SEC Settles GWG L Bond Charges Against Geoffrey Wolterstorff, LifeMark

The Securities and Exchange Commission (SEC) announced that it settled charges against LifeMark Securities and its advisor Geoffrey Wolterstorff (CRD# 2711805) relating to the sale of GWG L bonds. The SEC administrative proceeding, released in July, found that both the firm and Mr. Wolterstorff “failed to comply with Regulation Best Interest by recommending L Bonds issued by GWG Holdings… to retail customers without exercising reasonable diligence, care, and skill to understand the potential risks, rewards and costs associated with the recommendations.”

As the SEC notes, a prospectus for GWG L Bonds described them as investments with a “high degree of risks,” including the risk of losing one’s entire investment. It added that the investments “may be considered speculative” and that they are “only suitable for persons with substantial financial resources and with no need for liquidity in this investment.”

When recommending GWG L Bond investments to investors, according to the SEC, LifeMark and Mr. Wolterstorff failed to comply with Regulation Best Interest, under which firms and their representatives must take reasonable steps to understand significant disclosures and information regarding the investments they recommend, and to ensure that investment recommendations are in a customer’s best interest.

“Wolterstorff and LifeMark, acting through Wolterstorff, further failed to comply with Regulation Best Interest’s Care Obligation by recommending a $50,000 L Bond with a 5-year term to a 63-year old semi-retired retail customer with a moderate risk tolerance,” the SEC orders found, adding that the customer’s “only documented investment objective” was the preservation of capital. “This retail customer used retirement funds to purchase the L Bond and specifically explained to Wolterstorff he did not want to lose his principal,” according to the SEC. “The Orders find the recommendation was inconsistent with the customer’s investment profile.”

As part of its settlement with LifeMark and Mr. Wolterstorff, the firm agreed to a cease-and-desist order, censure, and civil penalty of $85,000. Mr. Wolterstorff, meanwhile, agreed to a cease-and-desist order, censure, civil penalty of $15,000, and six-month suspension from association with any broker, dealer, or investment adviser. The SEC’s complete orders can be found here, for Mr. Wolterstorff, and here, for LifeMark Securities. (Information current as of August 1, 2024.)

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