SEC v. Robert M. Vance, No. 1:24-cv-01150-BAM, Eastern District of California (Sept. 27, 2024) — Complaint

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ARIELLA OMHOLT GUARDI (IL Bar No. 6297336)
Email:  [email protected]
JEDEDIAH B. FORKNER (IL Bar No. 6299787)
Email:  [email protected]
United States Securities and Exchange Commission
175 West Jackson Blvd., Suite 1450
Chicago, Illinois 60604
Telephone: (312) 353-7390
Facsimile: (312) 353-7398

Attorneys for Plaintiff
United States Securities and Exchange Commission

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF CALIFORNIA
FRESNO DIVISION

 :
UNITED STATES SECURITIES :
AND EXCHANGE COMMISSION, :
 :    No. 1:24-cv-01150-BAM
Plaintiff,           :
 :   AMENDED COMPLAINT
- against -                                      :
                                                                        :
ROBERT M. VANCE, :    JURY   TRIAL   DEMANDED
                                                                        :
Defendant. :
 :

AMENDED COMPLAINT
Plaintiff United States Securities and Exchange Commission (“SEC” or
“Commission”), for its Complaint against defendant Robert M. Vance, alleges as follows:
JURISDICTION AND VENUE
1. This Court has jurisdiction over this action pursuant to Section 21 of the
Exchange Act [15 U.S.C. §§ 78u].

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2. The Commission brings this action pursuant to the authority conferred by
Section 21(d) and (e) of the Exchange Act [15 U.S.C. § 78u(d) and 78u(e)].
3. Venue is proper in this Court pursuant to Section 27 of the Exchange Act [15
U.S.C. § 78aa]. Acts, practices, and courses of business constituting violations alleged
herein have occurred within the jurisdiction of the United States District Court for the
Eastern District of California. Defendant resides in this district.
PRELIMINARY STATEMENT
4. This matter concerns recommendations by Vance that certain retail customers
purchase high risk, illiquid debt securities known as L Bonds. From approximately June 30,
2020 through approximately January 15, 2022 (the “Relevant Period”), these
recommendations violated Rule 15l-1(a) under the Securities Exchange Act of 1934
(“Regulation Best Interest” or “Reg BI”).
5. L Bonds were unrated corporate bonds offered by GWG Holdings, Inc.
(“GWG”). According to GWG’s disclosures during the Relevant Period, (a) L Bond
investments involved a high degree of risk, including the risk of losing an investor’s entire
investment; (b) L Bond investments “may be considered speculative”; (c) L Bond
investments were only suitable for investors with substantial financial resources and no need
for liquidity in the investment; and (d) GWG would use a portion of the L Bond proceeds to
repay existing L Bond holders. In addition, in November 2021, GWG disclosed, among
other things, that several enumerated factors raised substantial doubt regarding its ability to
continue as a going concern.
6. Despite these disclosures, in recommending the purchase of L Bonds to retail
customers, Vance failed to exercise reasonable diligence, care, and skill to understand the

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potential risks, rewards, and costs associated with the recommendations. Vance also
recommended the purchase of L Bonds to at least four retail customers for whom he did not
have a reasonable basis to believe the recommendations were in the customers’ best interest
based on the customers’ investment profiles and the potential risks, rewards, and costs
associated with the L Bonds.
7. During the Relevant Period, at least 45 of Vance’s retail customers purchased
a total of at least approximately $3.5 million in L Bonds upon Vance’s recommendations.
Many of these customers were at or near retirement age and had moderate risk tolerance.
8. There is a reasonable likelihood that Vance will, unless enjoined, continue to
engage in transactions, acts, practices, and courses of business of similar purport and object
to those set forth in this complaint.
9. The SEC therefore seeks a judgment against Vance providing permanent
injunctive relief; disgorgement of ill-gotten gains, pursuant to Sections 21(d)(3), 21(d)(5)
and 21(d)(7) of the Exchange Act [15 U.S.C. §§ 78u(d)(3), (5), (7)]; imposing civil
monetary penalties, pursuant to Section 20(d) of the Securities Act [15 U.S.C. § 77t(d)] and
Section 21(d)(3) of the Exchange Act [15 U.S.C. § 78u(d)(3)]; as well as other appropriate
and necessary relief.
DEFENDANT
10. Robert M. Vance, age 73, is a resident of Mi-Wuk Village, California. He
worked as a registered representative for Moloney Securities Co., Inc. from 2016 until
approximately November 2023. During the Relevant Period, Vance was registered as
General Securities Representative (i.e., Series 7), General Securities Principal (i.e., Series

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24), and Uniform Combined Securities Agent (i.e., Series 66). He is not currently associated
with a registered broker-dealer.
RELATED ENTITIES
11. Moloney Securities Co., Inc. (“Moloney”) is a Missouri corporation
headquartered in Manchester, Missouri and has been registered with the Commission as a
broker-dealer pursuant to Section 15(b) of the Exchange Act since 1995.
12. GWG Holdings, Inc. (“GWG”) was a publicly traded financial services
company (NASDAQ:GWGH) with its principal executive offices in Dallas, Texas.
FACTUAL ALLEGATIONS
I. BACKGROUND
A. Requirements of and Commission Guidance Regarding Reg BI
13. Reg BI, which became effective on June 30, 2020, established a standard of
conduct for broker-dealers and associated persons when they recommend securities
transactions to retail customers.
14. In July of 2019, the SEC issued an adopting release, offering guidance on how
the Commission interprets Reg BI. See Regulation Best Interest: The Broker-Dealer
Standard of Conduct, Exchange Act Release No. 34-86031, 84 Fed. Reg. 33318 (July 12,
2019) (the “Adopting Release”).
15. Reg BI’s General Obligation requires a broker, dealer, or a natural person
associated with a broker or dealer, when making a recommendation of any securities
transaction to a retail customer, to act in the best interest of that retail customer at the time
the recommendation is made, without placing the financial or other interest of the broker,
dealer, or associated person ahead of the interest of the retail customer. The Adopting

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Release states that the standard of conduct established by Reg BI cannot be satisfied through
disclosure alone.
16. Reg BI’s General Obligation is made up of four Component Obligations: (1)
Disclosure Obligation, (2) Care Obligation, (3) Conflict of Interest Obligation, and (4)
Compliance Obligation. Failure to comply with any of the Reg BI’s four Component
Obligations violates the General Obligation.
17. Reg BI’s Care Obligation requires, among other things, that in making a
recommendation of any securities transaction or investment strategy involving securities to
a retail customer, brokers, dealers, and associated persons of broker-dealers exercise
reasonable diligence, care, and skill to understand the potential risks, rewards, and costs
associated with the recommendation. This is called the “Reasonable Basis” prong of Reg
BI’s Care Obligation.
18. The Care Obligation also requires that, in making a recommendation of any
securities transaction or investment strategy involving securities to a retail customer,
brokers, dealers, and associated persons of broker-dealers exercise reasonable diligence,
care, and skill to have a reasonable basis to believe the recommendation is in the best
interest of a particular retail customer, based on the customer’s investment profile and the
potential risks, rewards, and costs associated with the recommendation. This is called the
“Customer Specific” prong of Reg BI’s Care Obligation.
19. The Adopting Release states that what is in the best interest of a retail
customer depends on the facts and circumstances of the recommendation, including
“matching” the recommended security to the retail customer’s investment profile. Where the
“match” between the retail customer profile and the recommendation appears less

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reasonable, it is more important for the broker to establish that it had a reasonable belief that
the recommendation was in the best interest of the retail customer.
20. The Adopting Release also states that a registered representative should
exercise reasonable diligence, care, and skill to consider reasonably available alternatives.
B. GWG and L Bonds
21. GWG was a publicly traded financial services company. Prior to 2018,
GWG’s business model involved acquiring life insurance policies in the secondary market.
22. Following several transactions with Beneficient Company Group L.P.
(“Beneficient”) in 2018 and 2019, GWG reoriented its business. Instead of acquiring life
insurance policies, it began to focus on Beneficient’s business model of providing liquidity
to holders of illiquid investments and alternative assets. In addition, GWG’s CEO and Board
of Directors resigned and were replaced.
23. GWG had a history of net losses and had not generated sufficient operating
and investing cash flows to fund its operations. Neither GWG nor Beneficient was profitable
during 2018 or 2019, and both companies posted net losses from operations exceeding $79
million during both years.
24. GWG depended on financing – primarily debt financing, such as through the
sale of L Bonds – to fund its operations. Since 2012, GWG had raised funds for its
operations by selling L Bonds to retail customers through a nationwide network of broker-
dealers.
25. In June 2020, GWG began a new L Bond offering under which it planned to
issue up to $2 billion of L Bonds. L Bonds sold in this offering were unrated; had terms of

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two, three, five, and seven years; and paid fixed interest rates of between 5.50% and 8.50%,
depending on the term.
26. The offering document GWG used for this bond offering (the “June 2020
Prospectus”) disclosed that, among other things,
(a) L Bonds involved a “high degree of risk,” including the risk of losing
one’s entire investment;
(b) L Bonds “may be considered speculative”;
(c) GWG would use a portion of L Bond proceeds to repay existing L Bond
holders; and
(d)  “L Bonds are only suitable for persons with substantial financial resources
and with no need for liquidity in this investment.”
27. GWG temporarily ceased the sale of L Bonds in April of 2021 because it was
unable to file its Form 10-K for the year ended December 31, 2020 (“2020 Form 10-K”).
28. GWG subsequently filed its 2020 Form 10-K on November 5, 2021 and
resumed selling L Bonds shortly after issuing a supplement to the June 2020 Prospectus
(“November 2021 Prospectus Supplement”).
29. GWG’s 2020 Form 10-K reported a net loss of $215 million and interest
expenses that exceeded total revenue by $30 million. 66% of GWG’s total assets consisted
of goodwill.
30. GWG’s November 2021 Prospectus Supplement and 2020 Form 10-K
contained additional important information and disclosures about GWG and L Bonds,
including:
(a) there was “substantial doubt” about GWG’s ability to continue as a going

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concern for the next twelve months following the filing of the 2020 Form
10-K;
(b) there was a material weakness in GWG’s internal control over financial
reporting for all periods from December 31, 2019 to December 31, 2020;
(c) GWG heavily relied on the sales of L Bonds to fund its operations and
GWG’s viability as a business would be negatively impacted if demand for
the L Bonds dissipated;
(d) GWG’s ability to service and repay debt obligations would be
compromised if it was forced to again suspend L Bond sales or if the
demand for L Bonds dissipated;
(e) there was a possibility GWG would lose its ability to exercise control over
Beneficient; and
(f) there could be impairments to goodwill, which constituted the majority of
GWG’s consolidated assets, and such impairments would require GWG to
write down the value of that goodwill.
31. On January 15, 2022, GWG filed a Form 8-K disclosing that it had failed to
make L Bonds interest payments of approximately $10.35 million and L Bonds principal
payments of approximately $3.25 million.
32. On April 20, 2022, GWG filed a bankruptcy petition in the Southern District
of Texas Bankruptcy Court. Since then, GWG has failed to pay millions of dollars in
interest payments to L Bond investors.
C. Moloney’s Processes for Selling L Bonds
33. Through its registered representatives, Moloney sold various securities to

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retail customers, including alternative investments, like L Bonds; preferred stocks; stocks;
bonds; mutual funds; and options.
34.  For their customers’ L Bond investments, Moloney registered representatives
were required to complete two forms:
(a) A one-page purchase form provided by GWG, which contained
information about the customer and the type and amount of L Bond they
sought to purchase.
(b) An Alternative / Illiquid Investment Suitability Form (“Moloney
Suitability Form”), which contained customer information – including age,
net worth excluding home (“Net Worth”), liquid net worth, annual income,
investment knowledge, investment objective, and risk tolerance.
35. The Moloney Suitability Forms included five possible investment objectives:
“Preservation of Principal/Income,” “Balanced Growth,” “Growth,” “Aggressive Growth/
Aggressive Income,” or “Speculation.”
36. The Moloney Suitability Form also included five possible risk tolerance
levels: 1) “I am willing to accept minimal risk, even if that means my investment does not
generate significant income or returns and may not keep pace with inflation”; 2) “I am
willing to accept low risk, including low volatility, and understand that I could lose a
modest amount of my investment”; 3) “I am willing to accept moderate risk, including some
volatility, to seek higher returns and understand I could lose a portion of my investment”; 4)
“I am willing to accept high risk, including high volatility, and understand I could lose a
substantial amount of my investment”; and 5) “I am willing to accept maximum risk and
understand I could lose all of my investment.”

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37. The Moloney Suitability Form included a section that required the registered
representative, for all purchases by retail customers subject to Reg BI, to “describe how this
purchase is in the client’s best interest” (the “Best Interest Rationale”).
38. Moloney’s written policies and procedures advised registered representatives
to “document suitability” of any recommended alternative or complex products, such as L
Bonds.
39. Moloney’s written policies and procedures also included special instructions
for its registered representatives regarding “high yield debt securities,” such as L Bonds.
The written policies and procedures required registered representatives to consider specific
risk factors before recommending any high yield debt securities to their customers. They
also mandated that all customers who purchased high yield debt securities must have
“higher risk” as one of their investment objectives.
II. VANCE RECOMMENDS L BONDS TO RETAIL CUSTOMERS IN
VIOLATION OF REG BI’S CARE OBLIGATION.

40. During the Relevant Period, Vance was a registered representative with
Moloney. Most of his customers were retired or were approaching retirement.
41. By the time the June 2020 L Bond offering began, Vance had been
recommending GWG securities for over ten years. Over the years, Vance had developed
relationships with several GWG personnel, including the ex-CEO who resigned in 2019.
42. From July 2020 to April 2021, despite the risks disclosed by GWG
 discussed
above in Paragraphs 23 through 26, Vance recommended at least approximately $2.3
million of L Bonds to at least 34 customers.
43. From December 2021 to January 2022, after GWG disclosed the additional

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risks, as discussed above in paragraphs 29 through 30, Vance recommended another
approximately $1.2 million of L Bonds to at least 13 customers.
A. Vance’s Failure to Comply with the Reasonable Basis Prong of Reg BI’s
Care Obligation

44. Vance was aware of the above-described risks associated with L Bonds.
Vance reviewed the June 2020 Prospectus and the November 2021 Prospectus Supplement.
45. However, Vance unreasonably disregarded, dismissed, misunderstood, or
failed to take reasonable steps to understand significant disclosures and information
regarding the potential risks, rewards, and costs associated with the L Bonds described in
the June 2020 Prospectus, the 2020 Form 10-K, and the November 2021 Prospectus
Supplement. For example, Vance unreasonably dismissed the language in the June 2020
Prospectus stating that the L Bond investments “may be considered speculative” and
involved a “high degree of risk” as typical or commonplace language in a prospectus,
despite the unique risks presented by L Bonds.
46. As another example, Vance gave unreasonable weight to GWG’s payment
history and his relationships with past GWG personnel, given the interceding changes in
GWG’s leadership and business model.
47. Vance also unreasonably dismissed the disclosures in the June 2020
Prospectus, the November 2021 Prospectus Supplement, and the 2020 Form 10-K that
GWG relied on proceeds from sales and renewals of L Bonds to fund its operations and to
repay existing debt obligations, including the interest and principal on existing L Bonds,
even after GWG stopped selling L Bonds between April and November 2021 and the
information incorporated into the 2020 Form 10-K that showed no positive operating

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revenue to replace the L Bond revenue.
48. In addition, Vance unreasonably dismissed the going concern and material
weakness disclosures in the November 2021 Prospectus Supplement and failed to
reasonably assess these risks in determining whether to recommend L Bonds to retail
customers in December 2021 and January 2022.
B. Vance’s Failure to Comply with the Customer Specific Prong of Reg BI’s
Care Obligation
49. Vance did not have a reasonable basis to believe that the L Bond investments
he recommended were in the best interest of at least four specific retail customers, as
described below.
Cust-
omer
Age         Investment
Objective
Risk
Tolerance
Date of
Sale
Current
L Bond
Purchase
Total L
Bond
Holdings
Annual
Income
Appx.
Net
Worth
L Bond
% of Net
Worth
A           60           Growth           Moderate           9/1/20           $40,000           $150,000           <$70k          $450k          33%
B            75            Growth            Moderate            10/1/20            $49,000            $49,000            <$70k          $170k          29%
C            60            Growth            Moderate            12/13/21            $120,000            $120,000            $110k          $1.2m          10%
D           61           Growth           Moderate           12/13/21           $25,000           $77,326           $117k          $800k          10%

50. These four customers’ risk tolerances, investment objectives, and net worth
were a mismatch for the L Bond investments Vance recommended. According to Moloney’s
Suitability Forms, each of the customers had a growth objective and moderate risk
tolerance. According to the Moloney Suitability Form, this meant these customers were
“willing to accept moderate risk, including some volatility, to seek higher returns” and
understood they “could lose a portion of [their] investment.” Further, each customer was at
or near retirement age, and invested 10% or more of their net worth in L Bonds based on a
recommendation from Vance.

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1. Customer A
51. In or around August of 2020, Vance recommended L Bonds to Customer A.
According to the Moloney paperwork, Customer A was 60 years old, had an annual income
under $70,000, and had a liquid net worth under $70,000. At the time of this
recommendation, Customer A already held $110,000 worth of 5-year L Bonds that were set
to mature between 2022 and 2025.
52. Upon Vance’s recommendation, Customer A purchased $40,000 in 5-year L
Bonds on or around September 1, 2020. This purchase brought Customer A’s total L Bond
holdings to $150,000, which constituted 33% of Customer A’s Net Worth.
53. The Best Interest Rationale that Vance included in Customer A’s Moloney
Suitability Form stated, “Client is looking for stable income and diversification outside the
stock market.”
54. Vance did not consider any alternatives to L Bonds for Customer A’s
September 2020 investment.
2. Customer B
55. Vance recommended L Bonds to Customer B, who was retired, in or around
September or October of 2020. According to the Moloney paperwork, Customer B was 75
years old with an annual income under $70,000 and less than $70,000 in liquid net worth.
56. Upon Vance’s recommendation, Customer B purchased $49,000 in 5-year L
Bonds on or around October 1, 2020.
57. Customer B’s L Bond holdings constituted 29% of Customer B’s Net Worth.
58. In the Best Interest Rationale section of Customer B’s Moloney Suitability
Form, Vance wrote, “Client is looking for stable income outside of the stock market.”

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59. Vance did not consider any alternatives to L Bonds for Customer B’s October
1, 2020 investment.
3. Customer C
60. Vance recommended L Bonds to Customer C, who was retired, in or around
December 2021. According to Customer C’s Moloney paperwork, Customer C was 60 years
old and had an annual income of $110,000. Customer C’s Customer Suitability Form stated
that Customer C’s objective with this investment was to “protect the principal and make a
modest return on investment that is not tied to the stock market.”
61. Upon Vance’s recommendation, Customer C purchased $120,000 in 3- and 5-
year L Bonds on or around December 13, 2021.
62. This L Bond investment constituted 10% of Customer C’s Net Worth.
63. In the Best Interest Rationale section of Customer C’s Moloney Suitability
Form, Vance wrote, “Wants diversity outside of the stock market. Likes the idea of a set
interest rate and not having daily fluctuations in account.”
4. Customer D
64. Vance recommended L Bonds to Customer D, who was retired, in or around
December of 2021. According to Customer D’s Moloney paperwork, Customer D was
61years old with an annual income of $117,000. Customer D’s Customer Suitability Form
stated that Customer D’s objective with this investment was “[w]anting longer term
investment not tied to stock market.”
65. Upon Vance’s recommendation, Customer D purchased $25,000 in 7-year L
Bonds on or around December 13, 2021. This brought Customer D’s total L Bond holdings
to over $77,000, which constituted 10% of Customer D’s Net Worth.

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66. In the Best Interest Rationale section of Customer D’s Moloney Suitability
Form, Vance wrote, “Client is looking for longer term investment that pays good dividends
and is not tied to the stock market.”
67. Vance did not consider any alternatives to L Bonds for Customer D’s
December 2021 investment.
C. Vance’s Commissions from the L Bond Recommendations He Made in
Violation of Reg BI

68. GWG paid commissions of 3.25% to 5% of the value of each L Bond sold,
depending on the term of the L Bond. For those L Bonds he recommended, Vance obtained
approximately 90% of those commissions, through an LLC he controlled.
69. Vance received at least approximately $140,000 in commissions for his retail
customers’ L Bond purchases during the Relevant Period.
CLAIM FOR RELIEF
Violations of Reg BI’s General Obligation
[Exchange Act Rule 15l-1(a)(1), 17 CFR § 240.15l-1(a)(1)].
70. The SEC realleges and incorporates by reference paragraphs 1 through 69
above.
71. By engaging in the conduct described above, when making recommendations
of securities transaction to retail customers, Vance failed to act in the best interest of the
retail customers by failing to exercise reasonable diligence, care, and skill to understand the
potential risks, rewards, and costs associated with the recommendation.
72. Also, by engaging in the conduct described above, Vance made
recommendations to retail customers without exercising reasonable diligence, care, and skill

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to have a reasonable basis to believe the recommendations were in the best interests of the
particular retail customer based on that retail customer’s investment profile and the potential
risks, rewards, and costs associated with the recommendation.
73. Vance’s failures to comply with Regulation Best Interest’s Care Obligation
constitute violations of Regulation Best Interest’s General Obligation.
74. By reason of the foregoing, Vance violated, and, unless restrained and
enjoined will continue to violate, Exchange Act Rule 15l-1(a)(1) [17 CFR § 240.15l-
1(a)(1)].
PRAYER FOR RELIEF
WHEREFORE, the SEC respectfully requests that the Court:
I.
Issue findings of fact and conclusions of law that Vance committed the violations
alleged herein.
II.
Issue judgment, in form consistent with Rule 65(d) of the Federal Rules of Civil
Procedure, restraining and enjoining Vance and all persons in active concert or participation
with him, from violating the federal securities laws alleged in this complaint.
III.
Order Vance to pay disgorgement of any unjust enrichment he received as a result of
the misconduct alleged, together with prejudgment interest thereon, under Sections 21(d)(3),
21(d)(5) and 21(d)(7) of the Exchange Act [15 U.S.C. §§ 78u(d)(3), 78u(d)(5), 78u(d)(7)].
IV.
Order Vance to pay civil penalties under Section 21(d)(3) of the Exchange Act [ 15

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U.S.C. § 78u(d)(3)].
V.
Retain jurisdiction of this action in accordance with the principles of equity and the
Federal Rules of Civil Procedure in order to implement and carry out the terms of all orders
and decrees that may be entered, or to entertain any suitable application or motion for
additional relief within the jurisdiction of this Court.
VI.
Grant such other and further relief as this Court may determine to be just and
necessary.

JURY DEMAND
The SEC demands a trial by jury on all claims so triable.

Dated:  October 8, 2024

Respectfully submitted,

UNITED STATES SECURITIES AND
EXCHANGE COMMISSION

/s/     Ariella O. Guardi
Ariella O. Guardi

Amended Complaint 1 1:24-cv-01150-BAM  

 

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ARIELLA OMHOLT GUARDI (IL Bar No. 6297336) 
Email:  [email protected] 
JEDEDIAH B. FORKNER (IL Bar No. 6299787) 
Email:  [email protected] 
United States Securities and Exchange Commission 
175 West Jackson Blvd., Suite 1450 
Chicago, Illinois 60604 
Telephone: (312) 353-7390 
Facsimile: (312) 353-7398 
 
Attorneys for Plaintiff 
United States Securities and Exchange Commission 
 

UNITED STATES DISTRICT COURT 
EASTERN DISTRICT OF CALIFORNIA 

FRESNO DIVISION 
                                                                               
 : 
UNITED STATES SECURITIES : 
AND EXCHANGE COMMISSION, :   
 :    No. 1:24-cv-01150-BAM 

Plaintiff, :        
 :   AMENDED COMPLAINT 

- against -                                   :   
 :  
ROBERT M. VANCE, :  JURY TRIAL DEMANDED 
 :   

Defendant. :    
 :   

  
AMENDED COMPLAINT 

Plaintiff United States Securities and Exchange Commission (“SEC” or 

“Commission”), for its Complaint against defendant Robert M. Vance, alleges as follows: 

JURISDICTION AND VENUE 

1. This Court has jurisdiction over this action pursuant to Section 21 of the 

Exchange Act [15 U.S.C. §§ 78u]. 

Case 1:24-cv-01150-BAM   Document 5   Filed 10/08/24   Page 1 of 17



 
 

Amended Complaint 2 1:24-cv-01150-BAM  

 

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2. The Commission brings this action pursuant to the authority conferred by 

Section 21(d) and (e) of the Exchange Act [15 U.S.C. § 78u(d) and 78u(e)]. 

3. Venue is proper in this Court pursuant to Section 27 of the Exchange Act [15 

U.S.C. § 78aa]. Acts, practices, and courses of business constituting violations alleged 

herein have occurred within the jurisdiction of the United States District Court for the 

Eastern District of California. Defendant resides in this district. 

PRELIMINARY STATEMENT 

4. This matter concerns recommendations by Vance that certain retail customers 

purchase high risk, illiquid debt securities known as L Bonds. From approximately June 30, 

2020 through approximately January 15, 2022 (the “Relevant Period”), these 

recommendations violated Rule 15l-1(a) under the Securities Exchange Act of 1934 

(“Regulation Best Interest” or “Reg BI”). 

5. L Bonds were unrated corporate bonds offered by GWG Holdings, Inc. 

(“GWG”). According to GWG’s disclosures during the Relevant Period, (a) L Bond 

investments involved a high degree of risk, including the risk of losing an investor’s entire 

investment; (b) L Bond investments “may be considered speculative”; (c) L Bond 

investments were only suitable for investors with substantial financial resources and no need 

for liquidity in the investment; and (d) GWG would use a portion of the L Bond proceeds to 

repay existing L Bond holders. In addition, in November 2021, GWG disclosed, among 

other things, that several enumerated factors raised substantial doubt regarding its ability to 

continue as a going concern. 

6. Despite these disclosures, in recommending the purchase of L Bonds to retail 

customers, Vance failed to exercise reasonable diligence, care, and skill to understand the 

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Amended Complaint 3 1:24-cv-01150-BAM  

 

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potential risks, rewards, and costs associated with the recommendations. Vance also 

recommended the purchase of L Bonds to at least four retail customers for whom he did not 

have a reasonable basis to believe the recommendations were in the customers’ best interest 

based on the customers’ investment profiles and the potential risks, rewards, and costs 

associated with the L Bonds.   

7. During the Relevant Period, at least 45 of Vance’s retail customers purchased 

a total of at least approximately $3.5 million in L Bonds upon Vance’s recommendations. 

Many of these customers were at or near retirement age and had moderate risk tolerance. 

8. There is a reasonable likelihood that Vance will, unless enjoined, continue to 

engage in transactions, acts, practices, and courses of business of similar purport and object 

to those set forth in this complaint. 

9. The SEC therefore seeks a judgment against Vance providing permanent 

injunctive relief; disgorgement of ill-gotten gains, pursuant to Sections 21(d)(3), 21(d)(5) 

and 21(d)(7) of the Exchange Act [15 U.S.C. §§ 78u(d)(3), (5), (7)]; imposing civil 

monetary penalties, pursuant to Section 20(d) of the Securities Act [15 U.S.C. § 77t(d)] and 

Section 21(d)(3) of the Exchange Act [15 U.S.C. § 78u(d)(3)]; as well as other appropriate 

and necessary relief. 

DEFENDANT 

10. Robert M. Vance, age 73, is a resident of Mi-Wuk Village, California. He 

worked as a registered representative for Moloney Securities Co., Inc. from 2016 until 

approximately November 2023. During the Relevant Period, Vance was registered as 

General Securities Representative (i.e., Series 7), General Securities Principal (i.e., Series 

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Amended Complaint 4 1:24-cv-01150-BAM  

 

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24), and Uniform Combined Securities Agent (i.e., Series 66). He is not currently associated 

with a registered broker-dealer.  

RELATED ENTITIES 

11. Moloney Securities Co., Inc. (“Moloney”) is a Missouri corporation 

headquartered in Manchester, Missouri and has been registered with the Commission as a 

broker-dealer pursuant to Section 15(b) of the Exchange Act since 1995.   

12. GWG Holdings, Inc. (“GWG”) was a publicly traded financial services 

company (NASDAQ:GWGH) with its principal executive offices in Dallas, Texas.  

FACTUAL ALLEGATIONS 

I. BACKGROUND 

A. Requirements of and Commission Guidance Regarding Reg BI 

13. Reg BI, which became effective on June 30, 2020, established a standard of 

conduct for broker-dealers and associated persons when they recommend securities 

transactions to retail customers.   

14. In July of 2019, the SEC issued an adopting release, offering guidance on how 

the Commission interprets Reg BI. See Regulation Best Interest: The Broker-Dealer 

Standard of Conduct, Exchange Act Release No. 34-86031, 84 Fed. Reg. 33318 (July 12, 

2019) (the “Adopting Release”). 

15. Reg BI’s General Obligation requires a broker, dealer, or a natural person 

associated with a broker or dealer, when making a recommendation of any securities 

transaction to a retail customer, to act in the best interest of that retail customer at the time 

the recommendation is made, without placing the financial or other interest of the broker, 

dealer, or associated person ahead of the interest of the retail customer. The Adopting 

Case 1:24-cv-01150-BAM   Document 5   Filed 10/08/24   Page 4 of 17



 
 

Amended Complaint 5 1:24-cv-01150-BAM  

 

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Release states that the standard of conduct established by Reg BI cannot be satisfied through 

disclosure alone. 

16. Reg BI’s General Obligation is made up of four Component Obligations: (1) 

Disclosure Obligation, (2) Care Obligation, (3) Conflict of Interest Obligation, and (4) 

Compliance Obligation. Failure to comply with any of the Reg BI’s four Component 

Obligations violates the General Obligation.  

17. Reg BI’s Care Obligation requires, among other things, that in making a 

recommendation of any securities transaction or investment strategy involving securities to 

a retail customer, brokers, dealers, and associated persons of broker-dealers exercise 

reasonable diligence, care, and skill to understand the potential risks, rewards, and costs 

associated with the recommendation. This is called the “Reasonable Basis” prong of Reg 

BI’s Care Obligation. 

18. The Care Obligation also requires that, in making a recommendation of any 

securities transaction or investment strategy involving securities to a retail customer, 

brokers, dealers, and associated persons of broker-dealers exercise reasonable diligence, 

care, and skill to have a reasonable basis to believe the recommendation is in the best 

interest of a particular retail customer, based on the customer’s investment profile and the 

potential risks, rewards, and costs associated with the recommendation. This is called the 

“Customer Specific” prong of Reg BI’s Care Obligation. 

19. The Adopting Release states that what is in the best interest of a retail 

customer depends on the facts and circumstances of the recommendation, including 

“matching” the recommended security to the retail customer’s investment profile. Where the 

“match” between the retail customer profile and the recommendation appears less 

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Amended Complaint 6 1:24-cv-01150-BAM  

 

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reasonable, it is more important for the broker to establish that it had a reasonable belief that 

the recommendation was in the best interest of the retail customer.   

20. The Adopting Release also states that a registered representative should 

exercise reasonable diligence, care, and skill to consider reasonably available alternatives.  

B. GWG and L Bonds  

21. GWG was a publicly traded financial services company. Prior to 2018, 

GWG’s business model involved acquiring life insurance policies in the secondary market.  

22. Following several transactions with Beneficient Company Group L.P. 

(“Beneficient”) in 2018 and 2019, GWG reoriented its business. Instead of acquiring life 

insurance policies, it began to focus on Beneficient’s business model of providing liquidity 

to holders of illiquid investments and alternative assets. In addition, GWG’s CEO and Board 

of Directors resigned and were replaced. 

23. GWG had a history of net losses and had not generated sufficient operating 

and investing cash flows to fund its operations. Neither GWG nor Beneficient was profitable 

during 2018 or 2019, and both companies posted net losses from operations exceeding $79 

million during both years.   

24. GWG depended on financing – primarily debt financing, such as through the 

sale of L Bonds – to fund its operations. Since 2012, GWG had raised funds for its 

operations by selling L Bonds to retail customers through a nationwide network of broker-

dealers.  

25. In June 2020, GWG began a new L Bond offering under which it planned to 

issue up to $2 billion of L Bonds. L Bonds sold in this offering were unrated; had terms of 

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Amended Complaint 7 1:24-cv-01150-BAM  

 

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two, three, five, and seven years; and paid fixed interest rates of between 5.50% and 8.50%, 

depending on the term.   

26. The offering document GWG used for this bond offering (the “June 2020 

Prospectus”) disclosed that, among other things,  

(a) L Bonds involved a “high degree of risk,” including the risk of losing 

one’s entire investment;  

(b) L Bonds “may be considered speculative”;  

(c) GWG would use a portion of L Bond proceeds to repay existing L Bond 

holders; and  

(d)  “L Bonds are only suitable for persons with substantial financial resources 

and with no need for liquidity in this investment.”  

27. GWG temporarily ceased the sale of L Bonds in April of 2021 because it was 

unable to file its Form 10-K for the year ended December 31, 2020 (“2020 Form 10-K”).  

28. GWG subsequently filed its 2020 Form 10-K on November 5, 2021 and 

resumed selling L Bonds shortly after issuing a supplement to the June 2020 Prospectus 

(“November 2021 Prospectus Supplement”). 

29. GWG’s 2020 Form 10-K reported a net loss of $215 million and interest 

expenses that exceeded total revenue by $30 million. 66% of GWG’s total assets consisted 

of goodwill. 

30. GWG’s November 2021 Prospectus Supplement and 2020 Form 10-K 

contained additional important information and disclosures about GWG and L Bonds, 

including:   

(a) there was “substantial doubt” about GWG’s ability to continue as a going 

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Amended Complaint 8 1:24-cv-01150-BAM  

 

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concern for the next twelve months following the filing of the 2020 Form 

10-K;  

(b) there was a material weakness in GWG’s internal control over financial 

reporting for all periods from December 31, 2019 to December 31, 2020;  

(c) GWG heavily relied on the sales of L Bonds to fund its operations and 

GWG’s viability as a business would be negatively impacted if demand for 

the L Bonds dissipated;  

(d) GWG’s ability to service and repay debt obligations would be 

compromised if it was forced to again suspend L Bond sales or if the 

demand for L Bonds dissipated;  

(e) there was a possibility GWG would lose its ability to exercise control over 

Beneficient; and  

(f) there could be impairments to goodwill, which constituted the majority of 

GWG’s consolidated assets, and such impairments would require GWG to 

write down the value of that goodwill.   

31. On January 15, 2022, GWG filed a Form 8-K disclosing that it had failed to 

make L Bonds interest payments of approximately $10.35 million and L Bonds principal 

payments of approximately $3.25 million. 

32. On April 20, 2022, GWG filed a bankruptcy petition in the Southern District 

of Texas Bankruptcy Court. Since then, GWG has failed to pay millions of dollars in 

interest payments to L Bond investors.  

C. Moloney’s Processes for Selling L Bonds 

33. Through its registered representatives, Moloney sold various securities to 

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Amended Complaint 9 1:24-cv-01150-BAM  

 

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retail customers, including alternative investments, like L Bonds; preferred stocks; stocks; 

bonds; mutual funds; and options.  

34.  For their customers’ L Bond investments, Moloney registered representatives 

were required to complete two forms:  

(a) A one-page purchase form provided by GWG, which contained 

information about the customer and the type and amount of L Bond they 

sought to purchase.  

(b) An Alternative / Illiquid Investment Suitability Form (“Moloney 

Suitability Form”), which contained customer information – including age, 

net worth excluding home (“Net Worth”), liquid net worth, annual income, 

investment knowledge, investment objective, and risk tolerance. 

35. The Moloney Suitability Forms included five possible investment objectives: 

“Preservation of Principal/Income,” “Balanced Growth,” “Growth,” “Aggressive Growth/ 

Aggressive Income,” or “Speculation.”  

36. The Moloney Suitability Form also included five possible risk tolerance 

levels: 1) “I am willing to accept minimal risk, even if that means my investment does not 

generate significant income or returns and may not keep pace with inflation”; 2) “I am 

willing to accept low risk, including low volatility, and understand that I could lose a 

modest amount of my investment”; 3) “I am willing to accept moderate risk, including some 

volatility, to seek higher returns and understand I could lose a portion of my investment”; 4) 

“I am willing to accept high risk, including high volatility, and understand I could lose a 

substantial amount of my investment”; and 5) “I am willing to accept maximum risk and 

understand I could lose all of my investment.” 

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Amended Complaint 10 1:24-cv-01150-BAM  

 

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37. The Moloney Suitability Form included a section that required the registered 

representative, for all purchases by retail customers subject to Reg BI, to “describe how this 

purchase is in the client’s best interest” (the “Best Interest Rationale”). 

38. Moloney’s written policies and procedures advised registered representatives 

to “document suitability” of any recommended alternative or complex products, such as L 

Bonds.  

39. Moloney’s written policies and procedures also included special instructions 

for its registered representatives regarding “high yield debt securities,” such as L Bonds. 

The written policies and procedures required registered representatives to consider specific 

risk factors before recommending any high yield debt securities to their customers. They 

also mandated that all customers who purchased high yield debt securities must have 

“higher risk” as one of their investment objectives. 

II. VANCE RECOMMENDS L BONDS TO RETAIL CUSTOMERS IN 
VIOLATION OF REG BI’S CARE OBLIGATION.  

 
40. During the Relevant Period, Vance was a registered representative with 

Moloney. Most of his customers were retired or were approaching retirement.  

41. By the time the June 2020 L Bond offering began, Vance had been 

recommending GWG securities for over ten years. Over the years, Vance had developed 

relationships with several GWG personnel, including the ex-CEO who resigned in 2019. 

42. From July 2020 to April 2021, despite the risks disclosed by GWG discussed 

above in Paragraphs 23 through 26, Vance recommended at least approximately $2.3 

million of L Bonds to at least 34 customers.  

43. From December 2021 to January 2022, after GWG disclosed the additional 

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Amended Complaint 11 1:24-cv-01150-BAM  

 

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risks, as discussed above in paragraphs 29 through 30, Vance recommended another 

approximately $1.2 million of L Bonds to at least 13 customers.  

A. Vance’s Failure to Comply with the Reasonable Basis Prong of Reg BI’s 
Care Obligation 

 
44. Vance was aware of the above-described risks associated with L Bonds. 

Vance reviewed the June 2020 Prospectus and the November 2021 Prospectus Supplement. 

45. However, Vance unreasonably disregarded, dismissed, misunderstood, or 

failed to take reasonable steps to understand significant disclosures and information 

regarding the potential risks, rewards, and costs associated with the L Bonds described in 

the June 2020 Prospectus, the 2020 Form 10-K, and the November 2021 Prospectus 

Supplement. For example, Vance unreasonably dismissed the language in the June 2020 

Prospectus stating that the L Bond investments “may be considered speculative” and 

involved a “high degree of risk” as typical or commonplace language in a prospectus, 

despite the unique risks presented by L Bonds. 

46. As another example, Vance gave unreasonable weight to GWG’s payment 

history and his relationships with past GWG personnel, given the interceding changes in 

GWG’s leadership and business model. 

47. Vance also unreasonably dismissed the disclosures in the June 2020 

Prospectus, the November 2021 Prospectus Supplement, and the 2020 Form 10-K that 

GWG relied on proceeds from sales and renewals of L Bonds to fund its operations and to 

repay existing debt obligations, including the interest and principal on existing L Bonds, 

even after GWG stopped selling L Bonds between April and November 2021 and the 

information incorporated into the 2020 Form 10-K that showed no positive operating 

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Amended Complaint 12 1:24-cv-01150-BAM  

 

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revenue to replace the L Bond revenue. 

48. In addition, Vance unreasonably dismissed the going concern and material 

weakness disclosures in the November 2021 Prospectus Supplement and failed to 

reasonably assess these risks in determining whether to recommend L Bonds to retail 

customers in December 2021 and January 2022. 

B. Vance’s Failure to Comply with the Customer Specific Prong of Reg BI’s 
Care Obligation 

49. Vance did not have a reasonable basis to believe that the L Bond investments 

he recommended were in the best interest of at least four specific retail customers, as 

described below. 

Cust-
omer 

Age Investment 
Objective 

Risk 
Tolerance 

Date of 
Sale 

Current 
L Bond 
Purchase 

Total L 
Bond 
Holdings 

Annual 
Income 

Appx. 
Net 
Worth 

L Bond 
% of Net 
Worth 

A 60 Growth Moderate 9/1/20 $40,000 $150,000 <$70k $450k 33% 
B 75 Growth Moderate 10/1/20 $49,000 $49,000 <$70k $170k 29% 
C 60 Growth Moderate 12/13/21 $120,000 $120,000 $110k $1.2m 10% 
D 61 Growth Moderate 12/13/21 $25,000 $77,326 $117k $800k 10% 

 
50. These four customers’ risk tolerances, investment objectives, and net worth 

were a mismatch for the L Bond investments Vance recommended. According to Moloney’s 

Suitability Forms, each of the customers had a growth objective and moderate risk 

tolerance. According to the Moloney Suitability Form, this meant these customers were 

“willing to accept moderate risk, including some volatility, to seek higher returns” and 

understood they “could lose a portion of [their] investment.” Further, each customer was at 

or near retirement age, and invested 10% or more of their net worth in L Bonds based on a 

recommendation from Vance. 

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Amended Complaint 13 1:24-cv-01150-BAM  

 

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1. Customer A  

51. In or around August of 2020, Vance recommended L Bonds to Customer A. 

According to the Moloney paperwork, Customer A was 60 years old, had an annual income 

under $70,000, and had a liquid net worth under $70,000. At the time of this 

recommendation, Customer A already held $110,000 worth of 5-year L Bonds that were set 

to mature between 2022 and 2025. 

52. Upon Vance’s recommendation, Customer A purchased $40,000 in 5-year L 

Bonds on or around September 1, 2020. This purchase brought Customer A’s total L Bond 

holdings to $150,000, which constituted 33% of Customer A’s Net Worth. 

53. The Best Interest Rationale that Vance included in Customer A’s Moloney 

Suitability Form stated, “Client is looking for stable income and diversification outside the 

stock market.” 

54. Vance did not consider any alternatives to L Bonds for Customer A’s 

September 2020 investment. 

2. Customer B 

55. Vance recommended L Bonds to Customer B, who was retired, in or around 

September or October of 2020. According to the Moloney paperwork, Customer B was 75 

years old with an annual income under $70,000 and less than $70,000 in liquid net worth. 

56. Upon Vance’s recommendation, Customer B purchased $49,000 in 5-year L 

Bonds on or around October 1, 2020.  

57. Customer B’s L Bond holdings constituted 29% of Customer B’s Net Worth.  

58. In the Best Interest Rationale section of Customer B’s Moloney Suitability 

Form, Vance wrote, “Client is looking for stable income outside of the stock market.” 

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Amended Complaint 14 1:24-cv-01150-BAM  

 

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59. Vance did not consider any alternatives to L Bonds for Customer B’s October 

1, 2020 investment. 

3. Customer C 

60. Vance recommended L Bonds to Customer C, who was retired, in or around 

December 2021. According to Customer C’s Moloney paperwork, Customer C was 60 years 

old and had an annual income of $110,000. Customer C’s Customer Suitability Form stated 

that Customer C’s objective with this investment was to “protect the principal and make a 

modest return on investment that is not tied to the stock market.”  

61. Upon Vance’s recommendation, Customer C purchased $120,000 in 3- and 5-

year L Bonds on or around December 13, 2021. 

62. This L Bond investment constituted 10% of Customer C’s Net Worth.  

63. In the Best Interest Rationale section of Customer C’s Moloney Suitability 

Form, Vance wrote, “Wants diversity outside of the stock market. Likes the idea of a set 

interest rate and not having daily fluctuations in account.” 

4. Customer D 

64. Vance recommended L Bonds to Customer D, who was retired, in or around 

December of 2021. According to Customer D’s Moloney paperwork, Customer D was 

61years old with an annual income of $117,000. Customer D’s Customer Suitability Form 

stated that Customer D’s objective with this investment was “[w]anting longer term 

investment not tied to stock market.” 

65. Upon Vance’s recommendation, Customer D purchased $25,000 in 7-year L 

Bonds on or around December 13, 2021. This brought Customer D’s total L Bond holdings 

to over $77,000, which constituted 10% of Customer D’s Net Worth.  

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Amended Complaint 15 1:24-cv-01150-BAM  

 

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66. In the Best Interest Rationale section of Customer D’s Moloney Suitability 

Form, Vance wrote, “Client is looking for longer term investment that pays good dividends 

and is not tied to the stock market.” 

67. Vance did not consider any alternatives to L Bonds for Customer D’s 

December 2021 investment. 

C. Vance’s Commissions from the L Bond Recommendations He Made in 
Violation of Reg BI 

 

68. GWG paid commissions of 3.25% to 5% of the value of each L Bond sold, 

depending on the term of the L Bond. For those L Bonds he recommended, Vance obtained 

approximately 90% of those commissions, through an LLC he controlled. 

69. Vance received at least approximately $140,000 in commissions for his retail 

customers’ L Bond purchases during the Relevant Period. 

CLAIM FOR RELIEF 
Violations of Reg BI’s General Obligation  

[Exchange Act Rule 15l-1(a)(1), 17 CFR § 240.15l-1(a)(1)].  

70. The SEC realleges and incorporates by reference paragraphs 1 through 69 

above. 

71. By engaging in the conduct described above, when making recommendations 

of securities transaction to retail customers, Vance failed to act in the best interest of the 

retail customers by failing to exercise reasonable diligence, care, and skill to understand the 

potential risks, rewards, and costs associated with the recommendation. 

72. Also, by engaging in the conduct described above, Vance made 

recommendations to retail customers without exercising reasonable diligence, care, and skill 

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Amended Complaint 16 1:24-cv-01150-BAM  

 

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to have a reasonable basis to believe the recommendations were in the best interests of the 

particular retail customer based on that retail customer’s investment profile and the potential 

risks, rewards, and costs associated with the recommendation. 

73. Vance’s failures to comply with Regulation Best Interest’s Care Obligation 

constitute violations of Regulation Best Interest’s General Obligation. 

74. By reason of the foregoing, Vance violated, and, unless restrained and 

enjoined will continue to violate, Exchange Act Rule 15l-1(a)(1) [17 CFR § 240.15l-

1(a)(1)]. 

PRAYER FOR RELIEF 

WHEREFORE, the SEC respectfully requests that the Court: 

I. 

Issue findings of fact and conclusions of law that Vance committed the violations 

alleged herein. 

II. 

Issue judgment, in form consistent with Rule 65(d) of the Federal Rules of Civil 

Procedure, restraining and enjoining Vance and all persons in active concert or participation 

with him, from violating the federal securities laws alleged in this complaint. 

III. 

Order Vance to pay disgorgement of any unjust enrichment he received as a result of 

the misconduct alleged, together with prejudgment interest thereon, under Sections 21(d)(3), 

21(d)(5) and 21(d)(7) of the Exchange Act [15 U.S.C. §§ 78u(d)(3), 78u(d)(5), 78u(d)(7)]. 

IV. 

Order Vance to pay civil penalties under Section 21(d)(3) of the Exchange Act [ 15 

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Amended Complaint 17 1:24-cv-01150-BAM  

 

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U.S.C. § 78u(d)(3)].   

V. 

Retain jurisdiction of this action in accordance with the principles of equity and the 

Federal Rules of Civil Procedure in order to implement and carry out the terms of all orders 

and decrees that may be entered, or to entertain any suitable application or motion for 

additional relief within the jurisdiction of this Court. 

VI. 

Grant such other and further relief as this Court may determine to be just and 

necessary. 

 

JURY DEMAND 

The SEC demands a trial by jury on all claims so triable.   

 

Dated:  October 8, 2024 

 

 

 

 

 
 

 
Respectfully submitted, 
 
UNITED STATES SECURITIES AND 
EXCHANGE COMMISSION 
 
/s/     Ariella O. Guardi                          
Ariella O. Guardi 

  

 

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