GWG Holdings, Inc. Investment Losses
The White Law Group continues to investigate GWG Holdings Inc. According to a prospectus, GWG Holdings Inc., through its subsidiaries, purchases life insurance policies sold in the secondary marketplace.
GWG Holdings has been offering up to $250,000,000 in Renewable Secured Debentures (the “debentures”) since 2012. This is a continuous offering with no minimum amount of debentures that must be sold before using any of the proceeds. The proceeds from the sale of the debentures are paid directly to GWG following each sale and will not be placed in an escrow account and the minimum investment is $25,000.
It states clearly in the prospectus they do not intend to list the debentures on any securities exchange during the offering period, and do not expect a secondary market in the debentures to develop. As a result, you should not expect to be able to resell your debentures regardless of how they perform. Accordingly, an investment in GWG Holdings debentures is not suitable for investors that require liquidity in advance of their debenture’s maturity date.
The prospectus also states that investing in GWG Holdings debentures may be considered speculative and involves a high degree of risk, including the risk of losing your entire investment.
Update on April 5, 2019
On April 2, 2019, GWG Holdings, Inc. announced that there would be a delay in the filing of its annual report for 2018. The delay is due to accounting for certain assets and liabilities related to the reverse merger transaction with The Beneficient Group, L.P. and the completion of an evaluation of fair value on its life insurance policies. This could be bad news for investors.
Other Risk Factors from GWG Holdings, Inc. Definitive Prospectus:
“- Material changes in the life insurance secondary market, a relatively new and evolving market, may adversely affect our operating results, business prospects and our ability to repay our obligations under the debentures.
– We have a relatively limited history of operations and our earnings may be volatile, resulting in future losses and uncertainty about our ability to service and repay our debt when and as it comes due.
– The valuation of our principal assets on our balance sheet requires us to make material assumptions that may ultimately prove to be incorrect. In such an event, we could suffer significant losses that could materially and adversely affect our results of operations and eventually cause us to be in default of restrictive covenants contained in our borrowing agreements.”
High Risk Debentures
According to the Financial Industry Regulatory Authority (FINRA), though, these highly-rated insurance policies allegedly don’t serve to “secure” the debentures. As FINRA has stated in a complaint, “the policies are not collateral for the Debentures and instead have been pledged as collateral for a separate line of credit.” In addition, FINRA states that the use of the proceeds of the sale of the Debentures, rather than being lock-boxed for the purpose of buying highly-rated insurance policies, is allegedly barely restricted at all. FINRA further alleges that money received from sales of debentures could be used to make payments on other debentures or for general working capital of the company.
Broker’s that choose to sell high-risk debentures are required to perform adequate due diligence to determine if such investment is suitable for each individual client. Investment recommendations should be in line with the client’s age, investment experience, net worth, risk tolerance, investment objectives, and income.
When a broker overlooks suitability requirements or misleads a client, not only are they potentially liable for investment loss, the brokerage firm that employs such brokers may also be on the hook for losses.
Recovery of Investment Losses
If you invested in debentures issued by GWG Holdings Inc and would like to discuss your litigation options with a securities attorneys, please call The White Law Group at 888-637-5510 for a free consultation.
The White Law Group, LLC is a national securities fraud, securities arbitration, investor protection, and securities regulation/compliance law firm with offices in Chicago, Illinois and Franklin, Tennessee.
For more information on The White Law Group, visit https://www.whitesecuritieslaw.com.
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