BDCA to issue shares of common stock at a price below NAV
The White Law Group continues to investigate potential claims involving broker dealers who may have improperly recommended Business Development Corporation of America (BDCA) to investors.
BDCA is a Business Development Company (BDC) that invests primarily in first and second lien senior secured loans and mezzanine debt issued by middle market companies. The company commenced its initial public offering in January 2011 and raised $1.9 billion before closing the offering in April 2015.
According to reports, BDCA was the focus of a proxy fraud scandal at the end of 2015. Its sponsor at the time, AR Capital and its dealer manager, Realty Capital Securities, were also involved in a series of scandals which led to the termination of all AR Capital-sponsored investment programs and an agreement by RCS to terminate its business.
On July 9, 2018, Business Development Corporation of America announced that shareholders had approved a proposal to allow BDCA to issue shares of common stock at a price below NAV. BDCA has not previously sold shares at a price below NAV and management noted in its April 10, 2018, definitive proxy that it did not foresee issuing shares below NAV in the foreseeable future.
The Risks of Non-traded BDCs Updated May 4, 2020
Non-traded BDCs, such as BDCA, do not trade on a national securities exchange, and are therefore illiquid products that can be difficult to sell. Investors can typically only sell their shares through redemption with the issuer, or through a fragmented and illiquid secondary market. Recently shares of BDCA were sold on Central Trade & Transfer, one such secondary market, for just $4.00 per share.
Usually investments such as BDCA have high up-front commissions and fees –sometimes as high as 10% — which goes to the broker, the broker-dealer, and the wholesale broker or manager. This may offer incentive for brokers to sell this type of investment, despite the risks to their clients.
Broker dealers are required to perform adequate due diligence on any investment they recommend and to ensure that all recommendations are suitable for the investor. Recommendations should be appropriate in light of the investor’s age, risk tolerance, net worth, and investment experience.
Broker dealers that fail to adequately disclose risks or make unsuitable investment recommendations can be held liable for investment losses in a FINRA arbitration claim.
If you have suffered losses in Business Development Corporation of America and would like to speak to a securities attorney about the potential to recover your investment losses, please call The White Law Group at 1-888-637-5510 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 Vero Beach, Florida. To learn more about The White Law Group visit www.whitesecuritieslaw.com.