Investors in FS Global Credit Opportunities Fund A (“FS Global”) 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.
FS Global was formed as an unlisted, closed-end business development company (“BDC”) under the Investment Company Act of 1940 that invests in loans, bonds, and other instruments.
Investors who wish to sell out of their investment in FS Global are limited in their options due to the its illiquidity. Investors who purchased shares in FS Global at the initial offering acquired shares at $10 per share, but currently has a reported estimated net asset value (“NAV”) of $7.36 per share. Even worse, shares have reportedly been sold in the limited secondary market at prices of between $5.36 and $5.18 per share.
Non-traded BDCs, as their name implies, do not trade on a national securities exchange, and are therefore illiquid products that are hard to sell (investors can typically only sell their shares through redemption with the issuer, or through a fragmented and illiquid secondary market). In addition, non-traded BDCs such as FS Global have high up-front fees (typically as high as 10%), which are apportioned to the broker, his or her broker-dealer, and the wholesale broker or manager.
BDCs are in the business of providing various debt and mezzanine financing solutions for (typically) small and medium-sized businesses that cannot access credit as readily as larger, more established companies. By providing credit solutions to less established companies, BDCs will frequently collect much higher than average interest income and seek to pass along such income to investors in the form of distributions. In light of a BDC’s leveraged structure and its typical investment portfolio, however, uninformed investors may come to learn too late that their investment carries considerable risk of loss of principal. Moreover, non-traded BDCs such as FS Global carry additional risks, including their lack of liquidity and high upfront fees and commissions.
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 non-traded REITs and non-traded BDCs such as FS Global.
Investors who wish to discuss a possible claim may contact a securities arbitration lawyer at Law Office of Christopher J. Gray, P.C. at (866) 966-9598 or via email at firstname.lastname@example.org for a no-cost, confidential consultation. Attorneys at the firm are admitted in New York, New Jersey, Wisconsin and various federal courts around the country, and handle cases nationwide (in cooperation with attorneys located in those states if required by applicable rules).