According to InvestmentNews, sources are reporting that GPB Capital Holdings is now under investigation by both the Securities and Exchange Commission (SEC) and the Financial Industry Regulatory Authority (FINRA). The probes come just a few months after Massachusetts Secretary of the Commonwealth William Galvin announced that he was conducting a widespread probe into over 60 brokerage firms that sold private placements that came from GPB Capital Holdings. Now, both federal securities regulators are also reportedly looking into these broker-dealers.
GPB, which mostly purchases auto dealerships, raised about $1.8B from investors who bought GPB private placement shares. InvestmentNews reports that according to one brokerage executive, the private placements’ loads were as follows: Investors paid 10% commission to the brokerage firm and financial representative that sold them the shares and they paid 2% went for organization and offering expenses.
Another source reportedly told InvestmentNews that at issue for the SEC in its investigation are:
• Whether or not GPB Capital Holdings made accurate disclosures to investors.
• How well the different GPB funds performed.
• What the capital distribution was for investors.
SInce its launch in 2013, GPB Capital Holdings has grown quickly, selling its funds’ shares via independent brokerage firms. However, just a few months ago, the private placement fund announced that it was taking a break from raising more money to concentrate on an accounting review, including restating certain funds’ financial statements from 2016 and 2015. GPB also had failed to turn in financial statements for two of its biggest funds, the GPB Automotive Portfolio and the GPB Holdings II, when they were due to the SEC earlier this year.
There are at least seven other GPB Capital Holdings funds, including the GPB Holdings III, GPB NY Development, GPB Gold Storage, and GPB Waste Management. In November, GPB Capital Holdings’ auditor, Crowe LLP, stepped down from that role. EisnerAmper, LLP has since been retained as the private placement firm’s replacement auditor. However, this type of change at this juncture should be cause for concern for GPB Capital Holdings investors.
GPB Capital Holdings Investor Claims
Private placements can be illiquid, risky investments and are not for every kind of investor especially investors that are inexperienced, have a low tolerance for risk, conservative investment goals, and/or a modest portfolio. Many older retail investors especially are often more suited to conservative, low risk investments.
Instead, private placements are generally more suitable for sophisticated investors, including experienced high net worth individual investors, institutional investors, accredited investors wanting risky investments, and other investors that don’t need to be able to access their funds right away. However, private placements are popular with brokerage firms and their brokers because of their usually high commission fees.
That said, both retail investors and sophisticated investors can still be subject to losses sustained due to private placement fraud. If you are an investor that lost money from backing any GPB Capital Holdings private placements, do not hesitate to contact Shepherd Smith Edwards and Kantas, LLP (SSEK Law Firm) right away and ask for your free initial case consultation. You may have grounds for pursuing an investor fraud claim against GPB Capital Holdings and/or the broker and brokerage firm that sold you the private placement.