$1M in Junk Bond Sales Helps Fund Cetera Acquisition by Genstar Capital
According to InvestmentNews, private equity firm Genstar Capital will sell $1B of junk bonds to help pay for its acquisition of Cetera Financial Group, which will be bought for $1.7B. Genstar will use $700M of its own money in the purchase.
Cetera Financial Group is comprised of six independent brokerage firms with approximately 8,000 brokers and advisers, including Cetera Advisors, Cetera Advisors Network, First Allied Securities, Cetera Financial Institutions, Summit Financial Services, and Cetera Financial Specialists. Cetera initially spun out of ING Groep (ING), a Dutch insurer, in 2010.
Financial Adviser Pleads Guilty in $2M Trade Loss Fraud
Vishal Savla, a financial adviser based in Chicago, Illinois, has pleaded guilty to wire fraud that involved bilking a relative and investors of over $2M. Savla had falsely claimed that a trading mistake was the reason investors lost the money when, in fact, their funds were lost because of poor trading on his part.
His plea deal over the investor fraud states that he raised $2.3M from investors and told them there would be “substantial returns.” He touted VCAP LLC, which was his trading fund, as trading in options, equities, and futures contracts.
Federal prosecutors accused the financial adviser of falsifying documents claiming that VCAP was doing well, as well as to help back up his claims of a purported trading mistake. Savla blamed investors’ losses on a “fat finger trade,” alluding that the error occurred when the trade was submitted online.
Savla falsely claimed positive returns for his investment fund of at least 50%, even though in reality its losses were far greater, including a 96% loss in 2015 and a 99% loss in 2016.
He also pointed to the “fat-finger trade” as the cause of VCAP’s value dropping 90% in one day. He even notified the SEC and hundreds of investors about the supposed mistake, and he asked the latter for more money. Savla allegedly used $500K that a relative gave him to pay back other investors.
Savla has since admitted to taking $260K of investor funds for his own use. Prosecutors, however, say that he took about $1.6 from investors, not including the money from the relative.
BlackRock Mutual Fund Shareholders Claim They Paid Too Much in Advisory Fees
In an investor fraud lawsuit, the shareholders of the BlackRock Equity Dividend Fund and the BlackRock Global Allocation Fund are claiming that they were charged “excessive” advisory fees—$280M a year, to be exact. They are arguing that the fees are too much for the value they received from the advisory services they paid for. They are accusing the defendant of breaching their fiduciary obligation by charging them too much in said fees.
Meantime, the defendants, BlackRock Investment Management LLC, BlackRock Advisors LLC, and BlackRock International Ltd. maintain that there was just cause for the fees, which they claim are lower than the industry’s’ median fees for such services, including the services of securities valuation, portfolio management, record keeping, and others. Their lawyer attributed the fees to the fund’s “scope, scale, size, and success.”
BlackRock Funds Overpaid For Advisory Services, Judge Told, Law360, August 20, 2018
Chicago Financial Advisor Guilty of Fraud for Swindling Investors and Family out of More Than $2 Million, Justice.gov, August 24, 2018
Junk Bonds Will Power Cetera Acquisition, Barron’s, August 23, 2018
More Blog Posts from SSEK Law Firm:
Investor Fraud: Alleged $100M Future Income Payments Fraud, Capital Investment Group to Pay One Elderly Investor $400K, and Tech Fund Adviser is Now Facing Fraud Charges, August 25, 2018