Sierra Income Lawsuit

Sierra Income Corp Lawsuit “FINRA”

Sierra Income Corp. (Sierra Income) is a non-traded business development company (BDC). In 2019 there was a merger with Medley Capital, but for original investors who paid at or near $10.00/share for Sierra Income, there are currently significant investment losses to consider.

For one thing, Sierra Income sales were promoted by financial advisors and broker-dealer firms based on their financial incentives.

Up-front fees and commissions were in the 10% range and most investors we have spoken to had no idea that only 90% of the funds they were investing were actually getting invested, while approximately 7% was used for sales commissions and a dealer management fee of 2.75% was also embedded as incentives for selling this product to investors.

While the impact of Covid-19 remains to be seen, the current sponsor stated value reported on investor account statements for Sierra Income is $5.78/share, and it represents approximately (-40%) decline from the original value. In reality, Sierra Income according to at least one secondary market source (Central Trade and Transfer) suggests investment losses may be far more significant as current buyers are only paying in the $2.15/share to $2.40/share range, representing an over (-75%) loss for some investors.  

Many investors purchased Sierra Income and similar risky, complex, non-traded REIT investments through LPL Financial. We help investors nationwide. Please contact us at 1-800-856-3352 or email us at case@htattorneys.com

LPL Financial Stops Selling Sierra Income

LPL Financial LLC with over 16,000 representatives is one of the largest broker-dealers. Now, in light of Covid-19, firms including LPL Financial have elected to temporarily halt sales of Sierra Income and similar products to investors.  LPL Financial LLC, according to FINRA Brokercheck has 236 separate disclosures (176 of them regulatory disclosures, several specifically relating to sales of non-traded REITs:

  • 2013 fine by Massachusetts state securities regulators
  • 2014 Financial Regulatory Authority (FINRA) Acceptance, Waiver and Consent (AWC) (neither admitting or denying the allegations) included a fine after allegations related to non-traded REIT transactions and inadequate supervisory procedures.
  • 2015 New Hampshire state securities regulators issues
  • 2015 an (AWC) that neither admitted nor denied the allegations, which related to (among other issues) sales practice issues of non-traded REIT investments. Fine of $10 million.
  • 2016 state securities regulators in Montana, Hawaii, Louisiana, Wyoming, Oklahoma, Oregon, South Carolina, Arkansas, Ohio, Tennessee, Wisconsin, U.S. Virgin Islands, Kentucky, Alabama, North Dakota, Kansas, Washington, California, Colorado, Florida, Iowa, Michigan, Minnesota, Nebraska, Georgia, Idaho, Mississippi, Puerto Rico, New Mexico, South Dakota, Indiana, Texas, Alaska, Missouri, Utah, Pennsylvania, Nevada and in the State of Maryland (as part of a multistate task force investigation with the North American Securities Administrators Association, Inc. (NASAA) regarding the sales of non-traded REITs. LPL Financial neither admitted nor denied the findings of fact and conclusions of law contained in a Consent Order.
  • 2017 New Jersey state securities regulators alleged failure to properly supervise sales of illiquid alternative investments to customers, including non-traded REITs and non-traded BDCs.
  • In 2017, another regulatory disclosure involves the State of Virginia Maine and the State of Vermont.
  • 2018 sales of non-traded REITs and related issues with the North Carolina, District of Columbia.

Sierra Income, Non-Traded REITs and BDCs Problems

Sierra Income and other non-traded REITs and BDCs are typically viewed as “high-risk” investments and recommendations of these investments, specifically for retirees.  Financial advisors that sold Sierra Income and similar products are having complaints filed against them.

According to the Financial Industry Regulatory Authority, Inc (FINRA) the prospectuses and Subscription Agreements for many of the securities indicate they were/are not suitable for investors who require access to liquidity, a guaranteed income and they were only appropriate for those investors who can handle a substantial loss of their investment.  Many financial advisors sold these types of investments despite being high-risk investments and presented them as relatively conservative income-producing investments.

How Can Sierra Income Investor Recover Losses?

Investors may be able to recover Sierra Income losses through a FINRA claim. FINRA claims are often one-way investors can potentially recoup their losses in these types of investments.  The customer dispute process at FINRA is fast, private, and easier than traditional lawsuits. Also, there are not usually depositions, because it is a paper-based discovery.

The reality is that these types of investments are complex, and many financial advisors may not fully comprehend all the intricacies, conflicts,  nor investment risks.  There have been issues raised by regulators regarding investments and this has caused many broker-dealers to stop selling these types of investments.

If you are an investor that purchased Sierra Income or non-traded BDCs and you have suffered losses, you should consider your potential options for recovering your investment losses.

We help investors nationwide. Please contact us at 1-800-856-3352 or email us at case@htattorneys.com

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