Prospect Floating Rate and Alternative Income Fund: Lawsuit Investigation

Prospect Floating Rate and Alternative Income Fund Lawsuit Investigation

Have you suffered investment losses in the Prospect Floating Rate and Alternative Income Fund?
The White Law Group continues to investigate potential securities claims involving FINRA-registered broker-dealers who may have improperly recommended Prospect Floating Rate and Alternative Income Fund to retail investors.

Prospect Floating Rate Fund: Investor Concerns

In February 2023, the Prospect Floating Rate and Alternative Income Fund warned shareholders that “there is substantial doubt about the company’s ability to continue as a going concern” for at least one year after February 13, 2023.

The business development company (BDC), formerly known as Prospect Sustainable Income Fund Inc., Prospect Flexible Income Fund Inc., TP Flexible Income Fund, and Triton Pacific Investment Corporation, noted that it had been unable to raise sufficient capital to build a portfolio that could cover its operating expenses.

Prospect reportedly relied on an expense limitation agreement with its adviser to fund distributions and pay certain expenses.

In a filing dated February 2, 2024, the company disclosed plans to raise $100 million in capital from investors.

2025 Update: Declining Performance and Net Asset Value (NAV)

According to the company’s Form 10-K filed for the fiscal year ending June 30, 2025, the Prospect Floating Rate and Alternative Income Fund continues to face challenges despite an increase in investment income. The fund’s net asset value (NAV) per share fell to $4.50, down from $4.69 in 2024, and a significant decline from the original $10 offering price.

While the fund reported net investment income of $3.6 million in 2025 (compared to a loss of $214,815 in 2024), rising operating expenses of $7.3 million and over $2.6 million in realized and unrealized losses negatively impacted overall results. The fund also paid approximately $3.1 million in shareholder distributions, which in some cases exceeded its income, raising questions about sustainability.

To support operations and provide liquidity, the company issued 2.1 million new shares, raising about $10 million in additional capital during the year. Despite the capital raise, the declining NAV and continued expenses highlight the risks facing investors in the Prospect Floating Rate and Alternative Income Fund.

Risks of Non-Traded Business Development Companies (BDCs)

BDCs were created by Congress to encourage investment in privately owned U.S. companies. Non-traded BDCs, however, carry many risks:

• High upfront fees and commissions – often 7% to brokers and 1% to the firm.

• Illiquidity – shares are not traded on public exchanges, making it difficult to sell.

• Declining NAVs – distributions may come from capital rather than earnings.

• Suitability concerns – not appropriate for many retail investors, particularly retirees or conservative investors.

FINRA has repeatedly warned firms that they must ensure these investments are suitable for each investor’s age, financial situation, net worth, and risk tolerance. Firms that fail to do so may be liable for investor losses.

FINRA Arbitration vs. Class Action

Investors considering recovery options often ask whether they should join a class action or pursue a FINRA arbitration claim.

• Class actions typically involve a group of investors suing the issuer of the investment (such as Prospect Floating Rate Fund). However, recoveries may be limited and can take years to resolve.

• FINRA arbitration is usually a more direct path, as claims are filed against the brokerage firm or financial advisor that recommended the investment. Investors may recover damages if the firm failed to conduct adequate due diligence or made unsuitable recommendations.

Most investors seeking to recover losses in the Prospect Floating Rate and Alternative Income Fund will likely need to pursue FINRA arbitration claims against their brokerage firms.

Potential Lawsuits to Recover Investment Losses

If your broker or financial advisor recommended the Prospect Floating Rate and Alternative Income Fund without properly disclosing the risks, you may be entitled to pursue a claim for recovery of your losses.

The White Law Group has represented thousands of investors in claims against broker-dealers for unsuitable investment recommendations.

Call our securities attorneys at 888-637-5510 for a free consultation.

Frequently Asked Questions (FAQs)

1. What is the Prospect Floating Rate and Alternative Income Fund?
It is a non-traded business development company (BDC) that invests in private U.S. companies. While designed to provide access to private debt markets, it carries significant risks, including high fees, illiquidity, and declining share values.

2. Why are investors filing complaints and lawsuits involving Prospect Floating Rate Fund?
Many investors allege their brokers misrepresented the safety of the fund or failed to perform due diligence before recommending it. Given the fund’s negative performance and steep NAV decline, some investors have sustained substantial losses.

3. How can I recover losses in the Prospect Floating Rate Fund?
You may be able to pursue recovery through FINRA arbitration, a forum where investors can file claims against the brokerage firms that sold the investment. This process is often more effective than joining a class action.

The White Law Group

The White Law Group is a national securities fraud, securities arbitration, and investor protection law firm with offices in Chicago, Illinois and Seattle, Washington. We represent investors in FINRA arbitration claims throughout the country.

For more information, please visit www.whitesecuritieslaw.com.