National investment loss lawyers KlaymanToskes reports that the U.S. Securities and Exchange Commission (“SEC”) has reached a settlement with Western International Securities, Inc. and five of its California-registered financial advisors regarding violations of Regulation Best Interest (“Reg BI”). The settlement, related to the sale of high-risk debt securities known as GWG L Bonds issued by GWG Holdings, Inc., follows an SEC complaint filed in June 2022.
KlaymanToskes has made substantial recoveries on behalf of GWG investors, following GWG Holdings’ bankruptcy filing in April 2022, and continues to currently represent many GWG L Bond investors throughout the country. The law firm is currently investigating the following Western International branches:
According to the SEC’s settlement with Western International Securities, the judgment includes a permanent injunction against violating Reg BI, disgorgement of $34,468 in commissions and fees retained from L Bond sales, prejudgment interest, and a civil penalty of $160,000. Additionally, the five individual brokers involved have agreed to pay disgorgement of their commissions, prejudgment interest, and individual civil penalties of $12,500 each. The firm and individuals have consented to a final judgment without admitting or denying the allegations.
If you suffered losses in GWG L Bonds and/or any other high-risk investments at Western International Securities, contact KlaymanToskes at 888-997-9956 or by email at investigations@klaymantoskes.com for a free and confidential consultation to discuss your recovery options.
The SEC’s complaint against Western International Securities and the five brokers alleged that they failed to comply with Reg BI, which requires brokers to act in the best interest of their clients when recommending securities. The brokers allegedly sold high-risk L Bonds without fully disclosing the risks involved or ensuring the investments were suitable for their clients.
GWG L bonds were marketed as safe and low-risk investments that were instead unrated, illiquid, high risk, and potentially speculative. GWG Holdings, Inc. disclosed on the second page of its 2020 Prospectus, “L Bonds are only suitable for persons with substantial financial resources and with no need for liquidity in this investment.” Additionally, GWG’s prospectuses disclosed that L Bond holders had no right to require GWG to redeem any L Bond prior to its due date, except in the case of the holder’s death, bankruptcy, or total permanent disability.
This settlement is part of a broader pattern of regulatory enforcement actions against Western International Securities. The firm has a history of supervisory failures, inadequate compliance systems, and broker misconduct, which have repeatedly put its clients at risk.
For instance, between January 2016 and December 2019, four former Western International brokers generated over $2.5 million in total trading costs through excessive trading, or “churning,” in customer accounts. This led to significant financial harm for their clients, with fees representing up to 30% of the accounts’ equity value.
Western International’s systems reportedly relied on outdated trade blotter-based surveillance, failing to incorporate crucial indicators of excessive trading, such as cost-to-equity ratios and turnover rates. Furthermore, the firm also allegedly neglected to provide field supervisors with adequate guidance for identifying and addressing potentially excessive trading.
Western also recently consented to a censure and agreed to pay over $870,000 in fines and restitution to customers, following allegations that the firm made unsuitable recommendations to its customers to invest in non-traded REITs and ETFs.
Investors may be entitled to a financial recovery if their brokerage firm failed to supervise the representative managing their brokerage account, and/or if their broker/advisor made unsuitable investment recommendations.
Further, investment firms may be held liable for any losses incurred by their customers in the event of misrepresentations or omissions of material facts, and/or an overconcentration of the customer’s portfolio in one particular investment, class, or market sector.
If you suffered losses due to unsuitable investment recommendations or broker misconduct at Western International Securities, and/or have concerns regarding your investment portfolio, contact KlaymanToskes at 888-997-9956 or fill out a short contact form for a free and confidential consultation to discuss your recovery options. We do not collect attorney’s fees unless we are able to obtain a financial recovery for you.
KlaymanToskes is a leading national securities law firm specializing in securities arbitration and litigation on behalf of retail and institutional investors. The firm has recovered over $600 million for clients in FINRA arbitrations and other securities litigation matters. With offices in California, Florida, New York, and Puerto Rico, KlaymanToskes is committed to helping investors recover their losses and hold brokerage firms accountable for their actions.
KlaymanToskes, P.A.
Lawrence L. Klayman, Esq.
888-997-9956
investigations@klaymantoskes.com
www.klaymantoskes.com