Securities Investigation – FS Investment Corporation II – FSIC II
Did you lose money investing in FS Investment Corporation II (FSIC II) at the recommendation of your financial advisor? If so, The White Law Group may be able to help you recover your losses by filing a FINRA Dispute Resolution claim against the brokerage firm that sold you the investment.
FS Investment Corporation II (FSIC II) is a business development company (BDC) designed to provide a high level of current income. FSIC II primarily invests in floating rate, senior secured loans of middle market private U.S. companies.
FSIC II is sponsored by FS Investments, formerly known as Franklin Square Capital Partners.
FS Investments often raises money for investments through Reg D private placement offerings like the company did for FS Investment Corporation II. These Reg D private placements are then typically sold by brokerage firms in exchange for a large up front commission, usually between 7-10%, as well as additional “due diligence fees” that can range from 1-3%.
Recovery of Investment Losses
Mackenzie Capital Management LP has just extended an offer to tender shares of FSIC II for just $5.15 per share. This may be at a significant loss to investors as the original offering price was $10.00 per share.
According to Mackenzie, the company’s estimated net asset value was $8.73 per share as of December 31, 2017, or $0.17 per share lower than the valuation as of December 31, 2016.
Additionally, the share repurchase program for FSIC II is reportedly oversubscribed. Mackenzie states in the offer, “In a tender offer that expired in March 2018, 16.1 million shares were submitted for tender. The company, however, purchased approximately 3.4 million of these shares. Repurchases are only made quarterly. Thus, it is unlikely that you will be able to sell your entire investment through the company’s repurchase program.”
The trouble with alternative investment products, like FS Investment Corporation II and other similar BDCs, is that they involve a high degree of risk and are typically sold as unregistered securities which lack the same regulatory oversight as more traditional investment products like stocks or bonds.
The White Law Group continues to investigate the liability that brokerage firms may have for improperly selling BDCs like FS Investment Corporation II to investors.
Broker dealers that sell alternative investments are required to perform adequate due diligence on all investment recommendations to ensure that each investment recommendation that is made is suitable for the investor in light of the investor’s age, risk tolerance, net worth, financial needs, and investment experience.
However, another problem with Reg D private placements is that the high sales commissions and due diligence fees the brokers earn for selling such products sometimes can provide brokers with an enormous incentive to push the product to unsuspecting investors who do not fully understand the risks of these types of investments or to outright misrepresent the basic features of the products – usually focusing on the income potential and tax benefits while downplaying the risks.
Fortunately, FINRA does provide for an arbitration forum for investors to resolve such disputes and if a broker or brokerage firm makes an unsuitable investment recommendation or fails to adequately disclose the risks associated with an investment they may be found liable for investment losses in a FINRA arbitration claim.
Free Consultation with a Securities Attorney
Please contact our offices at 888-637-5510 for a free consultation with a securities fraud attorney.
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 Franklin, Tennessee. The firm represents investors throughout the country in claims against their brokerage firm.
For more information on the firm and its representation of investors, visit www.WhiteSecuritiesLaw.com.