FS Investment Corporation III and FS Investment Corporation IV Closes to new subscribers

According to recent SEC filings, two FS Investments have each closed their public offerings to new investors.

FS Investment Corporation III and FS Investment Corporation IV are non-traded business development companies. On November 15th the two companies closed the offering to new subscriptions.

The two BDCs are sponsored by FS Investments, formerly Franklin Square Capital Partners, and focus primarily on investing in the debt securities of private companies throughout the United States.

The BDCs will continue to conduct quarterly tender offers through their respective share repurchase programs, and distributions will be declared and paid on a monthly basis, according to reports.

The companies say that participating stockholders will be able to reinvest distributions at a price determined by each board and the distribution reinvestment plan will remain in effect. The price will not be less than the net asset value per share, and no more than 2.5 percent greater than the NAV per share.

FS Investment Corporation III, which was declared effective in December 2013 and  was “designed to provide a high level of current income”, according to their website. FS Investment Corporation IV was declared effective in October 2015.

Last year FS Investment Corporation III closed its public offering to investors in the independent broker-dealer channel, and currently offers shares to investors in the institutional channel and to certain affiliated investors.

The Risks of BDCs

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

Business Development Companies (BDCs) like FS Investment Corporation III and FS Investment Corporation IV 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.

Brokers have an enormous incentive to push these kinds of products 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 an FS Investments offering. 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 and Franklin, Tennessee. The firm represents investors throughout the country in claims against their brokerage firm.