SEC Reportedly Charges Lifemark and Geoffrey Wolterstorff with Unsuitable Investments
The Securities and Exchange Commission (SEC) announced on July 29, 2024 that it has reportedly settled charges against New York-based dually-registered broker-dealer and investment adviser, LifeMark Securities Corporation, and its registered representative, Geoffrey Wolterstorff.
The charges reportedly stem from alleged violations of Regulation Best Interest (Reg BI), specifically concerning the recommendation of L Bonds issued by GWG Holdings, Inc. to retail customers.
Allegations against LifeMark and Wolterstorff
Between July 2020 and January 2022, LifeMark and Wolterstorff allegedly violated Regulation Best Interest by failing to exercise the necessary diligence, care, and skill when recommending GWG L Bonds to retail customers.
According to the SEC, both the firm and Wolterstorff purportedly ignored or failed to fully understand the risks, rewards, and costs associated with the investments they recommended. This failure to act in the best interest of their clients allegedly led to serious repercussions.
Understanding Regulation Best Interest
Regulation Best Interest, implemented by the SEC in June 2020, requires broker-dealers to act in the best interests of their retail customers when making recommendations.
This means that broker-dealers must place their clients’ interests above their own, ensuring that any recommendation is suitable for the customer’s investment profile, including their financial situation, risk tolerance, and investment objectives.
In this case, the SEC reportedly found that LifeMark and Wolterstorff failed to meet these standards. Despite significant disclosures in the June 2020 Prospectus, the November 2021 L Bond Prospectus Supplement, and GWG’s 2020 Form 10-K highlighting the high-risk nature of L Bonds, LifeMark and Wolterstorff allegedly recommended these investments to retail customers without conducting the appropriate level of due diligence.
According to its prospectus in June 2020, GWG purportedly disclosed risks associated with L Bonds, including that: L Bonds involved a “high degree of risk, including the risk of losing [one’s] entire investment[;]” “[i]nvesting in L Bonds may be considered speculative[;]” and “L Bonds are only suitable for persons with substantial financial resources and with no need for liquidity in this investment.”
The Consequences of Non-Compliance
The SEC’s Orders detailed specific instances of non-compliance. In December 2021, Wolterstorff allegedly recommended a $50,000 L Bond with a 5-year term to a 63-year-old semi-retired customer. This individual had a moderate risk tolerance and a clear investment objective of preserving capital, with an expressed desire to avoid losing principal.
Despite these clear indicators, the recommendation was made, which was later deemed inconsistent with the customer’s investment profile.
As a result of these alleged violations, the SEC reportedly imposed a series of penalties on both LifeMark and Wolterstorff. LifeMark agreed to a cease-and-desist order, a censure, and financial penalties totaling over $90,000.
Wolterstorff also reportedly agreed to a cease-and-desist order, censure, disgorgement, and a civil money penalty. Additionally, Wolterstorff was suspended for six months from association with any broker, dealer, investment adviser, and other related entities, as well as from participating in any penny stock offerings.
Broker Due Diligence
Broker-dealers and investment advisers must ensure they fully understand the products they recommend and that those products are suitable for their clients’ needs and financial situations. Failure to do so can lead to significant financial losses.
If your advisor makes unsuitable recommendations and you suffer investment losses, you may be able to recover those losses by filing a FINRA Arbitration claim.
Free Consultation with Securities Attorneys
If you believe that you may have been affected by similar practices with LifeMark Securities or if you need legal guidance regarding securities fraud, please call the securities attorneys at The White Law Group at 888-637-5510.
The White Law Group is a national securities fraud, securities arbitration, and investor protection law firm with offices in Chicago, Illinois and Seattle, Washington.
With experience in over 700 FINRA arbitration claims, we are committed to protecting the rights of investors.
Last modified: August 14, 2024
