FINRA's GWG L Bond Cases: The Supervision Findings

Updated October 2026. First published December 2024, with the FINRA cases decided since then.

GWG Holdings defaulted on its L Bonds in January 2022 and filed for bankruptcy in April 2022. The cases about who sold the bonds, and how, are still coming. A search for "GWG" in FINRA's Disciplinary Actions Online returned 44 documents in October 2026, against firms and individual representatives. The most recent firm case, against WestPark Capital, was accepted on June 18, 2026.

The SEC and federal prosecutors have their own GWG cases. In July 2024, the SEC settled its Regulation Best Interest suit over L Bond sales against Western International Securities and five of its representatives (Litigation Release No. 26065). The firm agreed to a $160,000 penalty and disgorgement of $34,468, and each representative to a $12,500 penalty, subject to court approval. And on May 7, 2026, a jury convicted Bradley Heppner, GWG's former chairman, of securities fraud, wire fraud, conspiracy, and false statements to auditors in a scheme to take more than $150 million from GWG (U.S. Attorney's Office, SDNY).

The sales cases are the ones a broker-dealer can learn from. The two firm settlements below make the same findings in nearly the same words, and the gap they describe is one you can check for in your own procedures this week.

What the L Bonds Were

FINRA's orders describe the product the same way. GWG had a history of net losses and hadn't generated enough cash from operations and investing to fund itself, so it sold corporate bonds called L Bonds to retail investors. After transactions with Beneficient in 2018 and 2019, it stopped buying life insurance policies and moved into providing liquidity for holders of illiquid and alternative assets. The bonds weren't directly secured by its life insurance portfolio and weren't rated. The offering documents for the fourth L Bond offering, which began in June 2020, said the bonds could be considered speculative, were illiquid, and suited only people with substantial financial resources and no need for liquidity.

That last sentence matters for supervision. The issuer told the selling firm who the product was for. The question in each case was whether the firm's process compared that statement with the customer.

WestPark Capital

WestPark, a Los Angeles firm with about 55 registered representatives, was censured, fined $175,000, and ordered to pay $345,073 in restitution plus interest (AWC No. 2021070498107). It also agreed that a registered principal would certify within 90 days that the issues were fixed, with exhibits to show it.

Between March 2019 and February 2021, five WestPark representatives recommended L Bonds to ten retail customers. All ten had moderate risk tolerances and investment objectives that didn't include speculation, and four were seniors. After the purchases, as much as 75% of a customer's liquid net worth was in alternative investments. Six of the ten had settled arbitrations with the firm; the restitution goes to the other four.

The finding about procedures is the part to read closely. WestPark's written procedures recited Reg BI and FINRA Rule 2111 but contained no procedures for the reviews needed to comply with them. They didn't say whether or how a supervisor should escalate a concern about one recommendation or a pattern of them. In practice, the firm had no reasonable process to spot recommendations that didn't fit a customer's profile.

The same order found that WestPark's private placement due diligence procedures named the obligation but didn't say what to collect, who does what, or how to document it. For one issuer's two offerings, the firm's review was limited to third-party reports the issuer had paid for, and it didn't follow up on red flags in those reports, including about $30 million in notes the issuer couldn't redeem at maturity.

FINRA found the Reg BI violations willful. That makes WestPark subject to a statutory disqualification.

American Trust Investment Services

American Trust was censured, fined $100,000, and ordered to pay $166,000 in restitution, and it agreed to retain an independent consultant (AWC No. 2020068655902, April 2025).

Between July 2020 and April 2021, three of its representatives recommended L Bonds to eight customers, including two seniors, two retirees, and a nonprofit. All had moderate or moderately aggressive risk tolerances and limited or no experience with alternative investments. Between about 14% and 72% of their liquid net worth ended up in alternatives.

The firm had no written Reg BI policies at all until June 2022, two years after the compliance date. The policies it adopted then discussed Reg BI in general terms. They didn't describe representatives' duties under the Care Obligation, didn't say how to weigh costs or reasonably available alternatives, and didn't tell supervisors what to review or when to escalate.

What the Firms' Processes Got Wrong

Read side by side, the two orders find the same three gaps:

The procedures restated the rule instead of telling a supervisor what to do. A section titled Reg BI that repeats the Care Obligation doesn't say which recommendations get a second look.
Neither firm had a reasonable process that weighed concentration. Both orders measure it across the customer's whole position in alternatives, L Bonds alone or together with other alternative products, as a share of liquid net worth.
There was no escalation path. Neither firm's procedures said what a supervisor does with a recommendation that looks wrong, or with a representative whose recommendations look wrong as a group.

What to Check in Your Own Supervision

Open your Reg BI procedures and find the steps a supervisor performs on a recommendation of an illiquid or speculative product. If the text only describes the rule, write the steps.
Set a concentration measure across all alternative investments against liquid net worth, and a level that triggers review before the trade.
Compare the product's own risk language with the customer's profile. When an offering document says a product suits only investors with no need for liquidity, the review should ask about this customer's liquidity needs.
Write down who reviews a pattern of recommendations by one representative, and what happens next.
For private placements, keep your own diligence file. A report the issuer paid for can be part of it, but WestPark's order shows it can't be all of it. FINRA's Regulatory Notices 10-22 and 23-08 set out the steps.

For a Reg BI case about the written procedures alone, with no product losses at all, see our post on a $35,000 fine for a Reg BI section with nothing in it. Rule 3110's supervision requirements are summarized on our FINRA Rule 3110 page.

This post is for informational purposes only and does not constitute legal advice. For guidance on specific regulatory obligations, consult your counsel or compliance advisor.