FS Global Credit Opportunities Fund: Shareholder Claims

FS Global Credit Opportunities Fund Plans to List on NYSE as “FSCO” 

The White Law Group continues to investigate potential claims involving broker dealers who may have unsuitable recommended FS Global Credit Opportunities Fund, an illiquid, alternative investment, to investors.   

FS Global Credit Opportunities Fund is a close ended fixed income feeder fund launched by Franklin Square Capital Partners. The fund invests primarily in global corporate credit, including loans, bonds and other credit instruments that companies use to finance their operations.  

According to filings with the SEC this week, FS Global Credit Opportunities Fund has announced plans to list its common stock on the New York Stock Exchange before the end of the third quarter of 2022. The company will trade under the ticket “FSCO” and will change its name to FS Global Credit Opportunities Corp., according to the filings. 

FS Global Credit Opportunities Fund plans to launch one tender offer prior to suspending it share repurchase program (SRP) on March 31st. After listing on the NYSE, the fund plans to implement an open-market share repurchase program. 

While the current Net Asset Value reported by the company is $7.49 per share, shares of the fund have recently been listed for sale by CTT Auctions, a secondary market for illiquid investments for just $5.50 per share. The original offering price was $10.00.  

The trouble with Business Development Companies (BDCs) is that they are complex and inherently risky products.  

Complex, High-Risk Investment  

According to its prospectus, an investment in this BDC involves a high degree of risk and may be considered speculative. Risk factors to consider:  

-this investment is not suitable for an investor if they need access to the money they invest.  

-Shareholders should consider that they may not have access to the money they invest for an indefinite period of time.  

-Unlike an investor in most closed-end funds, shareholders should not expect to be able to sell their common shares regardless of how performs.  

-If a shareholder is able to sell their common shares, the shareholder will likely receive less than their purchase price and the then current NAV per common share.  

BDC Sales & Performance in 2020  

Unfortunately for investors, sales of nontraded BDCs hit new lows in 2020 and also had poor performance due to COVID-19’s negative effect on returns, according to a report by Robert a Stanger & Co.  

Broker-dealers reportedly sold just $362.3 million in nontraded BDCs last year, the least since 2010, which was the year after the first product was launched, according to Robert A. Stanger & Co. Inc. Broker-dealers have sold more than $22.6 billion of nontraded BDCs since 2009. The brokers or advisors usually charge a 7% commission and the firm 1%, which translates into a total of $1.8 billion in commissions over that time, according to Investment News.  

Many of these non-traded BDCs were promised to provide steady growth, and invulnerability from volatile markets, which has not happened. According to the Wall Street Journal, FINRA’s Vice President for Corporate Financing has said these products are an “ongoing concern” for the regulator and that “firms must ensure they are suitable for an investor’s risk profile and investment strategy.”  

Investors looking to sell BDCs, often have difficulty finding a buyer, and can suffer significant losses on the sale. They also tend to come with high sales commissions and fees.  

Broker dealers are required to inform clients of the risks associated with investment recommendations. They must ensure that those recommendations are suitable for the investor in light of the investor’s age, risk tolerance, net worth, and investment experience. Firms that fail to do so may be held responsible for any losses.  

Filing a Complaint against your Brokerage Firm  

If you have suffered losses investing in FS Global Credit Opportunities Fund, the securities attorneys at The White Law Group may be able to help you. 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 firm, please visit www.whitesecuritieslaw.com.