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In its annual audited financial statement, Emerson Equity reported that problems related to an unnamed offering potentially could harm the firm.

The lead seller of the bonds of GWG Holdings Inc. recently revealed troublesome fallout from a product that failed, raising questions about the firm.

In its annual audited financial statement filed with the Securities and Exchange Commission, Emerson Equity reported that problems related to an unnamed offering potentially could harm the firm.

“In 2022, there was an offering that ceased distributions and redemptions and, as a result, this may have an adverse effect on the future financial condition or results of operations of the company,” according to Emerson’s 2021 financial statement, which was filed March 2 but was not posted on the SEC’s website until recently.

Last month, GWG, which sold $1.6 billion in bonds backed by life settlements through a network of about 140 independent broker-dealers, said it had voluntarily filed for Chapter 11 bankruptcy protection, a widely anticipated move. Emerson Equity was the lead broker-dealer in the sale of the bonds, according to GWG.

Over the winter, GWG defaulted on bond payments to investors. There’s no way to immediately understand what value, if any, those bonds have.

Dominic Baldini, president and owner of Emerson Equity, didn’t return calls last week and Monday for comment about potential adverse effects for the firm.

“It’s just recognizing a reality,” said Gordon Yale, a forensic accountant.

He noted that Emerson Equity also stated in its Focus report that 30% of total revenue in 2021 came from five customers. “So the suspension of GWG is likely material and they are required to disclose material events. Most of their expenses are variable so barring [legal] judgments, the loss of GWG doesn’t appear to imperil them.”

“Lack of due diligence in the alternative investment and real estate investment trust space can have a devastating impact on a broker-dealer as well as the compliance disclosure history of advisers,” said Jon Henschen, an industry recruiter.

Emerson Equity reported total revenue of $107 million and net income of $9.4 million in 2021, according to the Focus report, more than double the firm’s total revenue and net income the year earlier.