Independence Capital Co., Inc., a securities broker-dealer located in Parma, Ohio, was sanctioned an ordered to pay more than $100,000 in restitution as the result of the recommendation and sale of GWG Holdings Class L Bonds. Letter of Acceptance, Waiver, and Consent No. 2022074289902.
According to the Letter of Acceptance, Waiver, and Consent, Independence Capital failed to reasonably supervise five representatives’ recommendations of GWG Holdings Class L Bonds between 2020 and 2021, and that the firm failed to create and maintain written supervisory protocols reasonably designed to achieve compliance with Regulation Best Interest.
Reg BI’s Best Interest Obligation requires a broker, dealer, or a natural person associated with a broker or dealer, when making a recommendation of any securities transaction to a retail customer, to act in the best interest of that retail customer at the time the recommendation is made, without placing the financial or other interest of the broker, dealer, or associated person over of the interest of the retail customer. The Best Interest Obligation is satisfied only by compliance with four Component Obligations: (1) Disclosure Obligation, (2) Care Obligation, (3) Conflict of Interest Obligation, and (4) Compliance Obligation.
Independence Capital in accordance with the terms of the AWC, admitted that it to reasonably supervise the recommendations of five representatives who recommended their customers purchase GWG Holdings Class L Bonds, which were risky, speculative, illiquid products that were “only suitable for persons with substantial financial resources and with no need for liquidity.” GWG Holdings filed for bankruptcy in April 2022.
According to te AWC, Independence Captial recommended that nine retail customers invest $443,000 in L Bond investments, despite these customers having “low, moderate, or medium” risk tolerances. Four of the investors were seniors, according to the Letter, and none had speculative investment objectives. “In approving each of the sales to the nine customers, Independence Capital and [one of its supervisors] failed to perform a reasonable assessment of whether the recommendations were consistent with the customers’ investment profiles,” FINRA found, “particularly in light of the concentration levels.”
The Guiliano Law Group, P.C.
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