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Investors in Roundstone Healthcare Capital V May Have Arbitration Claims

Money MazeInvestors in Roundstone Healthcare Capital V, L.P. (“Roundstone V” or the “Limited Partnership”) may be able to recover losses on their investment through initiating an arbitration proceeding with FINRA Dispute Resolution if the recommendation to purchase Roundstone V was unsuitable or if a broker or investment advisor who sold Roundstone V made a misleading sales presentation.

Roundstone V is structured as a Delaware limited partnership and is based in Acton, MA.  The Limited Partnership was formed in 2009 as a capital investment entity, to invest in discounted portfolios of medical receivables.  On March 27, 2009, Roundstone V first sold securities through its private placement offering pursuant to Regulation D (“Reg D”) of the federal securities laws.

Investors who participated in the offering were required to invest a minimum of $10,000.  Shortly after commencing its initial offering of up to $25,000,000 in investor capital, the Limited Partnership sold $4,459,000 of securities through private placement by May 18, 2009.

As a general proposition, limited partnerships — particularly non-traded limited partnerships, such as Roundstone V — are very complex and risky investments.  For this reason, investing in a limited partnership through a private placement is typically only available to accredited investors (to be accredited an investor must have an annual income of $200,000 or joint annual income of $300,000, for the last two years, or alternatively, have a net worth in excess of $1 million).

One of the primary risks associated with investing in securities through a private placement has to do with their illiquid nature.  An investor who committed capital to the Roundstone V offering may not be able to readily redeem their investment with the issuer, nor can an investor seek to sell their Limited Partnership units on a national securities exchange.  And even when investors can redeem their units or find a secondary market platform on which to sell out of their investment, they often find that the bid is at a significant discount to the initial investment price.  This lack of liquidity and pricing inefficiency can prove very troublesome for retail investors who may need ready access to their investment dollars.

Furthermore, an additional risk associated with investing in non-traded partnerships has to do with their typically high fees (in many instances, a broker or promoter recommending such an investment will earn considerable commissions, perhaps as high as 10-15% of the initial investment).  With regard to Roundstone V, publicly available information through the SEC indicates that the Limited Partnership “commissions are 10% of gross proceeds.  Also, a placement agent is entitled to a portion of the GP’s incentive fees (if any).”  Therefore, investors in Roundstone V who invested, for example – $50,000, would immediately have $5,000 taken off the top in the form of commissions, not to mention potential incentive fees to the General Partner.  Such high fees act as an immediate ‘drag’ on investment performance.

Applicable industry rules and regulations mandate that broker-dealers and their financial advisors must perform adequate due diligence on an investment before recommending such a financial product to an investor.  Further, a financial advisor must perform a suitability analysis in connection with the sale of a private placement offering to ensure that the investment is suitable based on the investor’s stated investment objectives and other criteria, including the investor’s net worth and income, age and experience with investing, in addition to risk tolerance.

If you have invested in Roundstone V, or a similar non-traded partnership, 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.  Investors may 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.