Herbert J. Sims & Co., Inc. (HJ Sims) was founded in 1935 as a financial services firm offering private wealth management and other services… the firm represents to investors that it takes a holistic view and provides investor clients with the resources of a full-service firm, offering broker-dealer as well advisory services through affiliate entities.
The firm’s website and marketing suggest a client-first approach, putting client needs ahead of their own, but some of the issues being investigated, such as those noted below, might suggest otherwise.
According to its website and marketing materials, HJ Sims has offices in Florida, Puerto Rico, Texas, Connecticut, New Jersey, Maryland, Minnesota, North Carolina, California, Illinois, and Pennsylvania
If you have any information about HJ Sims investments that were created, marketed, or sold by brokers or financial advisors (and supervised by HJ Sims), please contact Haselkorn & Thibaut, P.A. nationwide at 1-800-856-3352. Additionally, if you have any questions about your legal rights, or if you have purchased or acquired bonds from HJ Sims and experienced any reduced interest payments or any default events, or if you have any questions, please do not hesitate to call now.
A recent regulatory issue for HJ Sims
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In July 2021 – HJ Sims was alleged to have failed to reasonably supervise sales of structured securities, including curve accrual notes and non-inversion notes, securities believed to be considered highly complex and high-risk and sometimes referred to as Variable Interest Rate Structured Products (VRSPS) to certain retail investor clients.
These products involved both a bond component and an embedded derivative component and were likely not suitable for certain investors nearing retirement age with low to moderate risk tolerance. It is believed that the SEC fined the firm $250,000.
Additional Issues Now Being Investigated:
More recently, there are additional issues according to SLCG, HJ Sims Reg D Offerings on Fire.pdf (slcg.com) there appear to be a number of HJ Sims Reg D offerings that suggest some investors may have incurred unnecessary losses and damages:
It is believed that HJ Sims sold some 93 Reg D Offerings totaling $2.2 billion in the past 10 years alone. It is also believed that in over 90% of those Reg D Offerings, HJ Sims was the sole brokerage firm selling the products to investors. It also appears that HJ Sims executives created and controlled almost all the Reg D Offerings issuers. The HJ Sims executives appear to own and control the legal entities issuing the debt securities that HJ Sims was selling the bonds to investor clients.
Based on a review of the underlying structure of these securities, it appears that if the offering failed, the executives would suffer a portion of the losses. Still, they would stand to realize all of the potential gains if the offering succeeded. In addition, HJ Sims would naturally benefit from the commissions and fees associated with the offering and sales of the bonds as well.
Thus, the HJ Sims firm and its executives stood to reap substantial commissions and fees as well as additional profits while bearing only a portion of potential losses on over $2 billion in Reg D bond offerings, where they instead appear to have potentially attempted to shift the losses over to retail investor clients who were buying those bonds.
Generally, after a bond has defaulted on one or more interest and/or principal payments, the value of that bond decreases significantly. Defaulted bonds typically drop in value well in advance of default and often drop dramatically in price after a default event.
Here, it is believed that the investigation and evidence will show that (at least in part due to a limited market- where 90% of these offerings are only being sold by HJ Sims, the bond price changes reflected on the customer account statements appears to have reflected values higher than what the actual liquid market or willing buyers would actually be willing to pay for those securities at the time. Essentially, HJ Sims continued to carry the bonds on account statements at prices higher than any actual liquid market value, and customers were unaware of the full extent of their losses in these securities.
Please note these issues are still being investigated in detail. The following Reg D Offerings are in default:
Sims Cathcart Funding (CUSIP 82915TAB4)
It was organized in 2012 and issued $6,260,000 in bonds due to mature on 6/1/23. However, on 10/1/20 and on 4/1/22 the bonds paid reduced interest payments to investors.
These bonds are believed to have listed prices in the $100 range even after they paid reduced interest payments to bondholders.
Gryphon Finance I, LLC (CUSIP 400511AB7)
It was organized in 2014 and issued $2,000,000 in bonds due to mature on 10/1/24. However, on 10/1/20 and afterwards and has paid reduced interest payments since.
These bonds are believed to have listed prices in the $85 per $100 range even after they defaulted. It is believed these bonds still reflected a value of $85 depite missing 9 quarterly interest payments. It is believed these bonds were likely worth as little as $20 or $30 at the time (after default) that HJ Sims was valuing them at $85 or more on customer account statements.
Hawkeye Village Finance I (CUSIP 42020PAB8)
was organized in 2014 and issued $11,000,000 in bonds due to maturity on 10/1/20. However, on 5/1/16 and afterward, the bonds defaulted on interest payments to investors.
These bonds are believed to have listed prices in the $60 per $100 range even after the 10/30/20 maturity date, despite the defaulted interest payments for four or more years leading up to that date or the failure to make any principal payment as the bonds came due. In February 2021, a distribution payment was made to bondholders that were little more than 1% of the amount that was due to investors months earlier at the maturity date of 10/30/20.
It is believed these bonds, notwithstanding the pricing reflected on account statements, were worthless or nearly worthless since the 2017 timeframe. Yet, HJ Sims continued to value the bonds on statements at $50 even after default.
Tuscan Isle Holdings I (CUSIP 90069EAB4)
It was organized in 2014 and issued $6,200,000 in bonds due to mature on 12/1/22. However, on 2/1/19 a reduced interest payment was made to bondholders, and from 5/1/19 and afterward there were missed interest payments.
These bonds are believed to have listed prices in the $40 per $100 range even after they defaulted and at a time where they may likely have been near worthless.
Riverchase Funding (CUSIP 768579AB0)
It was organized in 2015 and issued $3,650,000 in bonds due to mature on 12/1/22. However, on 1/1/20 and thereafter the bonds defaulted on interest payments.
These bonds are believed to have listed prices in the $70 per $100 range even after they defaulted and months just before maturity. It is believed these bonds were worth very little, yet HJ Sims valued them at $70 or more on customer account statements.
HJSI Athena Portfolio Finance (CUSIP 40423HAB3)
It was organized in 2015 and issued $41,660,000 in bonds due to mature on 4/1/26. However, on 10/1/21 there was a partially delayed interest payment, and on 4/1/22 there was a reduced interest payment.
These bonds are believed to have listed prices in the $95 per $100 range even after they defaulted. These bonds are likely worth as little as $20 or $30 since the default events, yet they are still valued at $95 by HJ Sims on account statements.
Meridian Portfolio Funding I
It was organized in 2016, issued $4,000,000 in bonds, and appears to be in default.
Tuscan Isle Champions Gate Holdings (CUSIP 90069JAB3)
It was organized in 2015 and issued $6,800,000 in bonds due to mature on 5/1/23. However, on 5/1/19 and thereafter the bonds defaulted on interest payments to investors.
These bonds are believed to have paid out $58.823529 per $1,000 as final default distribution of approximately 5.8% on 11/1/22 to investors. The bonds appear to have been near worthless after the default, and yet HJ Sims listed prices in the $45 per $100 range on investor account statements even after they defaulted and just months before liquidating for less than 6%.
Cypress Point Funding (CUSIP 23281HAB0)
It was organized in 2016 and issued $3,000,000 in bonds due to mature on 4/1/23. However, on 7/1/20 and on 10/1/20, the bonds defaulted on interest payments to investors, and they were liquidated at $16.67 on 12/10/20.
These bonds are believed to have listed prices in the $80 per $100 range even after they defaulted and just months before liquidating for less than $20. It is believed that as late as the 11/30/20 account statements, the bonds were still at $80, even though they were liquidated for just $16.67 10 days later. It is believed these bonds were likely worth as little as $20 or $30 at the time (after default) that HJ Sims was valuing them at $80 or more on customer account statements.
Wakefield Portfolio Funding I
It was organized in 2016, issued $5,160,000 in bonds and appears to be in default.
Poet’s Walk Funding I (CUSIP 73045AAA9)
It was organized in 2018 and issued $10,000,000 in bonds due to mature on 12/1/28. However, on 12/1/21 the bonds paid a reduced interest payment, and then missed an interest payment on 3/1/22, and again paid a reduced interest payment on 6/1/22 while also defaulting on principal payments due 3/1/22 and on 6/1/22.
These bonds are believed to have listed prices in the $90 per $100 range even after they defaulted.
Madison Funding I (CUSIP 557491AB3)
It was organized in 2019 and issued $5,115,000 in bonds due to mature on 6/1/24. However, on 3/1/21 there was a default and the bond has paid a reduced interest rate since that time.
These bonds are believed to have listed prices in the $100 range even after they defaulted.
What Can Investors Do?
If you are an HJ Sims investor, feel free to call or email the offices of Haselkorn & Thibaut, P.A. for a fast, friendly, no-obligation account review. We will schedule a call at no charge with an experienced securities lawyer that can help you identify any of the above or other potentially problematic issues or help put your mind at ease.
Our attorneys know and understand the complexities and legal issues related to these types of matters.
According to Matthew Thibaut, Esq., a founding partner of Haselkorn & Thibaut, P.A. (InvestmentFraudLawyers.com), a nationwide law firm that is investigating these potential claims on behalf of investors: “Based on the calls we’ve been getting recently, it appears that some financial advisors who were marketing these and similar investments to client investors who were seeking safe, conservative, fixed income securities are now finding that these securities were risky and the underlying structure appears to have been biased in favor of the firm and its executives, leaving retail investors exposed to the losses and, as you can imagine, this is not sitting well with some investors.”
Haselkorn & Thibaut, P.A. has established a hotline at 1-800-856-3352, where experienced attorneys can answer investor questions quickly and provide feedback as well as free no, obligation preliminary case evaluation call, and investors can then decide among their options on how best to proceed in addressing any losses they may have incurred.
If you have any information about HJ Sims investments that were created, marketed or sold by brokers or financial advisors (and supervised by HJ Sims), please contact Haselkorn & Thibaut, P.A. nationwide at 1-800-856-3352. Additionally, if you have any questions about your legal rights, or if you have purchased or acquired bonds from HJ Sims and experienced any reduced interest payments or any default events, or if you have any questions, please do not hesitate to call now.
The sole purpose of this release is to investigate how HJ Sims as a broker-dealer firms and any registered investment advisory affiliate firm investigated, marketed, and sold these and similar bond investment products, including, but not limited to how the investments were presented to investor clients and how the investor clients were updated regarding pricing of these securities.
Haselkorn & Thibaut, P.A. is a law firm that focuses on investment fraud, financial advisor negligence cases and FINRA securities arbitration claims throughout the country. The law firm has offices and is available by appointment in Palm Beach, Florida, on Park Avenue in New York City, in Phoenix, Arizona, in Houston, Texas, and in Cary, North Carolina.
