Report: Troubled Private Placement GPB Capital Holdings Paid Steep Commissions to Brokers and Broker-Dealers
According to reporting from InvestmentNews, GPB Capital Holdings — the troubled alternative investment company that is currently the subject of Ponzi scheme accusations — paid large commissions to the securities representatives as a substantial inducement to sell the private placement to investors.
Specifically, commissions were paid at a rate of 9.3 percent. In total, brokers and brokerage firms brought in $167 millions in fees for selling GPB Capital. This took place at the same time that investors suffered steep losses in this product.
Putting the GPB Commissions Into Perspective
GPB Capital Holdings raised more than $1.7 billion from investors, and 9.3 percent of that money ($167 million) went straight into the pocket of the brokers and brokerage firms that recommended and sold the private placement investment product to investors. Notably, 9.3 percent is a relatively high commission.
Under securities industry rules, 10 percent is the maximum commission that brokers and broker-dealers can charge on investments like those in GPB Capital Holdings. In this case, individual representatives pocketed commissions around 7 percent and brokerage firms collected the remaining 2 percent. Sadly, when earning such high commissions for selling financial products, securities representatives do not always do their due diligence or look out for the best interests of investors.
GPB Capital Holdings is Down Dramatically — May Be Ponzi Scheme
As was mentioned, GPB Capital Holdings is the subject of several investigations. A former business partner even accused the company of being a “Ponzi-like scheme” in a court filing. The former business associate, David Rosenberg, stated in court that GPB Capital was committing serious financial misconduct.Perhaps unsurprisingly, the largest GPB Capital funds have suffered tremendous losses in recent weeks and months. Its largest fund (GPB Holdings II) was down 25.4 percent. Meanwhile, the company’s second largest investment fund (GPB Automotive Portfolio) was down 39 percent. Another major GPB Capital fund (Armada Waste Management) has lost nearly 70 percent of its value. While brokers and broker-dealers made steeps commission, investors are left dealing with large losses.
Broker-Dealers May Be Liable for GPB Capital Losses
Your broker or brokerage firm may be legally liable for your losses in GPB Capital Holdings. Under FINRA Rule 2111, securities representatives have a duty to recommend suitable (consistent with your stated financial objectives and risk tolerance) investment and financial products to their customers. If you or your loved one suffered GPB Capital losses and you believe that the private placement investment fund was unsuitable based on your stated investment objectives and risk tolerance or the risks were not properly disclosed, you should discuss your case with an experienced FINRA arbitration attorney as soon as possible.
Lost Money in GPB Capital? Call Our Florida Investment Fraud Lawyer Today
At the office of Gregory Tendrich, P.A., our Florida Ponzi scheme lawyers represent investors in claims against negligent financial advisors and negligent brokerage firms. If your broker-dealer recommended an unsuitable investment, such as GPB Capital Holdings, we are here to help. For a free, no obligation case evaluation, please do not hesitate to contact our legal team today. With an office in Boca Raton, we serve investors throughout South Florida.