Franklin BSP Lending Corp. Investigation

BDCA Changes Name to Franklin BSP Lending Corp.

The White Law Group is investigating potential claims involving broker dealers who may have improperly recommended Franklin BSP Lending Corp. (formerly Business Development Corporation of America (BDCA)) to investors. 

Franklin BSP Lending Corp. is a Business Development Company (BDC) that invests primarily in first and second lien senior secured loans and mezzanine debt issued by middle market companies. The company commenced its initial public offering in January 2011 and raised $1.9 billion before closing the offering in April 2015. 

According to reports, the company was the focus of a proxy fraud scandal at the end of 2015. Its sponsor at the time, AR Capital and its dealer manager, Realty Capital Securities, were also involved in a series of scandals which led to the termination of all AR Capital-sponsored investment programs and an agreement by RCS to terminate its business. 

Unfortunately, the company approved a proposal to allow BDCA to issue shares of common stock at a price below NAV in 2018. The company noted in April 10, 2018,  in a definitive proxy that it did not foresee issuing shares below NAV in the foreseeable future. 

On January 4, 2022, the Board of Directors of Business Development Corporation of America (BDCA) officially changes its name to Franklin BSP Lending Corporation (FBLC) as of January 1, 2022. The company is externally managed by Benefit Street Partners (“BSP”).  

Secondary Sales Price suggest Losses for Investors 

According to Central Trade and Transfer, a secondary market place for non-traded investments, shares of Franklin BSP Lending Corp are currently listed to sell for around $6 per share. This may mean significant losses for investors, as shares were originally sold for $10 per share.  

The White Law Group continues to investigate potential claims involving broker dealers who may have unsuitably recommended high risk Business Development companies (BDCs) such as Franklin BSP Lending Corporation to unsuspecting investors. The firm has received numerous calls from investors looking to recover financial losses from investments in BDCs.  

Last year the company reported that its repurchase program was oversubscribed, as 40 million shares were reportedly submitted to the company for resale, yet the company only repurchased about 7% of the shares, according SEC filings.   

The Risks of Non-traded BDCs  

Non-traded BDCs, such as Franklin BSP Lending Corp., do not trade on a national securities exchange, and are therefore illiquid products that can be difficult to sell. Investors can typically only sell their shares through redemption with the issuer, or through a fragmented and illiquid secondary market.   

Usually, investments such as Franklin BSP Lending Corp have a high up-front commissions and fees –sometimes as high as 10% — which goes to the broker, the broker-dealer, and the wholesale broker or manager. This may offer an incentive for brokers to sell this type of investment, despite the risks to their clients. 

Broker dealers are required to perform adequate due diligence on any investment they recommend and to ensure that all recommendations are suitable for the investor. Recommendations should be appropriate in light of the investor’s age, risk tolerance, net worth, and investment experience. 

Broker dealers that fail to adequately disclose risks or make unsuitable investment recommendations can be held liable for investment losses in a FINRA arbitration claim. 

Free Consultation

If you have suffered losses in Franklin BSP Lending Corp. (formerly BDCA) and would like to speak to a securities attorney about the potential to recover your investment losses, please call The White Law Group at 1-888-637-5510 for a free consultation. 

The White Law Group, LLC is a national securities fraud, securities arbitration, investor protection, and securities regulation/compliance law firm with offices in Chicago, Illinois and Seattle, Washington. To learn more about The White Law Group visit www.whitesecuritieslaw.com.