The White Law Group continues to investigate the sale of RMC Medstone Capital V and RMC Medstone Capital VI promissory notes by brokerage firms who may have failed to perform adequate due diligence when recommending these products to clients.
Promissory notes are a form of debt that companies often use to raise capital. In exchange for an individual’s principal investment, the company promises to repay the principal investment plus interest at a determined future time. Promissory notes may seem like straightforward and safe investments but that is not always the case.
According to the SEC “While promissory notes can be legitimate investments, those that are marketed broadly to individual investors often turn out to be scams.”
Promissory notes that are sold as securities, like the RMC Medstone Capital, are often private placement offerings. Unfortunately, private placements do not undergo the same regulatory scrutiny as other investments. Private placements often lack liquidity, are complexly structured, and carry high-risk. In addition, the sales commission associated with private placements is often extremely high.
According to SEC filing, RMC Medstone Capital issued approximately $18million V Notes in private placement offerings between 2008 and 2009. The SEC filings also estimate the cost of sales commission at approximately $1.3 million. That’s approximately 9% in sales commission earned by the brokerage firm.
Brokerage firms have a legal responsibility to clients to perform sufficient due diligence on any investment to asses the risk, legitimacy of the company, and to determine if the investment is appropriate for a client considering age, risk tolerance, and financial objectives. Given what is known about RMC Medstone, it appears that many brokerage firms, motivated by the high commissions, failed to uphold their fiduciary duty to investors.
Individuals who have suffered significant losses as a result of their investment in RMC Medstone Capital may be able to recover their losses through FINRA arbitration against the brokerage firm that recommended the investment.
If you invested in RMC Medstone Capital and would like to discuss you litigation options, please call the securities attorneys of The White Law Group at 312-238-9650 for a free consultation.
The White Law Group, LLC is a national securities fraud, securities arbitration, investor protection, and securities regulation/compliance law firm with offices in Chicago, Illinois and Boca Raton, Florida.
For more information on The White Law Group, visit http://www.whitesecuritieslaw.com.