Sierra Income Corporation is a non-traded business development company (BDC) that invests mainly in first lien senior secured debt, second lien senior secured debt, and, to a lesser extent, the subordinated debt of middle-market companies with a yearly revenue between $50M and $1B.
Managed by registered investment adviser SIC Advisors, LLC, Sierra Income Corp. states that its investment goals are to make current income and generate long-term capital appreciation.
Unfortunately, investors who bought shares in this non-traded BDC may have sustained serious financial losses. This risky, illiquid investment was unsuitable for many inexperienced investors and its share price has dropped drastically from the $10/share paid by original investors.
The cancellation of its merger with Medley Management Inc. and Medley Capital Corp. in 2020 because of the uncertainty created by COVID-19 did not help matters.
Our non-traded BDC attorneys at Shepherd Smith Edwards and Kantas (SSEK Law Firm at investorlawyers.com) are offering free case assessments to investors who lost money in Sierra Income Corp. Call us at (800) 259-9010 today.Sierra Income Investors Have Experienced Significant Losses
In June 2021, Sierra Income Corp., which at the time managed an investment portfolio with a $631.4M fair market value, announced that it would merge with publicly-traded Barings BDC Incorporated (NYSE: BBDC).
Its distribution reinvestment plan was suspended, and after September 2021, shareholders were to receive all distributions in cash. However, the share repurchase program would stay suspended effective the start of that month.
Also in June 2021, Sierra Income shares were reportedly selling on the secondary markets for around $2.15 to $2.40/share. This was more than a 75% loss for investors and even lower than what shareholders’ account statements were listing at $5.78/share, which was an around 40% loss.
It didn’t help that brokerage firms and their financial advisors earned around 10% commissions and fees upfront, which means that only 90% of the money that Sierra Income shareholders were paying was invested.
This is not the kind of investment that inexperienced investors, conservative investors, or retail investors should have gotten involved with even if the pandemic had never happened. Unfortunately, it doesn’t appear that many of them were fully apprised of the risks. Or, they may have been unsuitably sold this non-traded BDC that was too risky and illiquid for them.LPL Financial and Other Brokerage Firms Sold Sierra Income Shares To Customers
A number of broker-dealers and their financial advisors marketed and sold investments in Sierra Income Corp. to customers. LPL Financial, which is one of the largest broker-dealers, was one of the firms. It has since suspended marketing and selling this non-traded BDC to investors.
In January 2021, LPL finalized its acquisition of San Diego-based brokerage firm Lucia Securities, which also sold Sierra Income shares to its customers. Our non-traded BDC attorneys have been speaking with clients of both firms to help them determine whether they have grounds for a FINRA arbitration claim to recover damages.What Responsibility Do Broker-Dealers Have to Sierra Income Investors?
Although COVID-19 may have negatively impacted business development companies —many BDCs have strong commercial real estate market connections — this did not exempt brokers from their fiduciary duty.
Sierra Income should only have been recommended to customers who had the tolerance level and investing profile to handle the potential risks. It was also their duty to fully apprise investors of these risks and make sure they understood them.
Based on conversations we’ve had with Sierra Income Corp. investors, it appears that many were not fully aware of the characteristics and risks involving this non-traded BDC.
They are now left with illiquid, non-traded shares that are not paying them much if anything at all. Also, brokerage firms may have failed to properly supervise their financial advisors that sold Sierra Income shares to customers.Knowledgeable Sierra Income Investment Lawyers
For over thirty years, SSEK Law Firm has been fighting for non-traded BDC investors and others in FINRA arbitration, mediation, and litigation. We have recovered many millions of dollars on behalf of our clients from the brokerage firms and financial advisors whose misconduct or negligence was the cause of their investment losses.