What Did Your Brokerage Firm or Investment Adviser Do Wrong With GWG
Published On: April 21, 2019

Stoltmann Law Offices, P.C. has been reporting concerns about the funds offered by GPB Capital for several months now. Our firm now represents multiple clients in FINRA Arbitration proceedings against the brokerage firms responsible for soliciting them to invest in the GPB Funds. Specifically, our clients invested in the GPB Automotive Fund and GPB Holdings Fund II.

On June 21, 2019, it was reported that GPB Capital finally issued valuations on two of its largest funds. Unfortunately for investors, these new valuations are not good. GPB Capital reported a decline of 25.4% for the GPB Holdings Fund II and a whopping 39% decline for the GPB Automotive Fund. It follows that the remainder of the GPB Holdings portfolio of funds will eventually suffer similar write-downs. These valuations are as of year-end 2018, so it is anyone’s guess what these rotting assets are worth as of today. Its truly troubling when private funds like these suffer massive losses when the broader, publicly-traded markets, like the S&P 500, have performed incredibly well for almost 10 years running.

Ongoing accurate valuation is a major problem for these illiquid opaque funds that invest in assets like car dealerships and private garbage collection companies. Stoltmann Law Offices has reviewed numerous GPB Fund materials and the concern is growing that these asset valuations by the company are going to snowball and accelerate into more rapid losses for investors. According to SEC filings approximately 60 brokerage firms sold clients investments in various GPB Capital Funds.  However, the primary sellers of these toxic funds appear to have been Royal Alliance, FSC Securities, SagePoint Financial, and Woodbury Financial Services.

There is one reason why these firms sell private placements like GPB Capital Funds: Commissions. These brokerage firms take commissions as high as 12% for selling GPB Funds. What exactly entitles them to commissions in excess of 12X what they would get for selling a mutual fund or stock? The brokerage firms will say they need to be compensated for all of the due diligence they perform on the front-end on an issuer like the GPB Capital Funds. Even though FINRA Rules and notices, including RN-10-22 require brokerage firms, as a matter of law, to perform due diligence on offerings like GPB, what the process actually looks like, rarely passes muster. In most cases, brokerage firms rely on a “due diligence” report by a law firm or investment company that is actually solicited and paid for by the issuer.  So, for example, GPB will pay a law firm to kick its tires, and then brokerage firms like Cetera Advisors and FSC Securities will rely on that report to fulfill its due diligence obligations. The brokerage firms are also excellent at checking boxes on forms and collecting papers for the file. What they lack however, is objective, reasoned analyses of these entities which, if performed in most instances would cause the firms to refuse to offer the investments to their clients. But then how would they get their 12%?

If you were sold investments in the GPB Funds, you will soon have sticker-shock when you see how much your investment has been written down. Call Stoltmann Law Offices at 312-332-4200 for a no obligation consultation with a securities attorney to discuss your legal options. We are a contingency fee law firm which means we do not get paid until you do!


The posting on this site are mere OPINIONS and NOT statements of fact in any way whatsoever. The information should not be relied upon and there have been no findings made against the firms or individuals referenced on this site. In addition, this Blog is made available for educational purposes only and incorporates information from the web as well as to give you general information and a general understanding of the law, not to provide specific legal advice. By using this blog site you understand that there is no attorney client relationship between you and Stoltmann Law Offices (161 N Clark Street 16th Floor Chicago, IL 60601). The Blog opinions should not be used as a substitute for competent legal advice from a licensed professional attorney in your state.


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