Civil Action No. 2:22-cv-04119 (C.D. Cal.)

On June 15, 2022, the Commission filed a complaint (the “Complaint”) against Western International Securities, Inc., Nancy Cole, Patrick Egan, Andy Gitipityapon, Steven Graham, and Thomas Swan. The Complaint alleged that there were 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”). They were high risk, illiquid, and only suitable for customers with substantial financial resources. The Complaint alleges 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, and that these recommendations violated Regulation Best Interest’s Care Obligation and Compliance Obligation.

The Defendants were ordered, and have paid a total of $327,280.52 in disgorgement, prejudgment interest, and penalties to the Commission. The Commission was ordered to hold the funds, together with any interest and income earned thereon (collectively, the “Fund”), pending further order of the Court. See Western International’s Final Judgment, Cole’s Final Judgment, Egan’s Final Judgment, Gitipityapon’s Final Judgment, Graham’s Final Judgment, Swan’s Final Judgment.

The Commission holds $327,280.52 in the Fund in a Commission-designated account at the U.S. Department of the Treasury. Any accrued interest will be added to the Fund for the benefit of harmed investors.

On March 9, 2026, the Court granted the Commission’s motion and entered an Order that established a Fair Fund, pursuant to Section 308(a) of the Sarbanes-Oxley Act of 2002 (the “Fair Fund”), so the funds paid by the defendants, together with any interest and income earned thereon, can be distributed to investors harmed by the conduct alleged in the Complaint. The Court’s Order also appointed Miller Kaplan Arase LLP as the Tax Administrator to fulfill the tax obligations of the Fair Fund and authorized the Commission to approve and arrange payment of all tax obligations owed by the Fair Fund and the related fees and expenses of the Tax Administrator directly from the Fair Fund without further approval of the Court. See the Court’s Order.