The Guiliano Law Group, P.C. is investigating claims against securities broker-dealers in connection with the sale and recommendation of Business Development Companies or BDCs.
Citing the “high commissions and fees,” the Financial Industry Regulatory Authority or FINRA claims that “many of the firms that distributed nontraded REITs are now turning to nontraded BDCs,” BDCs arre frought with high commissions and fees, illiquidity risks and general uncertainty, and has been recently listed among FINRA’s top Regulatory and Examination Priorities for 2016. FINRA is concerned about the recommendation and sale of BDCs to retail investors, which “could adversely affect investors and market integrity in 2016.”
Earlier this month, FINRA announced that it is conducting an investigation or inquiry with respect to the sale BDCs, and has requested that all broker-dealers provide FINRA with alist of each BDC offered by each firm, the the total number of shares bought and sold, the total dollar value of proceeds, and the number of customers purchasing the BDC. FINRA has also requested a copy of the firm’s due diligence procedures and, if not already included in the due diligence procedures, a written description of the due diligence that the firm conducts of the BDC initially and on an ongoing basis.
Some of the more questionable, or at least popular BDCs include the Franklin Square Energy and Power Fund, HMS Income Fund, Nextpoint Capital Fund, Carey Credit Income Fund, CNL Corporate Capital Trust; and the Sierra Income Corporation.
Last year, a broker, Gopi Krishna Vungarala was charged by FINRA for defrauding an Native American Tribe out of $11 million in commissions in connection with the sale of $190 million in BDCs and non-traded REITs.
Brokerage customers that may have purchasd BDCs through the misrepresentation or omission of material facts, self-dealing, or the failure to conduct due diligence by their srockbroker, ought to consult with qualified counsel to determine their legal rights,
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