Investors in VII Peaks Co-Optivist Income BDC II (“VII Peaks BDC”) may have FINRA arbitration claims, if their investment was recommended by a financial advisor who lacked a reasonable basis for the recommendation, or if the nature of the investment was misrepresented by the stockbroker or advisor.
In 2021, the Securities and Exchange Commission (“SEC”) announced settled charges against investment adviser VII Peaks Capital, LLC (“VII Peaks Manager”) and its co-owner and managing member, Gurprit Chandhoke (“Chandhoke”), for breaching their fiduciary duty by engaging in transactions that benefitted themselves to the detriment of VII Peaks BDC, a business development company (BDC) managed by VII Peaks Manager.
According to the SEC’s order, from late 2015 through 2017, VII Peaks Manager and Chandhoke breached their fiduciary duty to VII Peaks BDC by engaging in transactions that were not disclosed to or approved by the Board of Directors of the BDC. The SEC charged that VII Peaks Manager 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. The SEC also charged that VII Peaks and Chandhoke caused VII Peaks BDC to make loans to portfolio companies in order to generate the fees for themselves.