FSEP (FS Energy & Power Fund) investors have been having a rough time over the past few months after the losses that the investment company reported a $1.50/share loss for investors. There is some good news because an investigation has been launched to investigate the firm and lawyers from Haselkorn & Thibaut sided with investors to help them get justice. If you are among the investors that have been affected, the attorneys can help you file for a FINRA dispute resolution claim by calling 1-800-856-3352 to get a free consultation.
The law firm’s investigation relates to whether brokerage firms’ recommendations represented unsuitable investment advice, and whether financial advisors failed to disclose all relevant facts, including the risks associated with concentrated investments in the energy sector.
The fund mainly invests in income and debt-related equity securities that are held by private firms in the U.S, mainly in the power and energy industry. FSEP announced on March 25 this year that it planned to suspend its share repurchase program and its quarterly tender offer. The fund also revealed that the decision to suspend the two was fueled by difficult market conditions caused by the coronavirus. The fund also paused its regular cash distribution to its shareholders on March 31.
FSEP priced its shares in its distribution reinvestment plan at $5.85 per share as of September 30, 2019. The shares decreased to $6.70 from $7.15 in January 2018 and had dropped to $7.20 from $7.65 the previous year. By April 2017, the shares were going for $1.50 per share, thus leading to investor concern.
The fund revealed that the purpose of slashing the share value is to make sure that the DRP shares are not issued at a higher price than the NAV Per Share by 2.5%. Nevertheless, investors feel as if they were swindled, considering that the shares were originally issued at $10.00 per share. In other words, the current pricing means that investors have suffered a huge loss.
Which recovery options to investors currently have?
FSEP and other similar alternative investment services tend to be quite risky mainly because they are offered as non-traded securities. This means that they are not subjected to the same regulatory guidelines that traditional investment options such as bonds and stocks have to go through. They are also not the ideal option, especially for traders looking for investment options that will offer liquidity as FSEP traders have discovered. If the investors do decide to sell now, they will be selling at a loss.
Fortunately, there might be some hope for investors thanks to Haselkorn & Thibaut, which launched a probe into the situation. The law firm aims to explore the legal obligations of brokers that advises investors to put their money in BDCs such as FSEP.
Brokers that provide alternative investment to their clients are required by the Financial Industry Regulatory Authority (FINRA) to conduct due diligence on the investments that they recommend. The purpose of this due diligence is to ensure that the investments they are recommending to clients are healthy or suitable. This is especially concerning factors such as the investor’s age, net worth, risk tolerance, investment experience, and financial needs.
Haselkorn & Thibaut seeks to help pursue the best options available to help investors lose their funds through FSEP. Investors that have been affected by the situation have been urged to contact Haselkorn & Thibaut’s offices through 1-800-856-3352 to get a free consultation.