SEC Charges VII Peaks with Unapproved, Undisclosed Fees
Did your Broker recommend a VII Peaks Investment?
The White Law Group continues to investigate potential securities claims involving broker dealers who may have improperly recommended VII Peaks Capital LLC offerings to investors.
VII Peaks Capital LLC, an investment management firm based in Orinda, California, invests primarily in discounted corporate fixed income securities and employs a “co-optivist” TM (co-operative activism) approach where they act as cooperative, activist investors who work with senior management teams of target companies to proactively restructure their outstanding corporate debt.
The company filed several private placement offerings to raise capital from investors including the VII Peaks Co-optivist Income BDC II.
Bad News for VII Peaks Investors
According to filings with the SEC, the fund has seen a continual decline in value since its inception in 2014. The original offering price was $10.15 per share, but the fund decreased this price, as the NAV declined. In 2016 the BDC’s shares were sold for $8.75 per share and by December 2017 the net asset value had decreased to just $5.31 per share due to high yield debt prices declining, according to the filings. One of the fund’s positions, Relativity Media, apparently filed for bankruptcy in 2018, according to public records.
VII Peaks Co-optivist Income BDC II has repeatedly failed to file its financial reports, as required by the SEC.
SEC Charges VII Peaks Capital with Taking Unapproved and Undisclosed Fees
VII Peaks Capital and its co-owner settled charges with the SEC on June 4, 2021 for allegedly breaching their fiduciary duty by engaging in transactions that “benefitted themselves to the detriment of their client.” The SEC also charged the Chief Financial Officer of the BDC with causing VII Peaks’ violations.
The SEC’s order alleged that late 2015 through 2017, VII Peaks and its co-owner breached their fiduciary duty to VII Peaks Co-Optivist Income BDC II, Inc. a business development company, by engaging in unapproved transactions.
The SEC said that VII Peaks allegedly collected over $722,500 in due diligence fees for loans made by the BDC to various portfolio companies, even though the loan documentation said that the fees belonged to the BDC.
This reportedly caused a conflict of interest because VII Peaks and the executive were purportedly incentivized to cause the BDC to make loans to portfolio companies in order to generate the fees for themselves. The executive also allegedly profited financially from two transactions where his interests conflicted with the BDC’s.
The CFO allegedly failed to transfer the due diligence fees to the BDC, instead transferring them to VII Peaks. The SEC’s findings said that the CFO purportedly failed to disclose or seek approval from the BDC’s Board to have VII Peaks retain the fees.
Without admitting or denying the SEC’s findings, VII Peaks agreed to a cease-and-desist order and to pay disgorgement of $722,500, prejudgment interest of $123,199, and a civil penalty of $185,000, while its co-owner agreed to an associational suspension, investment company prohibition, and penny stock suspension, all for a period of twelve-months, a cease-and desist order, and to pay disgorgement of $87,500, prejudgment interest of $16,857, and a civil penalty of $90,000. Without admitting or denying the SEC’s findings, the CFO agreed to a cease-and-desist order and to pay a $20,000 penalty.
Filing a Complaint against your Brokerage Firm
The White Law Group continues to investigate potential securities claims involving broker-dealers who may have improperly recommended VII Peaks Capital offerings to investors.
To determine whether you may be able to recover investment losses incurred as a result of your purchase of a VII Peaks Capital offering, please contact The White Law Group at 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 Seattle, Washington. For more information on the firm, visit www.WhiteSecuritiesLaw.com.
To learn more about the investigation, please see: