Emerson Equity, the leading seller of L bonds issued by GWG Holdings, has filed a complaint alleging breach of contract against a network of insurance carriers, including "certain underwriters at Lloyd's London."
Typically, broker-dealers buy errors and omissions coverage as a defense against potential investor lawsuits and damages related to trading errors and other mistakes that could turn into liabilities. According to the lawsuit, the policy in question provides a limit of $5 million of liability coverage.
GWG Holdings sold $1.6 billion in bonds backed by life settlements through a network of independent broker-dealers voluntarily. GWG Holdings filed for Chapter 11 bankruptcy protection in April.
Questions remain as to what the GWG bonds are worth. In an annual audited financial statement filed with the Securities and Exchange Commission, Emerson reported in March that problems related to an unnamed offering potentially could harm the firm. According to AdvisorHub, the unnamed offering is widely believed to be the GWG bonds.
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