Brokerage Firm Arbitration Lawyers Investigating Herbert J. Sims

Reg D Securities Losses Can Be Caused by Broker Negligence

Our Brokerage Firm Arbitration Lawyers Are Investigating Herbert J. Sims (HJ Sims) After Regulation D Offerings Fail

Regulation D (Reg D) private placements are private securities offerings. These alternative investments are risky, often illiquid investments and exempt from having to  register with the US Securities and Exchange Commission (SEC). Reg D offerings are primarily suitable for sophisticated, high-net-worth individual investors and institutional clients.

Unfortunately, there are growing concerns over investor losses related to Regulation D private placements, which Shepherd Smith Edwards and Kantas (investorlawyers.com) is currently investigating. One of the financial firms we are scrutinizing is Herbert J. Sims & Co. (HJ Sims), which, over the last decade has been the lone broker-dealer on the sale of 84 Reg D offerings. At least 43 of these did not submit yearly registration forms, which they were required to do under state laws. HJ Sims is also said to have taken part in the sale of 9 other Reg D securities. All of the private placements were collectively valued at over $2B.

According to a report issued in November 2022 by SLCG Economic Consulting, HJ Sim’s Reg D program may have been intended more for its executives to make large bets using clients’ funds and retaining all the gains, while allegedly setting up its retail customers with the majority of losses. The report noted that at least 10 of the Reg D offerings have since defaulted, including:

• Gryphon Finance I
• Cypress Point Funding
• Riverchase Funding
• HJSI Athena Portfolio Finance
• Poet’s Walk Finding I
• Hawkeye Village Finance I
• Madison Funding I
• Tuscan Isle Champions Gate Holdings
• Sims Cathcart Funding
• Tuscan Isle Holdings 1

SLCG believes even though HJ Sims has been valuing these Reg D investments at $75 on the average, they are likely nearly worthless by now.

Did HJ Sims Have Conflicts of Interest and Allegedly Unsuitably Sell Reg D Bonds to Customers? 

SLCG notes in its report that HJ Sims executives either controlled or own the majority of the issuers of the Reg Ds that the broker-dealer sold to customers. This meant that if the offerings succeeded, they would “realize all the gains” and only a “portion of the losses” upon failure.  Add in commissions and other fees from selling Reg D private placements and there purportedly appear to be incentives for unsuitably selling these alternative investments to certain customers, including retail investors and retirees, while allegedly taking “extraordinary risks” with investors’ money.

What Are The Reg D Risks That Can Lead to Investor Losses?

These non-public offerings aim to help operating firms raise money. Offered by the issuer, the latter only has to put out limited disclosures about the offering price, which can make it hard to assess how a Regulation D security may compare to investments that are publicly traded.

These are unregistered securities that are more high-risk than traditional investments. They should only be sold to investors who qualify as accredited investors and others that have met certain exemptions and criteria. The sellers of Reg D private placements have a duty to make sure that they abide by these rules and exemptions when marketing and selling these alternative investments to clients.

Reg D offerings are illiquid and generally cannot be resold even on a secondary market. This also means there is no source for determining their actual value, which is why Reg D investments will often be listed at their purchase price in statements. Quite frankly, there is no way to determine what a Regulation D private placement is actually worth. A lack of transparency also makes it hard to know much about Regulation D investments.

What Should You Know If You Suffered Reg D Investor Losses Involving HJ Sims Offerings? 

Our skilled Reg D private placement loss lawyers are looking into allegations that the brokerage firm sought to pass on its risk of losses to clients while trying to maximize its gains. This would be both an alleged breach of its fiduciary duty and due diligence failures made to customers, as well as purported broker misconduct and possible securities fraud.  Meanwhile, HJ Sims likely earned high commissions and fees from these sales.

How Can Our Skilled Reg D Investor Loss Attorneys Help You?

Determining whether unsuitability, misrepresentations and omissions, broker negligence, or other stockbroker misconduct were factors that led to your private placement losses can be challenging, which is why you need the help of an experienced brokerage firm arbitration law firm. For over 30 years, Shepherd Smith Edwards and Kantas has fought for retail customers, retirees, senior investors, accredited investors, and institutional investors to receive the damages they are owed by broker-dealers and their financial advisors.

If you want to sue your broker-dealer, you will have to file a Financial Industry Regulatory Authority (FINRA) lawsuit and go through the arbitration process. Our knowledgeable Brokerage Firm Arbitration Lawyers have represented thousands of investors to recover millions of dollars on their behalf.

If HJ Sims sold you Reg D bonds and you would like to explore whether you have grounds for a private placement investor loss claim, call (800) 259-9010 today to schedule your free, no-obligation case assessment.