FINRA Disciplines Cape Securities Adviser Over Unsuitable GWG L Bond Sales
The Financial Industry Regulatory Authority has issued a disciplinary order against William S. Morris, a general securities representative, for violating the Regulation Best Interest care obligation. Without admitting or denying the findings, Morris consented to a three-month suspension, a $10,000 fine, and partial restitution of $5,607 plus interest.
Between February and April 2021, while associated with Cape Securities Inc., Morris recommended that five retail customers – four of whom were seniors – invest in GWG L bonds. FINRA found these recommendations were not in the customers’ best interests because the speculative and illiquid nature of the bonds clashed with the clients’ moderate risk tolerances and income-oriented investment objectives.
Morris also mistakenly believed the L bonds were still backed by a life insurance policy portfolio. In reality, in 2019, GWG Holdings Inc. had reoriented its business model to focus on riskier alternative assets and providing liquidity to holders of illiquid investments.
Morris’s recommendations led to high concentrations of alternative investments in his clients’ liquid net worth.
The L bonds were unrated, high-yield corporate bonds used to finance GWG’s operations. Offering documents warned the products were speculative and suitable only for individuals with “substantial financial resources and with no need for liquidity.” Shortly after Morris’s clients invested, GWG defaulted on its obligations in January 2022 and filed for Chapter 11 bankruptcy in April 2022. This left many bondholders facing the total loss of their investment.
FINRA concluded that Morris’s failure to match the recommended securities with the customers’ investment profiles constituted a willful violation of Rule 15l-1(a)(1) of the Securities Exchange Act (Reg BI) and FINRA Rule 2010.
The ordered restitution of $5,607 corresponds to the commissions Morris earned from the sales to four customers. The fifth customer was excluded from the restitution order because she had already settled a separate claim against Morris and his former firm. Morris left Cape Securities in February 2026 and is currently registered with another member firm.
The order is among the latest enforcement actions stemming from GWG L bond sales. Earlier this month, Texas Deputy Securities Commissioner Cristi R. Ochoa issued a disciplinary order against Landolt Securities Inc., reprimanding the firm and assessing a $10,000 administrative fine for supervisory failures related to the sale of speculative GWG L bonds. The order followed an investigation into the firm’s approval of those high-risk investments for Texas residents – including several elderly investors – in violation of the firm’s own internal supervisory guidelines.
In March, the Financial Industry Regulatory Authority suspended and fined Lester Joel Hochler, the former chief compliance officer of Cape Securities, for failing to exercise reasonable diligence in overseeing registered representatives.
From February to April 2021, Hochler approved recommendations by a registered representative for four retail customers to invest a total of $335,000 in GWG L bonds. The customers’ concentrations in alternative investments ranged from 11% to 43% of their liquid net worth, and three of the four customers were older adults, all with moderate risk tolerances that did not include speculation.
In November 2025, federal prosecutors announced the unsealing of an indictment charging Bradley Heppner, the former chairman of GWG Holdings, with misappropriating more than $150 million from GWG.
About a year earlier, AltsWire reported that investors who had purchased $1.6 billion in GWG L bonds were presented with a proposed settlement offering only a fraction of their initial investment. The settlement would allocate approximately $31.48 per $1,000 L bond unit. After deductions, that equates to roughly three cents on the dollar. The bonds were sold by approximately 40 broker-dealers.
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