Securities Arbitration Lawyers BlogGPB - Wall Street’s Highest Commission Product Just Became Retail Investors Biggest Nightmare
GPB Capital raised over 1.5 billion dollars primarily from mom and pop investors over the last four years. How was GPB they able to raise this money? By paying small and regional brokerage firms over nine (9) percent of the money raised back to the selling broker-dealers.
Last week, GPB announced that many of their funds are down 40% or more in value. In hopes of offering their clients some solace, GPB highlighted that it had already made distributions to investors of about 15% of the investors’ capital. However, many investors were shocked to learn that these distributions were not from earnings or profits but an actual return of the money they had previously invested. In other words, GPB wants to be applauded for returning to investors at least some of their money.
Silver Law Group Is Representing Investors Who Are Filing FINRA Arbitration Claims Against Their Brokerage Firms
Many investors are now wondering why their financial advisor sold them GPB. In many cases, financial advisors urged investors to make it a core part of their holdings or overconcentrating their account and ignoring the old adage “don’t put all your eggs in one basket.”
Structure of GPB Capital
GPB was not a publicly traded company and was sold via a private placement memorandum. Sales of this type can be particularly risky because, amongst other reasons:
- Brokerage firms have less information to rely on for its due diligence; and
- Investments are illiquid and cannot be sold if there’s a problem.
GPB used multiple investment vehicles for different products. For example, GPB’s Armada Waste Management is down over 60%. GPB first filed with the SEC in 2013. Therefore, GPB investors are suffering catastrophic losses during one of the biggest bull runs in history.
GPB Exemplifies Wall Street’s Fight Against A Fiduciary Duty Standard
The sale of GPB highlights why a strong fiduciary duty is required to protect small investors. In a world where investors know that you can buy stocks online for $5 a trade, stockbrokers are attracted to more complex products with substantial internal costs and commissions that investors do not understand. The 9% commission was earned upon the sale of the product to an investor. This guarantees that GPB would need to earn 9% just to break even. Many investors are now wondering how much GPB took in management fees and other costs.
As these types of products have grown over the years, many retail investors have been told that it is giving them an opportunity to invest like an institutional investor. However, these fees, costs and commissions would make a wirehouse broker blush and a sophisticated Silicon Valley investor laugh off a deal which comes with these fees.
Recovering GPB Losses Through FINRA Arbitration
If you purchased GPB Capital, you may have a claim to recover your money. Broker-dealers have an obligation to recommend suitable investments to their clients and perform due diligence into the products they sell them. FINRA-registered brokers and firms are subject to arbitration to resolve securities-related disputes.
Silver Law Group represents the interests of investors who have been the victims of investment fraud. Scott Silver is the chairman of the Securities and Financial Fraud Group of the American Association of Justice and represents investors nationwide in securities investment fraud cases. Please contact Scott Silver of the Silver Law Group for a free consultation at ssilver@silverlaw.com or toll free at (800) 975-4345.