FINRA Sanctions Ex-Kingswood Adviser Over GWG L Bond Recommendations
The Financial Industry Regulatory Authority has penalized Phillip Anderson, a former financial adviser at Kingswood Capital Partners, for allegedly recommending unsuitable and overconcentrated investments in risky alternative assets to his clients.
According to a letter of acceptance, waiver, and consent published by the self-regulatory organization last week, Anderson placed two senior retail customers in GWG L Bonds in March 2019, resulting in significant portions of their liquid net worth being tied to the high-risk investment – 96% for one client and 35% for the other.
FINRA detailed that GWG Holdings, the issuer of the L Bonds, was a publicly traded financial services firm with a history of net losses. In 2019, the company shifted its business model toward providing liquidity for illiquid investments and alternative assets. By January 2022, GWG defaulted on the L Bonds – titled as such because they were allegedly backed by life settlements –and halted their trading, eventually filing for bankruptcy in April 2022 and leaving investors with substantial losses.
The regulator found that Anderson’s recommendations of these bonds were unsuitable for the two senior clients and generated over $8,000 in commissions for the adviser. Earlier this month, according to the letter of acceptance, Anderson agreed to a five-month suspension from the securities industry, a $10,000 fine, and the disgorgement of $8,280 plus interest, without admitting or denying FINRA’s findings.
The GWG L Bonds have been the subject of numerous enforcement actions by both FINRA and the U.S. Securities and Exchange Commission against brokers, financial advisers, and their firms. Notably, the SEC’s initial charges related to alleged violations of Regulation Best Interest, which went into effect in 2020, involved these very bonds.
FINRA also revealed that Kingswood Capital Partners filed a Form U5 termination notice for Anderson in June 2023, indicating his voluntary departure from the firm. BrokerCheck records show that Anderson has not registered with another firm since then.
Earlier this year, 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 proposed settlement was to allocate approximately $31.48 per $1,000 L bond unit, translating to roughly three cents on the dollar, after deductions. These bonds were sold by approximately 40 broker-dealers.
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