FS Energy & Power Fund Reduces DRP, NAV Continues to Decline

FS Energy & Power Fund NAV Continues to Decline,  *UPDATED* 2/25/21

The White Law Group continues to investigate potential securities claims involving broker dealers who may have improperly recommended FS Energy & Power Fund to investors. The firm has represented numerous FSEP investors in FINRA claims against their brokerage firms. 

FS Energy & Power Fund (FSEP), a non-traded business development company (BDC), was reportedly designed to provide investors a combination of income, growth and diversification by investing primarily in the debt and income-oriented securities of private U.S. energy and power companies.

According to SEC filings on October 12, 2020, FSEP decreased the price at which it issues shares under its distribution reinvestment plan from $3.35 per share to $3.30 per share. The purpose of this decrease was “to ensure that the Company did not issue shares under the DRP at a price per share that was more than 2.5% greater than the NAV Per Share”.

Update on February 25, 2021

Unfortunately for investors, the fund has seen a continual decline in value since its inception in July 2011. Shares were originally offered for $10.00 per share but according to the most recent valuation published on  June 30, 2020, the NAV is now just $3.28 per share. 

According to Central Trade & Transfer, a secondary market for illiquid investments, on February 25, 2021, FSEP was listed to sell for $1.94 per share. 

FSEP shareholder average annual returns are -37.77 percent for the year, according to its website.

Investigating Potential Claims

The trouble with alternative investment products, like FS Energy & Power Fund, is that they involve a high degree of risk. They are typically sold as unregistered securities which lack the same regulatory oversight as more traditional investment products like stocks or bonds.

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

Further, BDCs tend to come with high sales commissions and due diligence fees. Brokers may have an enormous incentive to push the product to unsuspecting investors for their own gain. Many investors don’t understand the risks of these types of investments since the brokers often focus on the income potential and tax benefits while downplaying the risks.

Fortunately, FINRA does provide for an arbitration forum for investors to resolve such disputes. 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.

Free Consultation with a Securities Attorney

To determine whether you may be able to recover investment losses incurred as a result of your purchase of FS Energy & Power Fund, please contact 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. The firm represents investors throughout the country in claims against their brokerage firm.

For more information on the firm and its representation of investors, visit www.WhiteSecuritiesLaw.com.