GWG Renewable Secured Debentures Investment Losses
Have you suffered losses investing in GWG Renewable Secured Debentures.? If so, the securities attorneys of The White Law Group may be able to help you recover your losses in a FINRA arbitration claim against the brokerage firm that recommended the investment.
GWG purchases life insurance policies on the secondary market at a discount to the face value of the policies. GWG pays the policy premiums until the insured dies, then collects the face value of the insurance benefit. GWG Renewable Secured Debentures has purchased almost all of the policies it owns with funds borrowed from financial institutions or investors.
In 2012, GWG began selling the Debentures. The Debentures required a minimum investment of $25,000 and additional investments can be made in $1,000 increments. The maturity terms and interest vary from six months with an annual interest rate of 4.75% to seven years with an annual interest rate of 9.50%.
The prospectus for the Debentures states that the life insurance policies held by GWG are not collateral for obligations under the Debentures. Instead, those policies have been separately pledged as collateral for a line of credit used by GWG to purchase life insurance policies.
High Risk Debentures
Between March 2012 and November 2012, GWG and the Debentures managing broker-dealer distributed a sales brochure to certain investors that allegedly contained misleading statements, in violation of NASD Rule 2210(d)(1)(A) and FINRA Fule 2010. The GWG Brochure, which was created by GWG and included in its sales kit, along with the prospectus, stated that “Renewable Secured Debentures are secured by the corporate assets of GWG, which consist primarily of investments in life insurance policies purchased in the secondary market.” The GWG Brochure further stated that the Debentures “are secured by all the corporate assets of GWG. GWG’s assets consist primarily of the life insurance policies purchased in the secondary market and are summarized in the table below.” The table stated that GWG held over $489 million of life insurance policies.
However, the $489 million value was the face value of the policies and not their current value, a significantly lower number. Moreover, as stated in the prospectus for the Debentures, the life insurance policies were not collateral for the Debentures and instead had been pledged as collateral for a separate line of credit used by GWG to purchase life insurance policies and finance its operation. Any “secured” interest the Debentures have in the assets of GWG is thus subordinate to other significant interests of creditors. Although the correct information was contained in the prospectus, it had not been accurately reflected in the GWG Brochure.
The Debentures may be considered speculative investments and involve a high degree of risk, including the risk of loss of the entire investment.
They are only suitable for wealthy, sophisticated retail investors or institutional investors.
Brokerage firms that sell such products are required to perform adequate due diligence on the investments to ensure a reasonable likelihood of success, and to evaluate whether the investments are suitable in light of the client’s age, net worth, investment experience, and investment objectives. Firms that fail to perform adequate due diligence, or that make unsuitable recommendations, can be held responsible for losses in a FINRA arbitration claim.
Recovery of Investment Losses
If you suffered losses investing in the GWG Renewable Secured Debentures and would like a free consultation with a securities attorney, please call The White Law Group at 888-637-5510.
The White Law Group is a national securities arbitration, securities fraud, and investor protection law firm with offices in Chicago, Illinois and Vero Beach, Florida.
For more information on The White Law Group, visit https://www.whitesecuritieslaw.com.