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Emerson Equity Investors: You May Be Able to Recover GWGH L Bond Losses

Mar 11, 2022 Current Investigations

Investors who lost money investing in GWG L Bonds through Emerson Equity should contact a stock fraud attorney. Emerson Equity’s brokers allegedly recommended L Bonds issued by GWG Holdings, a financial services holding company that is embroiled in serious financial trouble. Kurta Law is investigating claims related to Emerson Equity’s sale of GWGH bonds and investors may have viable claims for recovering losses. Call 877-600-0098 or email for a free case evaluation today.

GWG Holdings and L Bonds Fail to Pay Investors

After GWG Holdings failed to make $13 million in payments to investors in January 2022, many investors realized L Bonds did not fit their financial needs. In February 2022, GWG Holdings stated in a letter that they would continue to pause their interest, maturity, and redemption payments while they explored options for restructuring.

Emerson Equity and L Bond Investor Disputes

Emerson Equity stockbrokers may have violated FINRA rules by recommending investments that are overly risky. FINRA Rule 2111 states that stockbrokers must consider their investor’s risk tolerance before recommending a security.

Emerson Equity served as the underwriter for GWG Holdings, which means the firm was in charge of bringing these bonds to the public market. In addition, prior to selling GWGH bonds, Emerson Equity was responsible for evaluating the risks associated with the L Bonds. Firms must evaluate any securities they offer and should look for discrepancies between their customers’ risk tolerance and the risks posed by certain securities.

FINRA Rule 3110 requires firms to supervise their stockbrokers and ensure they adhere to securities rules and regulations. Emerson Equity is also facing allegations that they failed to supervise one of their brokers, Tony Barouti, who allegedly recommended GWG Holdings to investors who could not tolerate the risks presented by these L Bonds. Other brokers at Emerson Equity may face similar allegations.

What are L Bonds?

L Bonds are life insurance bonds. These are highly risky and speculative investments, and L bondholders cannot re-sell their bonds on a secondary market. L Bonds mature in 2 to 7 years, making them highly illiquid, another factor that adds to their risk.

GWG Holdings May Liquidate Assets 

In April 2021, GWGH stopped offering L Bonds because of possible delisting from NASDAQ following their failure to file certain documents with the SEC. GWG Holdings relies heavily on L Bonds to raise money to meet its obligations. 

According to their most recent 10-K filing, GWG Holdings is the subject of an SEC investigation. The results of the investigation are not yet public, but the 10-K states that the investigation could have an adverse effect on the company due to legal fees and potential fines.

Emerson Equity Mutual Fund Disclosures

The L Bonds are not the only regulatory issues on Emerson Equity’s record.

Emerson Equity and general securities principal Dominic Baldini entered into an Acceptance, Waiver, and Consent agreement on December 22, 2021, in which they consented to the findings that they failed to establish a supervisory system for mutual fund transactions. The firm’s reports allegedly lacked the information necessary to evaluate unsuitable mutual fund trading.  

FINRA alleges that an Emerson Equity representative incurred unwanted charges by buying and selling Class A and Class B mutual funds on a short-term basis. These types of shares are long-term investments and are not suitable for short-term trading. Class A mutual funds incur front-end loads (a.k.a. sales charges), which make these trades unsuitable for short-term investments. Allegedly, investors incurred deferred sales charges of $1,641,929.94.

One representative allegedly engaged in unsuitable mutual fund switching. Mutual fund switching occurs when stockbrokers sell mutual fund shares and then purchase shares in another mutual fund family. This practice also incurs additional charges and commissions.

FINRA ordered the firm to repay the $1,641,929.94 to investors, plus interest. The regulator also imposed a fine of $60,000.

You can read Emerson Equity’s detailed record here.

Emerson Equity Background Information

Emerson Equity was established in California in 2003. According to FINRA, Emerson Equity has 200 registered representatives in 50 branches across the U.S. Emerson Equity has offices in Irvine, Glendale, Woodland Hills, Los Angeles and San Diego, California. The main office is located in San Mateo, California.

Investors Can Recover Losses from Emerson Equity

If you want to sue your Emerson Equity stockbroker to recover funds, you may be able to recover losses through FINRA arbitration. Often, brokerage firms require investors to sign a pre-dispute agreement to settle via FINRA. Securities fraud lawyers can help you navigate the FINRA arbitration process to secure your award or settlement as quickly as possible.