Erez Law Investigating Claims Involving Center Street Securities and GWG Renewable Secured Debentures
Posted on Wednesday, November 12th, 2014 at 8:32 am
Erez Law is investigating claims involving Center Street Securities and GWG Renewable Secured Debentures. Center Street Securities, Inc. (CRD #26898, Nashville, Tennessee) submitted an AWC in which the firm was censured; fined $100,000, which includes disgorgement of approximately $27,000; and required to conduct a comprehensive review of the adequacy of its policies, systems, procedures, and training with respect to reviewing and approving alternative products and responding to regulatory inquires. See FINRA Case #2012034936004. In another disciplinary matter, FINRA suspended Michael “Mike” Wurdinger (CRD #4926912, St. Louis, Missouri), who was a registered principal and Operations Manager at Center Street’s headquarters in Nashville, Tennessee from approximately February 2012 through February 2013, Wurdinger. The suspension, from June 16, 2014, through December 15, 2014, stemmed from FINRA’s finding that Wurdinger failed to adequately supervise sales of GWG Renewable Secured Debentures. See FINRA Case #2012034936001.
With regard to Center Street Securities, FINRA found that through the actions of multiple registered representatives, Center Street Securities made unsuitable recommendations to customers to purchase GWG Renewable Secured Debentures, an illiquid and high-risk alternative investment. FINRA found that registered representatives made unsuitable recommendations and recommendations containing misrepresentations to purchase the debentures to customers, including elderly customers and retirees, which resulted in the sale of more than $3 million in debentures to these customers. FINRA also found that Center Street Securities failed to maintain an adequate supervisory system and adequate written supervisory guidelines, and failed to reasonably supervise its representatives’ sales of debentures. Despite the presence of “red flags,” the firm failed to take reasonable supervisory steps to ensure the debenture sales were suitable or that the debentures had been accurately represented to the customers. For example, the firm failed to adequately consider whether the secured debentures were consistent with the customers’ investment objectives, risk tolerances, financial conditions, ages or liquidity needs. FINRA found that the firm also failed to adequately consider whether representations that had been made regarding the debentures were accurate, and approved debenture sales where certain forms contained inconsistencies, or where certain information was missing from the documentation. FINRA further found that Center Street Securities distributed an inaccurate sales brochure to more than 100 customers, and that some customer account forms contained inaccurate information about customer net worth or other information.
GWG Holdings, Inc., purchases life insurance policies on the secondary market at a discount to the face value of the policies. GWG then pays the policy premiums until the death of the insured, at which point it collects the face value of the policy. GWG intends to earn returns by collecting more upon the maturity of the policy than what it has paid out to purchase and maintain the policy. FINRA found that GWG had a limited operating history, was not yet profitable, and purchased most of the policies it owns with borrowed funds. In 2012, GWG began selling what it called Renewable Secured Debentures. The Debentures were speculative, high risk investments, in which investors could lost their entire investment, according to FINRA’s findings.
If you were a client of Center Street Securities or purchased GWG Renewable Secured Debentures, and have suffered investment losses or financial irregularities, please contact Erez Law to explore your legal options. Erez Law is a nationally recognized law firm representing individuals, trusts, corporations and institutions in claims against brokerage firms, banks and insurance companies. To learn more, please call us at 888-840-1571 or complete our “contact form.”