UPDATE: We have created a site specific hub for investors wanting information about the Aequitas Situation.
In the last two weeks, we have been contacted by investors around the country who were sold investments in the Aequitas Income Opportunity Fund II, LLC in 2015 and into 2016. This was at a time when the Securities and Exchange Commission was investigating Aequitas, when Aequitas was unable to make payments on its private notes to lenders, and when the Consumer Financial Protection Bureau was investigating Aequitas for its lending practices. We are at a loss to understand how professional Registered Investment Advisory firms and their investment advisors would put their clients’ retirement money into the Income Opportunity Fund II (or any Aequitas investment) in 2015 and 2016 in light of those events. We also question how Aequitas and its accountants and legal advisors could offer those investments without amending or supplementing their written disclosures to reflect Aequitas’s list of new problems.
Early Aequitas Warnings.
Investor rights attorney Bob Banks (click here for full biography) has been following Aequitas since 2011, when a high net worth client asked for advice on whether an investment in secured subordinated promissory notes issued by Aequitas Commercial Finance, LLC Fund was a safe investment. After reviewing the prospectus for that investment, Banks strongly advised his client not to make the investment. Among other things, Banks told his client that, contrary to the oral statements that were made to him, the Aequitas fund was not comprised of truly “secured” notes because other creditors would be paid before investors per the subordination agreements tied to the notes. Additionally, Banks noted, the Commercial Finance LLC notes involved loans to companies that were not able to get financing from traditional financial institutions, making them more of a credit risk. The “security” that was touted on some of the loans was equipment whose true value was not disclosed and may have been worth less than the loans they secured. And, the “security” was based on personal guarantees from persons of unknown credit reliability. Finally, Banks advised his client of the levels of fees charged to investors in the Commercial Finance LLC Fund, which is a common denominator running through all of the Aequitas investments Banks has reviewed.
Since then, Mr. Banks, associate attorney Darlene Pasieczny, and others on the team at Samuels Yoelin Kantor have followed Aequitas’s growth decline.
What Now? Primer On The Laws Governing Investment Advisors and Issuers of Investment Securities.
It is against the law to sell investments by means of misrepresentations of fact or by omitting to state important facts that a reasonable investor would want to know about. The rules governing FINRA-licensed financial advisors requires that the advisor understand any investment he or she recommends, and state that advisors cannot recommend any investment that is not suitable to the investment objectives and risk tolerance levels of the investor. The law also provides that Registered Investment Advisors have a fiduciary duty to their clients. That means, first and foremost, that they must place their clients’ interests ahead of their own interests. In other words, they cannot recommend investments that pay high commissions and fees if it is not in their clients’ best interest. We believe that Aequitas investments were sold in violation of the securities laws and the fiduciary responsibility laws, and that the investors we have agreed to represent are entitled to a refund of their investments, together with interests and their attorney fees. We are preparing to pursue those claims for investors in the Aequitas Income Opportunity Fund II and all other Aequitas investments that were misrepresented to individuals and institutions.