FS Energy and Power Fund (“FSEP” or the “Fund”) is a non-traded business development company that invests primarily in the debt of a portfolio of private U.S. energy and power companies. BDC’s have been around since 1980 when the U.S. Congress enacted legislation which ushered in certain amendments to federal securities laws allowing for BDC’s — which are simply types of closed-end funds — to make investments in developing companies and firms.

BDC’s are in the business of providing various debt and mezzanine financing solutions for typically small and medium-sized businesses that cannot access credit in the same way as larger, more established companies. By providing credit solutions to less established companies, BDC’s will frequently collect much higher than average interest income and seek to pass along such income to investors in the form of dividends.

While an investment in a BDC may seem like an attractive option for an investor seeking enhanced income, our office has all too frequently encountered situations in which money managers or brokers improperly recommended unsuitable “alternative” investment products to their clients, including such alternatives as non-traded REITs, as well as non-traded BDC’s such as FSEP.

Investors should understand that an investment in a non-traded BDC like FSEP carries many of the same risks associated with other non-traded investment vehicles. These risks include, but are not limited to: excessive front-end fees (as high as 10%) to the soliciting broker and his or her firm, in addition to liquidity issues. In fact, the Financial Industry Regulatory Authority (“FINRA”) has offered the following cautionary guidance in an effort to educate and inform investors of the liquidity concerns associated with investing in such an alternative investment product: “Due to the illiquid nature of non-traded BDC’s, investors’ exit opportunities may be limited only to periodic share repurchases by the BDC at high discounts.”

FSEP is managed by Franklin Square, a firm which specializes in alternative investment funds. As of September 2015, Franklin Square managed approximately $17 billion in total assets, including $15.7 billion in BDC assets, thus making Franklin Square the largest manager of BDC’s. A review of recent SEC filings indicates that FSEP closed its public offering in November 2016. According to FSEP’s most recently reported data, the Fund manages $4.4 billion in assets.

Investors who wish to sell out of their investment in FSEP are limited in their options due to the Fund’s illiquidity. For example, investors seeking to redeem their shares directly through Franklin Square need to wait until the Fund makes a quarterly tender offer, or wait until a future liquidity event transpires that may not occur for a number of years. While a secondary market to sell FSEP does exist, it is fragmented and relatively inefficient. Central Trade and Transfer recently listed shares of FSEP with a bid-ask spread of $6.60 – $6.85 per share.

The recent pricing in FSEP through Central Trade and Transfer suggests that investors in this non-traded BDC may well have suffered considerable investment losses of approximately 35% on their initial investment in FSEP at $10.00 per share.

If you have invested in FSEP, or another non-traded BDC or similar alternative product (such as a non-traded REIT) at the recommendation of a stockbroker or investment advisor, and you have suffered losses in connection with your investment (or are currently unable to exit your illiquid investment position without incurring considerable losses), you may be able to recover your losses in FINRA arbitration. To find out more about your legal rights and options, contact a securities arbitration lawyer at Law Office of Christopher J. Gray, P.C. at (866) 966-9598 or via email at newcases@investorlawyers.net for a no-cost, confidential consultation.

DISTINGUISHING A PRIVATE PLACEMENT FROM OTHER INVESTMENTS

When an investor decides to purchase shares in a publicly traded company, or for that matter purchase shares in a mutual fund or exchange traded fund (“ETF”), he or she will have the opportunity to first review a comprehensive and detailed prospectus required to be filed with the SEC. When it comes to a private placement, however, no such prospectus need be filed with the SEC – rather, these securities are typically offered through a Private Placement Memorandum (“PPM”).

The majority of private placements are offered under an exemption from registration requirements known as SEC Regulation D (“Reg D”). Among other things, Reg D provides certain safe-harbor exemptions to securities registration, and furthermore specifies the amount of money that can be raised in an offering, as well as the type of investor who may be solicited to invest in such a non-public offering. With certain exceptions, only retail investors who meet the “accredited investor” standard are permitted to invest in a private placement. Rule 501 defines an accredited investor as any person whose net worth exceeds $1,000,000 (excluding their residence), or alternatively who has income in excess of $200,000 per year ($300,000 jointly with a spouse) for the two most recent years.

Private placements might involve investing in a company’s stock in the form of shares, preferred stock, or even a debt instrument such as a bond, promissory note or debenture offering. When making an investment in a private placement, you should first receive and carefully review the PPM. The PPM is required to disclose all material facts about the investment. Any misrepresentation or any omission of a material fact necessary to make the statements in the PPM not misleading could give rise to liability where an investor suffers losses and the PPM is misleading or omits certain critical information.

SOME RISKS AND RED FLAGS ASSOCIATED WITH PRIVATE PLACEMENTS

An investor considering a private placement should be aware of their risks and be on the lookout for any potential red flags. In fact, the Financial Industry Regulatory Authority (“FINRA”) has previously issued an investor alert to inform the public about the risks and the potential for fraud and sales abuse concerning private placements.

To begin, FINRA has cautioned that by virtue of their limited offering documents (PPM versus more detailed prospectus), private placements will likely only provide prospective investors with limited information concerning a company and its financials. In addition, FINRA has warned investors about the illiquid nature of most private placement investments — before investing, an informed investor should first determine if he or she can allow their money to remain tied up for an extended period of time (usually several years) because private placement securities cannot be easily resold due to restrictions on their resale and the lack of a public market such as a stock exchange on which to sell them.

FINRA has also alerted investors to be very cautious of any private placements that you hear about through spam email or cold calling. Often, this is a red flag and a sign of fraud, and an investor should proceed with the utmost caution.

HAVE YOU INVESTED IN SECURITIES THROUGH A PRIVATE PLACEMENT?

If you have purchased unregistered securities through a private placement – and you have suffered considerable losses due to what you believe involved fraud, sales abuse or an unsuitable recommendation by a broker – you may be able to recover your losses in FINRA arbitration. To find out more about your legal rights and options, contact a securities arbitration attorney at Law Office of Christopher J. Gray, P.C. at (866) 966-9598 or newcases@investorlawyers.net for a no-cost, confidential consultation.

Investors Capital also allegedly failed to apply sales charge discounts to certain customers’ purchases of UITs, and inadequately supervised its representatives, according to FINRA’s allegations. To resolve the FINRA case, Investors Capital agreed to pay $250,000 in fines and $842,000 in restitution. The firm has already reportedly paid close to $224,500 in restitution to clients.

A UIT is a type of fund that holds a fixed portfolio of income-producing securities that is purchased and held to maturity as a long-term investment. UITs usually carry significant upfront sales charges of 2.5% to 3.5% of the purchase amount, according to FINRA.

When a broker recommends that a client purchase or sell a security, the broker must have a reasonable basis for believing that the recommendation is suitable for the investor. Recommendations of short-term transactions in UITs would likely be unsuitable in many circumstances due in part to the high transaction costs imposed by the upfront sales charges carried by UITs.

If you believe you have been the victim of stockbroker misconduct, you may wish to consult an attorney to find out more about your legal rights and options. Investors may contact a securities arbitration attorney at Law Office of Christopher J. Gray, P.C. at (866) 966-9598 or newcases@investorlawyers.net for a no-cost, confidential consultation.

Non-traded real estate investment trusts (REITs) are investments that pose a significant risk that the investor will lose some or all of his initial investment. Non-traded REITs are not listed on a national securities exchange, limiting investors’ ability to sell them after the initial purchase. Such illiquid and risky investments are often better suited for sophisticated and institutional investors, rather than retail investors such as retirees who do not wish to have their money tied up for years, or risk losing a significant portion of their investment. Non-traded REITs usually have higher fees for investors than publicly-traded REITs and can be harder to sell.

A partial list of non-traded REITs is as follows (not all of the REITs listed have performed poorly):

American Realty Capital – Retail Centers of America, Inc.

American Realty Capital Daily Net Asset Value Trust, Inc.

American Realty Capital Healthcare Trust II, Inc.

American Realty Capital Hospitality Trust, Inc.

American Realty Capital New York City REIT, Inc.

American Realty Capital Trust V, Inc.

Behringer Harvard Opportunity REIT I

Behringer Harvard Opportunity REIT II

Carey Watermark Investors Incorporated

Carter Validus Mission Critical REIT

CNL Growth Properties

CNL Healthcare Properties Inc.

CNL Lifestyle Properties, Inc.

Cole Credit Property Trust IV, Inc.

Cole Credit Property Trust V, Inc.

Cole Office & Industrial REIT

Cole Real Estate Income Strategy (Daily NAV), Inc.

Corporate Property Associates 17 – Global, Inc.

Corporate Property Associates 18 – Global

Dividend Capital Diversified Property Fund Inc.

Global Income Trust, Inc.

Griffin Capital Essential Asset REIT, Inc.

Griffin-American Healthcare REIT III

GTJ REIT, Inc.

Hines Global REIT, Inc.

Hines Real Estate Investment Trust, Inc.

Industrial Income Trust, Inc.

Inland Real Estate Income Trust, Inc.

InvenTrust Properties Corp.

Jones Lang LaSalle Income Property Trust, Inc.

KBS Legacy Partners Apartment REIT, Inc.

KBS Real Estate Investment Trust I, Inc.

KBS Real Estate Investment Trust II, Inc.

KBS Real Estate Investment Trust III

KBS Strategic Opportunity REIT, Inc.

Northstar Healthcare Income, Inc.

Northstar Real Estate Income II, Inc.

Northstar Real Estate Income Trust, Inc.

Phillips Edison Grocery Center REIT I, Inc.

Phillips Edison Grocery Center REIT II, Inc.

Realty Finance Trust, Inc.

RREEF Property Trust

Steadfast Income REIT

Strategic Realty Trust Inc.

TIER REIT Inc.

United Realty Trust, Inc.

Brokers and financial advisors are required to make investment recommendations that are consistent with their clients’ risk tolerance, net worth, investment objectives and experience in the market. However, due to the high sales commissions brokers typically earn for selling REITs – as high as 15%- brokers can be tempted to make “one size fits all” recommendations to investors in order to reap commissions. These high up-front fees and commissions can negatively affect performance over time, as illustrated by the estimated $50 billion that non-traded REITs have cost customers.

If you have suffered significant losses as a result of unsuitable recommendations of non-traded REITs or other non-conventional investments by a stockbroker or financial advisor, you may have a valid securities arbitration claim. To find out more about your legal rights and options, contact an investor rights attorney at Law Office of Christopher J. Gray, P.C. at (866) 966-9598 or newcases@investorlawyers.net for a no-cost, confidential consultation.

LPL’s failure to supervise sales of nontraditional ETFs continued into 2015, according to FINRA. FINRA also alleged that LPL failed to have adequate supervisory systems and guidelines for sales of nontraded REITs from January 2007 to August 2014. LPL consented to the fine without admitting or denying the charges.

This was not LPL’s first regulatory issue concerning lack of supervision concerning high-commission investments such as non-traded REITs. In March 2014, FINRA fined LPL $950,000 for supervisory deficiencies related to sales of a wide range of alternative investment products. These include nontraded REITs, oil and gas partnerships, business development companies, hedge funds, managed futures and other illiquid investments.

Real estate investment trusts (REITs) are highly risky products that pose a significant risk that the investor will lose some or all of his initial investment. REITs are often better suited for sophisticated and institutional investors, rather than retail investors such as retirees who do not wish to risk losing a significant portion of their investment.

Brokers and financial advisors are required to make investment recommendations that are consistent with their clients’ risk tolerance, net worth, investment objectives and experience in the market. However, due to the high sales commissions brokers typically earn for selling REITs – as high as 15%- brokers can be tempted to make “one size fits all” recommendations to investors in order to reap commissions. Brokerage firms such as LPL are required by FINRA rules to supervise brokers and investment advisors- even those who work in independent branch offices- to ensure that the brokers make only suitable recommendations.

If you have suffered significant losses as a result of unsuitable recommedations of REITs or other non-conventional investments by a stockbroker or financial advisor, you may have a valid securities arbitration claim. To find out more about your legal rights and options, contact an investor rights attorney at Law Office of Christopher J. Gray, P.C. at (866) 966-9598 or newcases@investorlawyers.net for a no-cost, confidential consultation.

FINRA BrokerCheck, an online resource for researching the background of stockbrokers and financial advisors, indicated that Hernandez has worked in Florida since 2007 and has been associated with various brokerage firms, including MetLife Securities (2007), Wachovia Securities (2007-08), J.B. Hanauer & Co. (2008), Summit Brokerage Services (2009 -10) and Liberty Partners Financial Services (2010-13).

Brokerage firms have an obligation to supervise all associated persons to prevent actions such as misappropriation and forgery. If you suffered significant losses are a result of misappropriation, forgery, or other misconduct by a stockbroker or financial advisor, you may be able to recover your losses in FINRA arbitration. To find out more about your legal rights and options, contact a securities arbitration lawyer at Law Office of Christopher J. Gray, P.C. at (866) 966-9598 or newcases@investorlawyers.net for a no-cost, confidential consultation.

Vitale is being charged with selling unregistered securities and acting as an unregistered broker. According to the charges, Vitale and his firm (Realty Acquisitions & Trust Inc.) were able to raise $8.7 million from their investors, many of whom were seniors who may now be looking to hire securities fraud lawyers to represent them in filing their claims. In a news release, the SEC stated that Vitale allegedly led the investors to believe that their money was “100% protected” even though that was untrue. That charge (if found guilty) could give the defrauded victims and their investment fraud lawyers great leverage during arbitration.

To get investors, Vitale also allegedly claimed to hold a business degree from the University of Notre Dame, and that he was a financial expert. While Vitale did go to Notre Dame high school in West Haven, Connecticut, he did not go to the South Bend, Indiana college. Also named in the complaint was the Coral Springs Investment Group (also known as Lauderdale-by-the-Sea Company), which stands accused of holding onto assets of the investors that should have been returned.

In 2013, Florida’s Attorney General, Pam Bondi, sought an injunction against Vitale and two Broward County companies (The Cambridge Land Trust Company and The Hartford Land Trust Company) when they were accused of misleading consumers by charging upfront fees and promising better mortgage deals in exchange for consumers handing over the titles to their homes to the land trusts. In that case, Vitale and his alleged accomplices received an order from Broward Circuit Judge Michael Gates to stop doing business.

If you suffered significant losses as a result of securities fraud, you may have a valid claim to recover money with the help of a securities arbitration lawyer. To find out more about your legal rights and options, contact a stockbroker claims lawyer Law Office of Christopher J. Gray, P.C. at (866) 966-9598 or newcases@investorlawyers.net for a no-cost, confidential consultation.

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Non-traded REITs are illiquid investments, not listed on public exchanges and with a very limited market for sale of shares if the investor wishes to sell subsequent to his or her initial purchase.. Their offering documents typically claim that after some period of time, perhaps 5-10 years, the REIT intends to list on an exchange, merge with another company, or in some other way allow investors to sell their shares- a so called “liquidity event.” However, for many non-traded REITs that began to be sold to investors eight to ten years ago, such a “liquidity event” has failed to take place. Further, non-traded REIT investments have greatly underperformed other asset classes and in many instances have made distributions to investors that are derived not from income derived from their underlying assets, but rather from the proceeds of the sale of additional shares in the REITs to subsequent investor.

Even if a non-traded REIT lists on a major exchange, that does not mean that its original investors have benefited from being sold such an illiquid investment. An example of a non-traded REIT that has consistently underperformed similar liquid and publicly-traded investments is Columbia Property Trust (CXP, formerly known as Wells Real Estate Investment Trust II). Columbia/Wells II was first sold as a non-traded REIT in 2004 and subsequently listed on the New York Stock Exchange in October 2013. Before it was listed, it sold shares to new investors at $10 per share. After its first day trading on the NYSE, its per share value was $22.52.

However, this $22.52 a share valuation resulted from a four-for-one stock split, meaning that the shares sold for $10.00 a share prior to the IPO were effectively worth only $5.63 a share. .

Typically, non-traded REITs carry a high commission, sometimes as high as 15 percent, which motivates some brokers to make unsuitable recommendations to their clients. Non-traded REITs are attractive to investors because they carry a relatively high distributions of cash representing income and/or return of capital. According to stock fraud lawyers, however, these investments are inherently risky and illiquid because there is a limited market for reselling shares. This illiquidity and volatility makes non-traded REIT shares unsuitable for many individuals with conservative risk tolerances and those who need easy access to funds, especially when their portfolios are over-concentrated in illiquid investments.

According to securities fraud attorneys, brokers firms have an obligation to fully disclose all the risks of a given investment when making recommendations, and those recommendations must be suitable for the individual investor receiving the recommendation given their age, investment objectives and risk tolerance. If a broker or firm fails to make suitable recommendations, investors may be able to recover losses through FINRA arbitration.

If you suffered significant losses as a result of an unsuitable recommendation to purchase shares in Wells II/Columbis or other non-traded REITs from a stockbroker or financial advisor, you may be able to recover your losses through securities arbitration. To find out more about your legal rights and options, contact a stock fraud lawyer at Law Office of Christopher J. Gray, P.C. at (866) 966-9598 or newcases@investorlawyers.net for a no-cost, confidential consultation.

If you’ve lost money because of Mr. Haigney, you can contact us at InvestorLawyers.net for a free, confidential consultation. We may be able to help.

Not even Gould’s own mother was safe, and she lost around $500,000 to her son, the bulk of her inheritance. All in all, more than 25 people were swindled out of more than $5 million. Gould spent some of the money on charitable donations to boost his reputation while at the same time spending it on strippers and entertaining them at St. Louis hotel parties. In addition, he paid the rent of at least one stripper. Gould also paid off personal debt, renovated his home, started several businesses, and facilitated a ponzi scheme.

Once the theft was discovered, Gould confessed and, according to his lawyer, has cooperated and attempted to remedy the losses of his victims. During his trial, he expressed remorse for his actions and disdain for himself.

During proceedings, there was no shortage of touching victim testimony. One victim lost the last $7,000 of her husband’s death settlement while another widow wrote of the loss of her savings, some of which was the last money her husband earned while battling cancer.

Of the 97 to 121 months in prison Gould was facing, he received only the minimum sentence. According to Assistant U.S. Attorney Hal Goldsmith, Gould has currently only repaid between $40,000 and $50,000. However, he has now been ordered to pay $3.1 million on his own and another $1.2 million together with David Rubin of Chesterfield with whom he defrauded one man. Gould and Rubin both pleaded guilty on April 29. Rubin has not yet been sentenced.

Secret deals allowed the bank inside information about competitors’ bids and were aided by a minimum of 11 bidding agents. JPMorgan Chase maintains that any illegal actions were concealed from management as a whole and were conducted against the firm’s policies. The illegal conduct was, according to JPMorgan, made by former employees. Furthermore, the division in which these employees used to work has been shut down and the firm has increased their ethics training for staff and implemented an improved compliance program. This settlement will undoubtedly send a message to the financial world of the repercussions of tampering with the fairness of the bond market.

In addition to the most recent settlement, last month JPMorgan settled with the SEC for $154 million, paid in response to allegations that it mislead buyers of complex mortgage investments. In connection with this settlement, James Hertz, a former JPMorgan executive, pleaded guilty to criminal charges. Hertz is one of 18 financial services executives to be brought up on criminal charges, nine of which have pleaded guilty. In this case, The New York Times says “Investors harmed in the JPMorgan transaction, known as Squared CDO 2007-I, will receive all their money back,” a happy ending in financially-turbulent times for many investors.