Kingswood Capital Partners has been fined $150,000 and formally censured by the Financial Industry Regulatory Authority (FINRA) following supervisory lapses tied to unsuitable sales of illiquid alternative investments to senior clients.
The enforcement action stems from transactions that occurred between March and June 2019, when Kingswood allegedly failed to supervise a former representative’s recommendations—specifically involving GWG Holdings’ L Bonds, among other high-risk products.
While the firm neither admitted nor denied the findings, it agreed to settle the charges and not contest the imposed sanctions.
According to FINRA, Kingswood lacked adequate written supervisory procedures to assess concentration risks in illiquid products. The firm’s compliance protocols did not clearly instruct supervisors on how to evaluate overconcentration or respond to potential red flags.
The case involved three senior investors, aged 66 to 81, all with moderate risk tolerances and limited financial resources. Kingswood approved transactions that reportedly resulted in these clients holding between 25% and 96% of their net worth in illiquid alternative investments.
GWG Holdings later defaulted on its obligations to L Bond investors in January 2022 and filed for bankruptcy that April—heightening the fallout from these transactions.
FINRA concluded that Kingswood violated Rules 3110 and 2010, which mandate robust supervisory systems and high standards of commercial honor. The regulator emphasized the importance of protecting vulnerable investors, especially retirees with limited capacity to absorb losses.
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By
Staff Writer
