FINRA to Issue New Guidelines for Non-Traded Business Development Companies (BDCs)

The Financial Industry Regulatory Authority Inc. (FINRA) may soon issue an investor alert warning against investing in non-traded BDCs, or business development companies. Securities commissioner, A. Heath Abshure, noted that in the past one or two filings were regular;  more recently, there are at least 10 non-traded BDCs  either raising money or in line to become offerings.

BDCs were created by Congress in the 1980s as a response to a perceived crisis in the capital markets during the 1970s. They were meant for small and growing companies, effectively providing them access to capital. Eric Schwartz, chief executive of Cambridge Investment Research Inc. notes, “[non-traded BDCs have a lot of appeal right now”.  BDCs invest in the debt and equity of growing companies. The product is usually reserved for investors with a net worth of $250,000 or more, or a net income of at least $70,000 combined with a net worth of at least $70,000. Investors are to be informed of the product’s illiquidity. Currently, there are about 28 publicly traded BDCs ranging in value from $10 million to $3 billion.

Eccleston Law represents individual and institutional investors nationwide to recover their investment losses caused by securities fraud, unsuitable investment recommendations, breach of fiduciary duty, negligence or other misconduct. We have extensive experience representing investors in arbitration and litigation disputes with securities broker-dealers and investment advisory firms, and have recovered tens of millions of dollars for investors.

If you are an investor that has suffered losses investing in a non-traded BDCs, please contact one of our attorneys at 312-332-0000 to discuss your recovery options.