly secured by GWG's life insurance portfolio and were not rated by any bond rating agency.”
GWG sold L Bonds to retail investors in four separate offerings and made those sales broker-dealers, including WestPark, which entered into an agreement with GWG to sell L Bonds in July 2016 and approved the product for sale by its brokers, according to Finra.
“The offering documents for the third and fourth L Bond offerings, which commenced in December 2017 and June 2020, respectively, stated the bonds could be considered speculative, involved a high degree of risk, were illiquid, and were only suitable for persons with substantial financial resources and with no need for liquidity,” the industry regulator wrote.
“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.
Donald Trump's second turn at the White House is expected to bring a fresh bout of turbulence, supercharging retail demand.
“After learning about a bad actor who is barred, the securities industry should have a responsibility to put clients on notice,” one lawyer said.
Wealth managers weigh in on the chipmaker's influence over the greater market in the wake of its earnings report.
Streamline your outreach with Aidentified's AI-driven solutions
This season’s market volatility: Positioning for rate relief, income growth and the AI rebound
