Risky, Illiquid Business Development Company Was Not Suitable for Many Investors
If you are someone who invested in the Sierra Income Corporation, you may have lost money. This business development company (BDC) is a non-traded investment.
Earlier this year, Sierra Income suffered losses after its announced merger with Medley Capital Corp. and Medley Management Inc. was terminated because of the economic uncertainty caused by COVID-19. Not long after that, the company announced that it was suspending monthly distributions.
Original investors had paid $10/share. In mid-October, the BDC’s shares were listed at $1.50/share on Central Trade & Transfer. Also, Sierra Income announced that distributions were being reinstated over the last three months of the year at $0.01/share.
Unfortunately, it appears that many Sierra Income investors were never fully apprised of some of the risks and terms involved in this non-traded BDC, which is why they are now contending with significant losses in an investment they should probably have never gotten involved in.
Our non-traded BDC investment fraud attorneys at Shepherd Smith Edwards and Kantas (SSEK Law Firm) would be happy to offer you a free case consultation to determine whether you have grounds for a broker fraud claim against the financial advisor that recommended Sierra Income to you. Contact us today.
Many Sierra Income Investors May Not Have Been Properly Apprised of the Terms
Sierra Income invests middle-market companies’ subordinated debt and first lien and second lien secured debt. Investors of this BDC were charged high fees and expenses, including yearly operating ratios, advisory fees, broker fees and commissions of up to 10%, not all of which may have been disclosed to them.
Now, some Sierra Income investors are reporting losses as high as over 75%.
What are Non-traded Business Development Companies?
Non-traded BDCs invest in the debt of small and medium-sized companies, in addition to distressed companies. Some of the risks involved in investing in non-traded-BDCs include:
- They are highly speculative and risky
- Illiquidity, which makes them unsuitable for investors wanting plenty of cash flow
- They are long-term investments and not for investors wanting a shorter commitment
- Distributions are not guaranteed
Non-traded BDC investors should have either a net worth of $250K or a yearly gross income of $70K.
Unfortunately, the lure of high commissions can persuade some brokers to recommend certain financial products to customers even when investments aren’t a good fit for the latter’s financial goals, investing experience, investment portfolio or risk tolerance level. There also have been scenarios in which a financial advisor didn’t fully understand an investment or its risks, which is why they failed to properly explain them to customers.
LPL Financial Sold Sierra Income Investments
One of the firms that persuaded customers to buy shares in Sierra Income is LPL Financial (LPLA). The broker-dealer has been accused of excessively selling alternative investments, including non-traded BDCs, to investors.
If you are a Sierra Income investor, you may have grounds for filing a Financial Industry Regulatory Authority (FINRA) claim against your broker-dealer and their registered representative. Call SSEK Law Firm today at 800-259-9010. Over the years, we have helped thousands of investors to recover their losses.