Initiated By
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Allegations
Plaintiff Securities and Exchange Commission alleges that this matter concerns violations by Western and five of its registered representatives of the Best Interest Obligation under Rule 15l-1(a) of the Securities Exchange Act of 1934 ("Regulation Best Interest" or "Reg BI") in connection with their recommendations to retail customers to purchase an unrated debt security known as an L Bond. L Bonds were corporate bonds offered by GWG Holdings, Inc. ("GWG"). L Bonds were high risk, illiquid, and only suitable for customers with substantial financial resources. The L Bonds relevant to this Complaint paid fixed interest rates of between 5.50% and 8.50%, depending on the maturity period of the bond. GWG offered maturity periods of two, three, five, or seven years. Between July of 2020 and April of 2021, registered representatives of Western recommended and sold approximately $13.3 million in L Bonds to retail customers. Western and its registered representatives Nancy Cole, Patrick Egan, Andy Gitipityapon, Steven Graham, and Thomas Swan (together, the "Registered Representative Defendants") failed to exercise reasonable diligence, care, and skill to understand the risks, rewards, and costs associated with L Bonds. At the time they recommended L Bonds to retail customers, the Registered Representative Defendants did not understand key risks associated with L Bonds and GWG. Defendants also recommended L Bonds to at least seven retail customers without a reasonable basis to believe L Bonds were in those customers' best interests. Among other things, these customers had moderate-conservative or moderate risk tolerances, investment objectives that did not include speculation, limited investment experience, limited liquid net worth, and/or they were retired. The Registered Representative Defendants nevertheless recommended L Bonds to these seven customers without reasonable bases for doing so. Western's written policies and procedures merely recited the objectives of Reg BI, without offering registered representatives specific guidance tailored to Western's operations. Western also had inadequate procedures for enforcing what limited policies it had regarding compliance with the Care Obligation of Reg BI. As a result of the conduct described in this Complaint, Gitipityapon violated Rule 15l-1(a)(1) of the Exchange Act.
Resolution
Judgment Rendered
Sanctions
Civil and Administrative Penalty(ies)/Fine(s)
Sanctions
Disgorgement
Amount
$6,652.50
Sanctions
Monetary Penalty other than Fines
Sanctions
Injunction
Sanctions
undertakings