Last Updated: June 2024 (Austin, Texas)
D.H. Hill Securities Sanctioned Over Sales Of GWG L Bonds
In a Disciplinary Order recently issued by the Texas State Securities Board (TSSB), D.H. Hill Securities was reprimanded and fined $42,000 for its failure to enforce a supervisory system reasonably designed to achieve compliance with applicable securities laws and regulations and in violation of Section 115.10(a) of the TSSB rules.
GWG L Bonds are high-yield, unrated, corporate debt instruments that originally financed the purchase of life insurance policies. In 2018, GWG ceased purchasing life insurance policies with investor money and began investing in a company named Beneficient and its subsidiaries, which were in the business of extending loans backed by cash flows from illiquid alternative investments. Sellers of the bonds, including D.H. Hill Securities received commissions ranging from 1.95% to 7.2%.
While the prospectus for the L Bond offering stated that purchase of the bonds involved a high degree of risk and could be considered speculative, investors were rarely told this by selling brokers.
TSSB found that D.H. Hill Securities allowed the sale of GWG L Bonds in excess of firm-imposed guidelines which were intended to limit the concentration level in customer accounts.
CEO of D.H. Hill Suggests GWG L Bonds are Like Junk Bonds
According to the TSSB Disciplinary Order, Dan Hill (CRD 1012712 ) , the firm’s founder and chief executive officer, acknowledged the risk the L Bonds carried when considering the addition of the L Bonds to their sales platform and noted that: “ this is higher risk that it appears. Nothing like a typical bond other than maybe a junk bond.”
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D.H. Hill Securities
According to their website, D.H. Hill Securities, headquartered in Kingwood, Texas, was established in 1996..” for the purpose of facilitating traditional securities investments and alternative investments for our Registered Representatives. D. H. Hill Securities has also provided its expertise in assisting Real Estate Investment Trusts (REITs) with Intitial Public Offerings (IPOs) and Dealer-Manager supervisory services.”
D.H. Hill Securities Registered Representatives:
California– Frank Ibarra (CRD 4418224)
Florida– Don Wallace (CRD 1471984) , Gary Spitz (CRD 1828144) , Rob DeChick (CRD 4152582)
Georgia– John Williams (CRD 2769181)
Nebraska– Joel Barjenbruch (CRD 5295640) , George Phelps (CRD 362302)
North Carolina– Leslie Kern (CRD 1140180)
New York– Lawrence Bedard (CRD 2300509)
Tennessee– Steve Standley (CRD 4282051)
Texas– Art Cornett (CRD 54395), Brian Hagen (CRD 5189815), Frederick Buehrer (CRD 6102291) , James Armstrong (CRD 1014619), Michael Clouse (CRD 2230606) , Noor Amirali (CRD 3062220), Taylor Hodges (CRD 5960385), Cheryl Smith (CRD 3109981)
[LEARN MORE]: “How to Research Your Broker-What is a CRD?”
The Texas State Securities Board
Mission of the TSSB, according to their website:
The State Securities Board is responsible for administering and enforcing the Texas Securities Act. The mission of the State Securities Board is to protect Texas investors. Consistent with that purpose, the Agency seeks to ensure a free and competitive securities market for Texas, increase investor confidence, and thereby encourage the formation of capital and the creation of new jobs in Texas.
The Financial Industry Regulatory Authority
The Financial Industry Regulatory Authority (FINRA) is the agency that licenses and regulates stockbrokers and brokerage firms. FINRA requires brokers and brokerage firms to report customer complaints and disputes as well as regulatory sanctions. In addition brokers are required to disclose certain financial matters such as personal bankruptcies, judgments and liens.
Rex Securities Law
[LEARN MORE]: Firms Have a Duty to Supervise their Financial Advisors (FINRA Rules 3110 & 2090)
Brokers and their firms have a duty to comply with the FINRA suitability rule which requires that they have a reasonable basis to believe that a recommendation is suitable for the customer.
[LEARN MORE]: FINRA Rule 2111- suitability -Regulation Best Interest
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