Broker Settles Action Based on Selling L Bonds By Making Misrepresentations

Regardless of how sophisticated an investor is, the complexity of the securities markets can at times result in an investor being deceived. A good example, is one of the Commission’s most recent cases, SEC v. Moretz,  Civil Action No. 5:24-cv-00171 (W.D.N.C. Filed July 29, 2024).

The cases centers on the sale of a product called L Bonds. Those bonds are tied to life insurance and often used to finance the purchase of a policy. In this case, the Commission’s complaint alleged that investors were being deceived by Defendant Garrett W. Moretz, a registered investment adviser who was selling the L Bonds did not disclose that the investment had risk.  Rather, in making the sales pitch, Defendant repeatedly made misrepresentations about the risk.  For example, he told one potential investor that the bonds were 100% safe.  He told another investor that there was “zero risk” in investing in L Bonds.  In fact, neither statement was true.  The complaint alleged violations of Securities Act Section 17(a) and Exchange Act Section 10(b) and Rule 10b-5.

To resolve the matter, Defendant consented to the entry of permanent injunctions based on the provisions cited in the complaint. Defendant Moretz will also be precluded from associating with a broker, or investment adviser for one year.

The court also imposed monetary penalties.  Those included $4,374.91 as disgorgement and $1,404.68 in prejudgment interest.  Defendant also agreed to pay a penalty of $35,000. See  Lit. Rel. No. 26372 (August 12, 2025).