In November of 2023, Center Street Securities (CS) notified the Financial Industry Regulatory Authority Inc. (FINRA) that it was terminating its affiliation as a licensed securities broker-dealer. Center Street sold numerous troubled alternative investments to clients, including GWG L Bonds, a recently bankrupt venture. Center Street was not a large brokerage firm, and in 2021 it was purchased by Arete Wealth Management (Arete), which possesses an independent broker-dealer network.
The Issue With GWG L Bonds
GWG Holdings, a Texas financial company, initially sold L Bonds to retirees as safe, low-risk investments. These investment vehicles funded life insurance policies by purchasing them from policyholders. In reality, however, L Bonds are high-risk and illiquid investments, resulting in significant losses for investors.
Defaults & Scrutiny
In December 2021, the SEC investigated GWG Holdings because of questionable accounting practices. After the investigation, in April 2022, the company defaulted on L Bondholder payments and filed for bankruptcy. As a result, brokerage firms that recommended L Bonds to investors have been under significant scrutiny.
Brokerage Firm Misconduct
Many firms likely misinformed investors about the high risks involved – even recommending them to those seeking safer options – to reap profits. These actions breach brokers’ and firms’ fiduciary duty to their clients.
And Center Street is no exception.
Over the past decade, roughly 40 FINRA-licensed broker-dealers sold over a billion and a half GWG L bonds. These bonds were supposedly backed by insurance policies purchased from individuals, called life settlements. And when GWG declared bankruptcy last year, many investors were left holding the bag.
Securities Arbitration
Due to its participation in the sales of GWG Bonds, Center Street was facing dozens of securities arbitrations seeking over 9 million dollars in damages, most of those likely due to the sales of GWG bonds. Unfortunately, this happens all too often: a small brokerage firm sells toxic products, reaps the benefits, and then sells its brokers to another entity.
Clients of Center Street, at this point, are left with unresolved claims or receive pennies on the dollars going after leftover insurance if a firm had coverage. However, Oakes & Fosher is pursuing these claims in FINRA arbitration against Arete as a successor firm. All of the Center Street brokers were under the Arete umbrella starting in 2021, and after Center Street withdrew its registration, the brokers became licensed with Arete. Arete is arguing that its 2021 purchase of Center Street was an asset purchase only, however, Oakes & Fosher believes that FINRA arbitration panels will hold Arete responsible and not buy into its “heads they win, tails you lose” type argument. .
Taking Action
Numerous L Bond investors have unfortunately suffered significant losses from the misconduct of their “trusted” financial advisors. Although you may feel stuck, you don’t have to stay that way. Seeking the assistance of experienced securities fraud attorneys can help you determine whether you have a claim.
FINRA arbitration is a specialized legal process for resolving broker misconduct outside of court. Because of its unique and stringent mandates, having a lawyer on your side is crucial.
A securities fraud lawyer will not only offer personalized legal guidance but also:
- Assess your case to determine whether you have a viable claim.
- Draft a statement detailing how the brokerage firm’s misconduct resulted in financial loss.
- Gather evidence.
- Represent you in the arbitration hearing.
- Negotiate settlements if possible or pursue a favorable decision from the arbitration panel.
What This Means for Center Street Securities Investors
If you or someone you know has suffered significant financial losses from the misconduct of Center Street, you may have a claim against the acquiring firm. Don’t hesitate to call the law offices of Oakes & Fosher, LLC.
Oakes & Fosher has been handling these types of cases for over 20 years and represents investors throughout the country. All cases are handled on a contingency fee basis, so there are no attorneys’ fees unless we recover for you. Please contact us for a confidential, no-cost consultation. We’re here to hold Center Street Securities Inc. and its parent firms accountable.
