Texas Securities Commissioner Fines Landolt Securities Over GWG L Bond Sales

Texas Deputy Securities Commissioner Cristi R. Ochoa has 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 follows 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.

GWG L bonds were unrated, high-yield corporate bonds used to finance life insurance policies. While they offered interest rates as high as 8.5%, the prospectus explicitly warned that they carried a “high degree of risk,” including the potential loss of an investor’s entire principal.

In 2019, GWG shifted its business model toward loans backed by illiquid alternative assets, further increasing the speculative nature of the bonds. GWG Holdings Inc. ultimately filed for Chapter 11 bankruptcy in April 2022, leaving many bondholders facing the total loss of their investment.

The Texas State Securities Board’s investigation, initiated in January 2025, found that Landolt Securities approved sales to 27 Texas investors despite clear red flags. The firm’s written supervisory procedures were designed to protect vulnerable investors, yet the firm failed to enforce them.

Age limits ignored: The firm’s guidelines prohibited recommending alternative investments to clients older than age 70. Investigators found that Landolt approved sales to clients aged 74 and 75.

Concentration thresholds breached: Firm policy limited any single alternative investment to 15% of a client’s net worth. Two investors were allowed to allocate 24% and 29% of their net worth to the L bonds.

Incomplete and false documentation: In some instances, account forms were left blank or contained false information regarding whether the investment exceeded the firm’s 15% threshold.

The disciplinary order highlighted specific examples of unsuitable sales:

• Client A, a 74-year-old with a “moderate” risk tolerance and an “income” objective, was permitted to invest $70,000 (29% of her net worth) into a two-year L bond. Her account form was left blank regarding the risk explanation and falsely marked “no” regarding the 15% concentration threshold; and
• Client B invested $50,000 (24% of their net worth) into a three-year L bond. Despite the high concentration, the account forms provided no explanation as to why the investment was appropriate.

The securities commissioner concluded that Landolt Securities failed to maintain and enforce a supervisory system reasonably designed to achieve compliance with the Texas Securities Act and board rules. The firm’s approval of these purchases without a reasonable basis was deemed an “inequitable practice in the sale of securities.”

As part of the settlement, Landolt Securities consented to the reprimand and must pay the $10,000 fine to the general fund of the state of Texas within 10 business days.

The order is among the latest enforcement actions stemming from GWG L bond sales. In March, the Financial Industry Regulatory Authority suspended and fined Lester Joel Hochler, the former chief compliance officer of Cape Securities Inc., for failing to exercise reasonable diligence in overseeing two registered representatives.

From February to April 2021, Hochler approved recommendations by one 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 ago, 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, translating to roughly three cents on the dollar, after deductions. The bonds were sold by approximately 40 broker-dealers.

Visit the AltsWire directory page.