Business Development Company May Have Been Unsuitable For Some Investors
If you are an investor who suffered losses after your stockbroker recommended the Franklin Square KKR Capital II Fund (FSKR), also known as FS KKR Capital Corp II, you may have grounds for pursuing a broker fraud claim for damages.
This business development company (BDC), which is a merger of four non-traded BDCs, reportedly was unsuitably recommended to a number of customers and/or the risks were never fully disclosed to them.
Our broker fraud lawyers at Shepherd Smith Edward and Kantas (SSEK Law Firm) have been speaking with FSKR investors to help them explore their legal options. SSEK Law Firm represents clients throughout the US in recouping their investment losses caused by broker-dealer negligence or fraud.
FSKR Investors Say They Weren’t Apprised of the Risks
Franklin Square Capital Corp II was launched late last year and is the merger of four non-traded BDCs: Investment Corporation II (FSIC II), FS Investment Corporation IV (FSIC IV), Corporate Capital Trust II (CCT II), and FS Investment Corporation III (FSIC III). It is a business development company that specializes in certain kinds of investments including:
- Floating rate
- Senior secured loans
- First lien and second lien secured bonds
- Debt securities
- Subordinated debt
- Corporate bonds
- Equity interests (especially warrants or options in middle-market companies)
- Collateralized securities
This fund aims to invest in a diverse range of sectors, as well as in private US-based companies and non-US securities. However, recent investor claims suggest that brokers and financial firms unsuitably recommended these investments without fully apprising them of the risks involved.
NYSE Listing, Reverse Stock Split, Tender Offer Cause FSKR Capital Corp II’s Price Drop
Last month, FS KKR Capital Corp. II was listed on the New York Stock Exchange and investors are now finding that the shares that they bought are worth much less than their initial offering price. This is in part due to a reverse stock split that caused the BDC’s net asset value per share to drop, as did an unsolicited tender offer by Mackenzie Capital Partners, LP.
Unfortunately, this fund may have been too risky for many investors to get involved in, to begin with, given the type of portfolio they were holding and their investment goals and financial needs. Many are saying that their broker never fully apprised them of the risks involved in this BDC, which is a high-risk alternative investment, illiquid, and not appropriate for many retail investors and retirees.
Meantime, FSKR earned brokers high commissions when they sold them to customers. Unlike more low-risk stocks that charge a 1-2% commission, this type of investment usually charges 7-10% in commissions.
Broker-Dealer Fraud Lawyers
When unsuitable investment recommendations lead to investor losses, broker-dealers and their broker that recommended and sold these securities can be held liable for those losses through Financial Industry Regulatory Authority (FINRA) arbitration. This is not the type of investor fraud claim that you wanted to handle without experienced legal help.
For 30 years, SSEK Law Firm has helped thousands of investors to recover both damages and losses from brokerage firms and their registered representatives. Contact our stockbroker fraud lawyers today if you lost money in FS KKR Capital Corp. II.