Tag: GWG Class L Bonds

GWG Holdings, Inc. is a Delaware corporation headquartered in Minnesota, which through its subsidiaries, purchases life insurance policies on the secondary market at a discount to the face value of the policies.

Once GWG purchases a policy, it has the obligation to keep the policy in effect by paying the policy premiums until the insured passes away. Upon the insured’s death, GWG collects the face value of the insurance benefit. The objective of this business is to earn returns by collecting more money upon the insured’s death than the amount that GWG pays to purchase, finance, and service the policies.

However, at the time of sale, it was disclosed in the limited offering materials, that:

a) GWG had a very limited operating history;

b) GWG purchased almost all of the policies it owns with funds borrowed from financial institutions or investors.

c) the GWG bonds were “illiquid, speculative, investments that involve a high degree of risk-including the risk of losing the entire investment;

d) there was no trading market for the GWG bonds and investors cannot access their principal prior to maturity absent death, bankruptcy, or total disability;

e) the GWG bonds are not directly secured by life insurance policies; and that

f) the underlying life insurance policies are not direct collateral for obligations under the GWG bonds. Instead, those policies have been separately pledged to a bank as collateral for the line of credit used by GWG to purchase the policies.

Hillard Charles Rest of Newport Beach, California, a stockbroker registered with JRL Capital Corporation, is the subject of a customer initiated investment related Financial Industry Regulatory Authority (FINRA) securities arbitration claim in which the customer requested compensatory damages based upon allegations that Rest breached his fiduciary duties, made misrepresentations and omissions of material fact, in violation…