Consider Legal Action
Published On: December 18, 2022

Stoltmann Law Offices, a Chicago-based securities and investment fraud law firm offers representation to defrauded investors and consumers nationwide on a contingency fee basis. Our firm is investigating potential claims against Herbert J Sims & Co., a/k/a HJ Sims, in connection with dozens of private offerings solicited and engineered by HJ Sims.

Private placements are investments that are not publicly registered with the Securities and Exchange Commission. Although a totally legitimate way to raise capital, private placements fall into the alternative investment category. They are supposed to only be sold to “accredited investors”, are speculative, illiquid, and opaque when compared to publicly traded securities. Private placements are the darlings of the independent broker-dealer community because they generate commissions many times higher than publicly traded securities. For most private placements, commissions range from 7% to 12% in total fees, costs, and commissions to the brokerage firm.  The justification for such high commissions, the brokers say, is that they have to spend so much time and resources in the due diligence process to vet the investments prior to offering them for sale to their clients. This due diligence process is required to be undertaken and is mandated by FINRA Rule 2111, Regulation Best Interest, and several FINRA notices, including most prominently, Regulatory Notice 10-22.

HJ Sims hits the trifecta with its private placement offerings. Not only does it receive high commissions, HJ Sims actually creates many of the investments they sell, and their board and corporate officers share in the loot raised by HJ Sims selling these deals to their client base.  One of these offerings is Madison Funding I, LLC, which HJ Sims brought to market in 2019.  They issued $5,115,000 in bonds due June 1, 2024. The bonds defaulted on principal payments due March 2, 2021 and has paid reduced interest since. Incredibly, AFTER the bonds defaulted, HJ Sims continues to valuate the bonds at $100 on customer account statements, and shockingly, Madison Funding I, LLC is owned and controlled by executives of HJ Sims. It is common sense that a bond in default is NOT worth what it was sold at, but don’t tell that to HJ Sims.

Another example of the gross conflicts of interest and wayward pricing in offering private placements to clients is Poet’s Walk Funding I, LLC, which HJ Sims raised $10,000,000 for by selling its bonds to HJ Sims clients. These bonds defaulted and have paid reduced interest, and yet are still being valued at $90 on HJ Sims client account statements.  Once again, HJ Sims executives own and control this entity too. The conflicts are incredible. Since 2012, HJ Sims has sold its clients over $2 billion worth of proprietary private placements.  Many of these investments defaulted, have suspended paying interest, and have cost their clients millions of dollars in losses.

If you invested in private placements sold to you by HJ Sims, you should call Stoltmann Law Offices at 312-332-4200 for a free, no obligation consultation with a securities attorney. You may have claims to make through  FINRA Arbitration to recover investment losses.

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