Stoltmann Law Offices, a Chicago-based securities and consumer protection law firm, is representing investors in FINRA Arbitration cases involving brokerage firms and speculative, high-risk investments. Our firm is becoming increasingly concerned about the prospects for investors with money locked-up in bonds offered by Legion Capital.
These bonds are debt obligations issued by Legion Capital, which is a publicly-held private equity company that provides loans for real estate development
Although public (LGCP), the stock has virtually no trading volume, is worth pennies per share, and trades “OTC” or “over the counter”. Financial records establish that Legion Capital has thirteen employees, has virtually no net-income, and has revenue of under one million dollars. Legion has a market cap of about $3,280.00 and is registered as a Regulation A company.
According to publicly available records, Legion Capital issued $20 million in two-year bonds and another $20 million in preferred stock pursuant to a Form 1-A under Regulation A of the Securities and Exchange Act, on or about June 2, 2021. These two year bonds were for a 5.5% annualized interest rate, paid monthly. An investment in this tiny company’s bonds is speculative and extremely risky. To make it worse, only paying investors 5.5% per year to put their capital at such risk, meant that investors are grossly under-compensated for taking this level of risk. These Legion Capital bonds are alternative investments and to make matters worse the bonds are unrated.
Alternative investments like these Legion Capital bonds, are speculative, extremely high risk, and are generally unsuitable for most investors
Factors that go into whether an investment is suitable include the investor’s age, net worth, investment experience, and critically, actual investment objectives and risk tolerance. Given the risk of total loss, and the mere 5.5% return, if an investor was solicited by a financial advisor to invest in these Legion Capital bonds, a number of questions should be asked about what reasonable alternatives were available instead of these speculative Legion Capital bonds.
Legion Capital bonds are not traded and are illiquid. Further, if Legion Capital were to goes into bankruptcy or default on these bonds, given the total lack of capital the company has, the chances that investors would recover their investment is virtually zero. These private placement bonds also cannot be transferred or assigned to other investors – you are stuck with them until they mature.
When a brokerage firm recommends that clients invest in debt issued by penny-stock companies like Legion Capital, it must comply with Regulation Best Interest and all applicable securities rules, laws, and regulations. The existence of reasonably available alternatives dooms a recommendation under Regulation Best Interest. Instead of exposing client money to the risk of total loss – pure speculation – for a mere 5.5% return, a “reasonably available” alternative recommendation would include a basket of dividend-paying stocks or bond-ETFs which offer similar yields and virtually no chance of total loss. Brokers sell these speculative bonds because they pay huge commissions – that is where the story begins and ends with these recommendations.
If you were sold Legion Capital bonds, you should contact Stoltmann Law Offices, P.C. for a free, no obligation initial consultation with a securities lawyer. Call 312-332-4200 today. Stoltmann Law Offices offers representation to defrauded investors nationwide on a contingency fee basis, which means we do not get paid until you do!