FSIC III, FS Investments – Investigation Update

Investigating Potential Claims – FS Investment Corporation III – FSIC III 

Have you suffered losses investing in FS Investment Corporation III (FSIC III)? If so, the securities attorneys at The White Law Group may be able to help you recover your losses by filing a FINRA Arbitration Claim against the brokerage firm that sold you the investment.

FS Investment Corporation III (FSIC III) is an investment offered by FS Investments. FS Investments often raises money through Reg D private placement offerings like the company did for FS Investment Corporation III. These Reg D private placements are then typically sold by brokerage firms in exchange for a large up front commission, usually between 7-10%, as well as additional “due diligence fees” that can range from 1-3%.

Mackenzie Capital Management, a secondary market for private placement investments has just extended a tender off to purchase shares of FSIC III for just $5.00/share. Unfortunately for many investors, it appears that the tender offer price would represent a significant loss on their initial capital investment.

According to Mackenzie, the company’s estimated net asset value is declining. The NAV was $8.22 per share as of December 31, 2017, or $0.31 per share lower than the valuation as of December 31, 2016.

Unfortunately for investors, the share repurchase program is oversubscribed. “In a tender offer that expired in March 2018, 10.4 million shares were submitted for tender. The company, however, purchased approximately 2.9 million of these shares. Repurchases are only made quarterly. Thus, it is unlikely that you will be able to sell your entire investment through the company’s repurchase program,”  according to Mackenzie’s offer.

Update on June 7, 2019

According to its website, the most recent estimated Net Asset Value (NAV) for FSIC III is $7.62/share, as of March 30, 2019. Shares are currently listed for sale on Central Trade & Transfer, a secondary market for alternative investments, for just $6.00/share.

Securities Investigation

The White Law Group is investigating the liability that brokerage firms may have for improperly selling BDCs like FS Investment Corporation III to investors.

BDCs such as FS Investment Corporation III come with a high degree of risk. They are typically sold as unregistered securities, meaning they lack the same regulatory oversight as more traditional investment products like stocks or bonds.

Broker dealers are required to perform adequate due diligence on all investment recommendations. They must ensure that each investment recommendation is suitable for the investor in light of the investor’s age, risk tolerance, net worth, financial needs, and investment experience.

A problem with Reg D private placements is the high sales commissions and due diligence fees the brokers earn. Brokers have an enormous incentive to push the product to unsuspecting investors who do not fully understand the risks. They may also focus on the income potential and tax benefits while downplaying the risks.

Free Consultation

The Financial Industry Regulatory Authority (FINRA) provides an arbitration forum for investors to resolve disputes with their brokerage firm. If a broker or brokerage firm makes an unsuitable investment recommendation or fails to adequately disclose the risks associated with an investment they may be found liable for investment losses in a FINRA arbitration claim.

You may be able to recover investment losses incurred as a result of your purchase of FS Investment Corporation III. Please contact The White Law Group at 1-888-637-5510 for a free consultation.

The White Law Group is a national securities fraud, securities arbitration, and investor protection law firm with offices in Chicago, Illinois. The firm represents investors throughout the country in claims against their brokerage firm.