Massachusetts Secretary of State William Galvin has launched an investigation into the sales practices of independent broker-dealers in connection with private placements that are sponsored by GPB Capital Holdings.
The Securities Division has information about one independent firm’s sales practices in connection with GPB sales, coming in the wake of GPB’s announcement that it has temporarily stopped bringing in new funds and suspended redemptions while it concentrates on accounting and financial reporting.
In addition, two private placements that are required because of their size to file financial statements with the Securities and Exchange Commission failed to meet filing deadlines. There’s also the matter of a private lawsuit with GPB and a former business partner who allegedly failed to follow through with a $40 million auto dealerships sale.
These matters have led to a sweep of 63 broker-dealers that sell GPB private placements, with the division requesting data on the extent of sales activity in Massachusetts, disclosure and marketing documents that the firms provide to investors on the solicitations and data on investor suitability.
“While my Securities Division’s investigation is in the very nascent stages, recent activity within GPB raises red flags of potential problems. These red flags, coupled with the fact that sales of private placements by independent broker-dealers have been an ongoing source of investor harm, have led to this investigation,” Galvin says in a statement.
He adds, “I must also express my serious concerns regarding the expected proposal by the SEC to expand who can participate in private securities offerings. Without a strong fiduciary rule to prevent sales practice abuses, it is utter folly not to know that main street investors will be hurt.”
A GPB Capital spokesperson said the company couldn’t comment on the BD sweep, but “as we have previously disclosed to investors, GPB Capital is in the process of completing the audits of the financial statements for certain of its funds and is currently not accepting new capital from investors until that process is complete.”
— Check out Galvin Busts NPH Affiliate for Improper REIT Sales on ThinkAdvisor.