Securities lawyers are investigating brokerage firms who made inappropriate recommendations and sold investments in Icon Leasing Fund 11 and Icon Leasing Fund 12, as well as LEAF Equipment Leasing Income Funds I-IV, to investors who would not be able to withstand the high risks associated with the funds.
Equipment-leasing funds of this type are both illiquid and highly risky, because the secondary market for the shares is very small. This is the case because dividend payments from these funds tend to be unpredictable because they are tied to profits made from those equipment leases.
The value of Icon 11 and Icon 12, for example, dropped substantially not long after the funds stopped taking on new investors. funds. While Icon 11 and Icon 12 later stopped paying out dividends to those investors, the funds still paid huge commissions to financial firms and investment advisors, reportedly among the biggest commissions for alternative products. Icon 11 and Icon 12 reportedly used just 81 percent of investors’ money on the equipment that is supposed to generate value, while 18 percent of that money went to various commissions, fees and expenses.
Beyond that, filings reveal that Icon funds reserved the right to buy shares for affiliates and officers at a discount. This practice, in addition to harming investors’ value, would also have earned higher returns for Icon’s related entities.
Brokers who market these types of funds tend to tout a reliable income stream from investing in equipment leases. However, much of the distributions made to investors in these funds are not actually income, but rather a return of the initially invested capital. Additionally, the tax benefits typically marketed to investors in these types of funds can only actually be applied to income from other investments. For many investors, the tax benefit these funds are designed to provide is completely illusory.
Up front fees of around 20 percent of the initial capital are common in these equipment-leasing programs. For example, just as Icon used 18 percent of investments to pay out commissions, expenses and fees, another leasing fund known as LEAF III financed 80 percent of its lease portfolio with debt, and then added a 2 percent acquisition fee, 4 percent of gross rental revenue on operating leases and 2 percent of gross revenue on full payout leases each year.
If you received an unsuitable recommendation of Icon Leading Fund 11 and/or Icon Leasing Fund 12, or any of LEAF Equipment Leasing Income Funds I-IV, and suffered significant losses are a result, 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 email@example.com for a no-cost, confidential consultation.