Silver Law Group has filed a FINRA arbitration claim for more than $1 million on behalf of an investor who purchased shares in a GPB Capital’s Automotive Portfolio. The claim is against the broker-dealer who sold the investment to our client.
Starting in 2016, based on the strong recommendation of their brokers, our clients made purchases in GPB Capital’s Automotive Portfolio that totaled $1,100,000. The Automotive Portfolio is a private placement managed by GPB which has more than $600 million in assets. GPB Capital raised more than $1.5 billion, mostly from retail investors with accounts at regional broker-dealers.
Our clients believed that their brokers had conducted adequate due diligence, such as determining if the Automotive Portfolio was a credible, legitimate, and suitable entity. That’s the job they were paid to do and they had “the most resources to ascertain the financial viability of GPB and the Automotive Portfolio,” according to the complaint.
Unfortunately for our clients, the brokerage firm allegedly did not conduct adequate due diligence. If they had, they would have discovered serious issues with GPB and its Automotive Portfolio, which became known by our clients after they bought into the illiquid private placement fund.
GPB Capital’s Problems
In April 2018, GPB missed a filing deadline with the SEC. As of this writing, the company has still not submitted audited financial statements. In December 2018 the company stopped paying distributions. The dividend paid by GPB private placements was attractive to many investors. However, GPB now highlights it was a return of principal.
In March 2019, the company’s offices were raided by the FBI. The SEC, FINRA, and New York’s Business Integrity Commission are also investigating the company.
In June 2019, GPB Capital reported that the value of its two biggest investment funds, GPB Holdings II and GPB Automotive Portfolio, had declined by 25% and 39%, respectively. Those 2 funds raised $1.27 billion from investors, most of the $1.5 billion that independent broker-dealers sold to investors.
The company says its other five funds also have significant declines in value. But even at the reduced valuations, GPB investors have no willing buyers and are forced to hold and risk further reductions in price. Investors question whether there is any veracity of these valuations, what the current valuation is, and who would buy the GPB Funds at these valuations.
Lack Of Due Diligence By Brokers, Overconcentration In GPB Capital Holdings
So why would broker-dealers sell a risky private placement like GPB to investors seeking a conservative investment? In many cases, it is because of the commission they got for selling it. As much as 12% of the money an investor put into GPB went toward commissions for brokers and the brokerage firms they worked for.
Motivated by money, brokers allegedly pushed the unsuitable GPB on clients without performing adequate due diligence into the company. In many cases, investors were encouraged to make GPB a core part of their portfolio overconcentrating the investor’s portfolio in GPB.
Our complaint alleges that the broker-dealer violated the law with the following charges: breach of fiduciary duty, negligence, breach of contract, and failure to supervise.
Recovering GPB Losses Through FINRA Arbitration
Silver Law Group has filed other arbitration claims on behalf of clients who invested in GPB, including the first against Advisor Group broker-dealer SagePoint Financial, which requests $400,000 in damages.
Investors who own shares of a GPB fund may have a claim to recover money through FINRA arbitration. Broker-dealers have an obligation to recommend suitable investments to their clients and perform due diligence into the products they sell them. FINRA-registered brokers and firms are subject to arbitration to resolve securities-related disputes.
Silver Law Group represents the interests of investors who have been the victims of investment fraud. Scott Silver is the chairman of the Securities and Financial Fraud Group of the American Association of Justice and represents investors nationwide in securities investment fraud cases. Please contact Scott Silver of the Silver Law Group for a free consultation at firstname.lastname@example.org or toll free at (800) 975-4345.