Investors in Business Development Corporation of America (“BDCA”) 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.
BDCA is a non-traded business development company, also known as a BDC, that provides flexible financing solutions to various middle market companies, including first and second lien secured loans and debt issued by mid-sized companies. BDCA commenced its initial public offering in January 2011 and raised $1.9 billion after being offered at $11.15 per share. Currently, BDCA has a reported estimated net asset value (“NAV”) of $7.75 per share. Even worse, shares on the secondary market are reportedly valued between $6.05 and $5.75 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 BDCA 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.