Private Equity Fund Loss Attorneys

Merrill Lynch Ordered To Pay $3.7M for Private Equity Feeder Fund Losses Involving Investments Sponsored by Blackstone, Apollo And More

Two Customers Alleged Negligence, Breach of Fiduciary Duty When Suing Broker-Dealer

Earlier this month, a FINRA arbitration panel ruled that Merrill Lynch must pay $3.7M for losses sustained by two customers in private equity investments. The award included $2.7M in compensatory damages and $995K in legal fees.

The broker involved, Chelsea Deng, is not a respondent in the case and denies the allegations made. She is now a Morgan Stanley financial advisor in Beverly Hills, CA.

The investment products involved were sponsored by KKR, Blackstone, Apollo, and others. Merrill will buy back the securities at issue, which were allegedly unsuitable for retail investors and not in these claimants’ best interests.

The investment loss recovery claim was made over private equity feeder funds that pool capital from different investors into bigger vehicles. While private equity funds usually have high seven-figure minimum commitments, private equity feeder funds have a lower minimum—in the six-figures; still, they tend to charge clients high fees and other costs.

An expert used by the claimants in this case demonstrated that the feeder funds that Merrill recommended made returns of under 3% a year—a far cry from the 15-20% that was allegedly misrepresented as what investors could make. In their FINRA lawsuit, the investors alleged unsuitability, misrepresentations, omissions, and more.

The self-regulatory organization has long cautioned broker-dealers about recommending these kinds of complex investments to retail customers. Private equity investments tend to be illiquid, high-risk, nontransparent, highly speculative, and complex. They can, however, be attractive to financial advisors, broker-dealers, and private equity sponsors because of the high fees they can earn.

The underlying private equity funds’ performances, which can be impacted by the economy, poor investing choices by private equity firms, and other risks, may be involved.

It is important that your financial advisor conduct proper due diligence into any private equity funds and the feeder funds to ensure proper suitability for a customer.

How Can Our Trusted Private Equity Fund Loss Attorneys Help?

Filing an investor recovery claim over private equity losses, including those involving private equity feeder funds, can be a complex kind of securities case. You want to work with a knowledgeable securities law firm that knows how to maximize your chances for a successful case outcome.

Shepherd Smith Edwards and Kantas Private Equity Fund Loss Attorneys (investorlawyers.com) have been representing investors who have sustained serious losses, including against the largest Wall Street Firms for decades. We have helped thousands of investors to recoup portfolio losses.

Call our Private Equity Fund Loss Attorneys at (800) 259-9010 or contact us online to schedule your free case consultation.