Moloney Securities Fined over GWG L Bond Sales

Moloney Securities (CRD# 38535[1]) reached a settlement[2] in September with the Securities and Exchange Commission (SEC) over sales of bonds issued by GWG Holdings. Known as “GWG L Bonds[3],” these investments were backed by life settlements. GWG filed for bankruptcy in April 2022 amidst an SEC investigation into its sales of these products. 

SEC Settlement: Moloney Securities Unsuitably Sold Bonds

According to the settlement, Moloney Securities’ sales of GWG L Bonds failed to comply with Regulation Best Interest. Under this regulation, broker-dealer firms and their representatives must exercise reasonable diligence to understand the risks, rewards, and costs associated with investment recommendations. The firm allegedly recommended L Bonds without a reasonable basis to believe they were suitable for retail customers. 

As the SEC notes, GWG’s own disclosures regarding the products described them as highly risky. They involved the risk that an investor might lose their entire investment. Additionally, GWG described them as speculative products “only suitable for investors with substantial financial resources and no need for liquidity.” The company’s disclosures also noted that “GWG would use a portion of the L Bond proceeds to repay existing L Bond holders.” 

Firm Pays 6-Figure Penalty

The SEC alleged compliance failures by Moloney’s CEO, Donald Hancock. It also alleged that Moloney representatives Laura Barnes and David La Grange failed to comply with Regulation Best Interest. As part of the settlement, the firm agreed to pay a civil penalty of $250,000. It also agreed to pay disgorgement of $58,698. The above-named representatives and Hancock agreed to pay disgorgement and penalties totaling more than $120,000. 

In a statement to InvestmentNews[4], the firm’s president, Ted Moloney, addressed the settlement. “Moloney Securities is glad to have finally resolved this matter,” he said. “Our firm cooperated with the Commission and its staff concerning these issues, and we are pleased to have the matter behind us and look forward to continuing to serve our clients.”

Investment News’ article also describes the dire state of investments in GWG Holdings. “At the moment, no one knows what the GWG bonds are worth,” it notes.

Call MDF Law About Your GWG L Bond Losses

If you suffered losses investing in GWG L Bonds, you may be able to file a FINRA arbitration claim against the broker-dealer firm that marketed them. Claimants who receive a recovery through the arbitration process will still be eligible for payments issued through GWG’s bankruptcy process.

Contact MDF Law’s experienced broker fraud attorneys at 800-767-8040 for a free consultation about your recovery options. Our clients only pay a fee if they successfully collect lost funds, and we provide free consultations nationwide. You may have a limited window to file a FINRA arbitration, so don’t delay: call MDF Law today.