WestPark Capital Faces $520,000 in FINRA Sanctions Over GWG L Bonds

When WestPark Capital’s brokers put retirees’ life savings into GWG L Bonds, they weren’t just making a bad recommendation. They were ignoring red flags that the investment wasn’t suitable for the people they were supposed to protect.

Now, FINRA has ordered the Los Angeles-based broker-dealer to pay $175,000 in fines and $345,073 in restitution after finding the firm failed to supervise those recommendations and did not have meaningful due diligence system in place. For the four senior investors still awaiting payment, the damage was done long before regulators caught up.

If you or a family member suffered losses in GWG L Bonds sold by WestPark Capital or another broker-dealer, the issue may not just be a bad investment. It may be a firm that never had the oversight in place to protect you. When brokerage firms fail to monitor their representatives, investors pay the price. Our failure to supervise attorneys at Meyer Wilson Werning have recovered over $350 million for investors harmed by exactly this kind of institutional failure. Contact us today for a free, confidential consultation to find out whether you have a claim.

The WestPark Capital FINRA Fine: Supervisory Failures Behind the GWG L Bond Sanctions

According to the FINRA Letter of Acceptance, Waiver and Consent detailing the WestPark Capital GWG L Bond findings, FINRA’s enforcement action against WestPark Capital centered on several distinct supervisory breakdowns:

• Failure to supervise GWG L Bond recommendations: FINRA found that WestPark Capital did not maintain supervisory systems reasonably designed to review the suitability and appropriateness of its brokers’ GWG L Bond recommendations to retail customers.
• Inadequate Regulation Best Interest and FINRA Rule 2111 compliance: The firm’s supervisory framework allegedly did not ensure that brokers met the Care Obligation under Regulation Best Interest (Reg BI) or the suitability requirements of FINRA Rule 2111 when recommending GWG L Bonds.
• Deficient private placement due diligence: FINRA also found that WestPark Capital failed to conduct adequate independent due diligence on four private placements from two issuers beyond GWG L Bonds, including a development-stage cannabis company with no operating history or regulatory licenses and a rent-to-own retailer where the firm relied solely on third-party reports commissioned by the issuer itself.
• Individual broker sanctions: FINRA separately sanctioned WestPark Capital stockbroker Alan Mark Mason in AWC No. 2021070498102 for unsuitable recommendations of GWG Class L Bonds, imposing a $5,000 fine and a two-month suspension.

The total sanctions against WestPark Capital included a $175,000 fine and $345,073 in restitution plus interest, and the firm must certify that it has remediated the identified deficiencies.

How WestPark Capital’s Conduct Harmed GWG L Bond Investors

GWG L Bonds were illiquid, high-risk, speculative debt instruments backed by life settlement assets, a category of alternative investments that carried significant credit risk and liquidity constraints. When GWG Holdings Inc. filed for bankruptcy in April 2022, many L Bond holders faced substantial or total losses with no realistic path to sell or redeem their bonds.

WestPark Capital was one of roughly 40 independent broker-dealers that collectively sold close to $1.6 billion in GWG L Bonds over the past decade. The FINRA action against WestPark Capital suggests that the firm’s supervisory failures contributed to a pattern in which GWG L Bonds were allegedly marketed to retail and senior investors as safe or income-producing investments, without adequate disclosure of their complexity, credit risk, and severe liquidity limitations.

Multiple investors have already taken legal action against WestPark Capital over GWG L Bond losses:

• A 72-year-old retail investor filed a six-figure arbitration claim against WestPark Capital, alleging unsuitable recommendations of GWG L Bonds.
• Another arbitration filing against WestPark Capital sought between $50,000.01 and $100,000.00 in damages tied to GWG L Bond losses, alleging fraud, breach of fiduciary duty, negligence, and negligent supervision.
• A separate FINRA arbitration involving a WestPark Capital broker sought $5,000,000.00 in damages and alleged breach of fiduciary duty and unsuitable recommendations related to GWG L Bonds.

These claims underscore a broader pattern: brokerage firms that allegedly failed to supervise GWG L Bond sales may be held liable for their customers’ losses through FINRA arbitration, even after GWG Holdings’ bankruptcy.

What This Means for Investors Who Purchased GWG L Bonds

Investors who purchased GWG L Bonds through WestPark Capital, or any other independent broker-dealer, should understand the regulatory framework that governs their brokers’ obligations. Under FINRA Rule 2111 (Suitability), brokers are required to have a “reasonable basis” to believe that a recommended investment is suitable for the client’s unique financial situation, age, and risk tolerance. For conduct after June 30, 2020, the SEC’s Regulation Best Interest (Reg BI) established an even higher “best interest” standard for broker-dealers. FINRA Rule 3110 (Supervision) mandates that brokerage firms must maintain adequate systems to oversee their brokers’ recommendations and identify potential red flags of broker misconduct.

WestPark Capital’s FINRA sanctions indicate that the firm allegedly fell short of these obligations. For affected investors, several warning signs may indicate that their GWG L Bond losses are recoverable:

• The investment was recommended without a thorough discussion of liquidity risks, credit risk, or the speculative nature of life settlement-backed bonds
• The investor’s age, income, net worth, or investment objectives made GWG L Bonds an unsuitable recommendation
• The broker or firm failed to disclose that GWG Holdings was in financial distress before or during the period in which L Bonds were being sold
• A disproportionate concentration of the investor’s portfolio was allocated to GWG L Bonds or other illiquid alternative investments

Critically, FINRA arbitration claims against WestPark Capital and its brokers remain viable even though GWG Holdings has filed for bankruptcy. The focus of these claims is the brokerage firm’s misconduct: its failure to supervise, its inadequate due diligence, and its brokers’ allegedly unsuitable recommendations, rather than the issuer’s solvency.

How Meyer Wilson Werning Can Help

Meyer Wilson Werning represents investors nationwide who have been harmed by unsuitable GWG L Bond recommendations and brokerage firm supervisory failures. Our attorneys, led by founding partner David P. Meyer, have more than 75 years of combined experience and have recovered over $350 million for clients across the country. The firm works on a contingency-fee basis, meaning investors pay no attorney fees unless there is a financial recovery.

If you purchased GWG L Bonds through WestPark Capital or another independent broker-dealer and suffered losses, our legal team can investigate your account records, evaluate whether your broker’s recommendations were suitable for your financial situation and risk tolerance, and pursue a claim through arbitration on your behalf. Contact us today for a free and confidential consultation to discuss your path to recovery.

Frequently Asked Questions

What did FINRA find WestPark Capital did wrong in its GWG L Bond sales?

FINRA found that WestPark Capital failed to reasonably supervise GWG L Bond recommendations to retail customers and lacked adequate private placement due diligence procedures. The firm’s supervisory systems were not designed to ensure compliance with Regulation Best Interest’s Care Obligation or FINRA Rule 2111. FINRA also found due diligence failures on several additional private placements, including a development-stage cannabis company and a rent-to-own retailer.

How much was WestPark Capital fined by FINRA over GWG L Bond recommendations?

FINRA censured WestPark Capital and imposed a $175,000 fine in connection with its supervisory failures related to GWG L Bond recommendations. The firm was also ordered to pay $345,073 in restitution plus interest to affected customers. These sanctions underscore the seriousness with which FINRA viewed WestPark Capital’s supervisory lapses involving GWG L Bonds and other private placements.

Can WestPark Capital customers recover losses from GWG L Bonds through FINRA arbitration?

Yes. WestPark Capital clients who suffered GWG L Bond losses may be able to recover damages through FINRA arbitration claims alleging unsuitable recommendations, failure to supervise, and Reg BI violations. Claims against WestPark Capital remain viable even though GWG Holdings filed for bankruptcy, because the focus is on the broker-dealer’s own misconduct.

Why were GWG L Bonds especially risky for senior and conservative investors?

GWG L Bonds were illiquid, speculative debt instruments backed by life settlement assets, making them unsuitable for investors seeking income and capital preservation. When GWG Holdings filed for bankruptcy in April 2022, many bondholders faced substantial or total losses with no way to sell or redeem their bonds.