Independence Capital Regulatory Review and FINRA AWC Update (GWG L Bond Supervision Failures)
The securities fraud attorneys at The White Law Group continue to monitor regulatory actions involving broker-dealers that sell high-risk alternative investments. A recent Letter of Acceptance, Waiver, and Consent (AWC) issued by Financial Industry Regulatory Authority highlights supervisory and Regulation Best Interest (Reg BI) failures at Independence Capital Co., Inc. tied to recommendations of GWG L Bonds.
Firm Overview: Independence Capital Co., Inc.
- CRD Number: 24723
- FINRA Member Since: 1989
- Headquarters: Parma, Ohio
Summary of the Recent FINRA AWC (GWG L Bond Supervision & Reg BI Failures)
According to FINRA’s AWC (on January 27th, 2026) findings covering August 2020 through February 2021, the firm:
- Failed to reasonably supervise five registered representatives’ recommendations of GWG L Bonds
- Failed to establish and maintain written supervisory procedures reasonably designed to achieve compliance with Regulation Best Interest (Reg BI)
- Failed to meet the Compliance Obligation under Reg BI
- Violated FINRA Rules 3110 and 2010
- Willfully violated Exchange Act Rule 15l-1(a)(1) (Reg BI)
Sanctions Against the Firm
FINRA ordered that Independence Capital:
- A censure
- Pay $168,680 in partial restitution, plus interest
- Complete specified undertakings to improve compliance and supervision
A firm principal associated with the supervisory failures was also sanctioned by FINRA. FINRA imposed a suspension in principal capacities, a fine, and continuing education requirements.
Related FINRA AWC: Brokers Sanctioned for GWG L Bond Recommendations
FINRA also issued a separate AWC (No. 2022074289901) on November 17th, 2025, involving two registered representatives associated with the firm for GWG L Bond recommendations that regulators found were not in the customers’ best interests under Reg BI.
Independence Capital Co. Sanctioned Brokers
Thomas G. Scheiman — CRD #1508288
- Found to have recommended GWG L Bonds to a retail customer
- Sanctions included:
- Suspension (all capacities) for two months
- $5,000 fine
- Disgorgement of $2,600 plus interest
Stephen M. Franko — CRD #2157707
- Found to have recommended GWG L Bonds to multiple retail customers
- Sanctions included:
- Suspension (all capacities) for three months
- $5,000 fine
- Partial restitution of $5,640 plus interest
FINRA found that these GWG L Bond recommendations involved speculative, unrated corporate bonds and did not satisfy the best-interest standard required under Reg BI.
Why GWG L Bond Sales Have Drawn Regulatory Scrutiny
GWG L Bonds were widely sold by some broker-dealers as income-producing alternatives, but they carried significant risks, including:
- Illiquidity
- Issuer credit risk
- Complex business model tied to life settlement assets
- Lack of public market trading
- Heightened default risk
Regulators have focused heavily on whether firms and brokers:
- Conducted reasonable due diligence
- Properly disclosed risks
- Evaluated suitability and best interest
- Maintained effective supervisory systems
- Implemented Reg BI–compliant procedures
Why Supervision and Reg BI Compliance Matter
FINRA Rule 3110 requires firms to maintain reasonable supervisory systems and written supervisory procedures (WSPs). Reg BI adds a higher conduct standard when recommending securities to retail customers.
When supervision and Reg BI controls are weak, risks increase that:
- High-risk products are recommended to conservative investors
- Concentration limits are ignored
- Product risks are understated
- Customer best interests are not prioritized
Regulators increasingly bring enforcement actions where alternative investments are sold without strong supervisory guardrails.
Investor Takeaways
Regulatory findings do not automatically mean every recommendation at a firm was improper — but they are important warning signals. Investors who suffered losses in GWG L Bonds or other alternative investments may want to review:
- How the investment was presented
- Whether risks and liquidity limits were explained
- Whether the recommendation matched their risk tolerance and objectives
- How concentrated their portfolio became in alternative products
How The White Law Group Helps Investors
The White Law Group, with offices in Chicago and Seattle, represents investors nationwide in FINRA arbitration claims involving:
- Alternative investments
- Private placements
- Unrated or illiquid bonds
- Broker supervision failures
- Reg BI violations
If you suffered losses connected to GWG L Bonds or recommendations made through Independence Capital, your account and the recommendation process may be worth a professional review. Please call our offices at 888-637-5510 for a free consultation.
FAQs — Independence Capital & GWG L Bond Sales
What did FINRA find against Independence Capital?
FINRA found the firm failed to reasonably supervise GWG L Bond recommendations and failed to maintain supervisory procedures reasonably designed to comply with Regulation Best Interest.
What rules were cited in the AWC?
FINRA cited Rules 3110 and 2010, along with willful violations of Exchange Act Rule 15l-1(a)(1) (Reg BI Compliance Obligation).
Can investors recover GWG L Bond losses?
In some cases, yes. Investors may pursue recovery through FINRA arbitration if a broker-dealer failed to supervise recommendations or violated best-interest standards.
