FINRA Orders WestPark Capital to Pay $520,000 Over GWG L Bond Sales
From the desk of Jim Eccleston at Eccleston Law
The fallout from the collapse of GWG Holdings continues to affect the broker-dealers that sold the company's illiquid L bonds. According to InvestmentNews, the Financial Industry Regulatory Authority (FINRA) recently ordered Los Angeles-based WestPark Capital Inc. to pay $520,000 after finding that the firm failed to meet Regulation Best Interest standards when recommending the investments to customers.
According to InvestmentNews, FINRA found that WestPark failed to reasonably supervise recommendations of GWG L bonds to 10 retail customers when the investments were not in the customers' best interests or suitable for their investment profiles.
FINRA determined that WestPark violated Regulation Best Interest's care obligation, along with other rules governing the supervision of brokers and advisors. The conduct occurred from March 2019 through the present, according to InvestmentNews.
The sanctions include a $175,000 fine and $345,000 in restitution to customers. WestPark, which has 55 brokers and began operations in 1996, consented to FINRA's findings without admitting or denying them, InvestmentNews reports.
The enforcement action represents another development in the long-running GWG L bond collapse. As InvestmentNews reports, GWG Holdings sold more than $1 billion in bonds to retail investors through financial advisors before the company filed for bankruptcy in 2022. The illiquid bonds did not trade and are now worthless.
According to InvestmentNews, FINRA found that GWG had a history of net losses and lacked sufficient operating and investing cash flows to fund its operations. In January 2022, after WestPark customers had invested in the L bonds, GWG defaulted on its obligations to investors and suspended further sales.
WestPark is not the first broker-dealer to face regulatory scrutiny over the sale and marketing of GWG L bonds. According to InvestmentNews, FINRA has also taken action against other small and mid-sized broker-dealers that sold the investments.
The regulatory action against WestPark follows the criminal conviction of Bradley Heppner, the former chairman of GWG Holdings and Beneficient. As InvestmentNews reports, a Manhattan jury convicted Heppner in May on all charges brought by federal prosecutors following a three-week trial.
Federal prosecutors alleged that Heppner participated in a scheme to fraudulently extract more than $150 million from GWG. The collapse of GWG resulted in more than $1 billion in losses to retail investors.
Heppner was convicted of securities fraud, wire fraud, conspiracy to commit securities fraud and wire fraud, and making false statements to auditors. According to InvestmentNews, he faces a maximum sentence of 20 years in prison on each count of securities fraud, wire fraud, and making false statements to auditors, as well as up to five years in prison on the conspiracy count. His sentencing is scheduled for October.
Eccleston Law LLC represents investors and financial advisors nationwide in securities, employment, transition, regulatory, and disciplinary matters.
Tags: eccleston, eccleston law, finra, gwg l bonds, westpark capital, gwg holdings, broker-dealer regulation
