Business Development Corporation of America (BDCA) Losses and Lawsuits

Levin Law, P.A. Is Investigating Brokerage Firms That Recommended and Sold Business Development Corporation of America (BDCA) Shares to Customers

The national securities law firm, Levin Law, P.A. (“Levin Law”) is investigating brokerage firms that recommended and sold shares in Business Development Corporation of America to their customers.  If your investment advisor, stockbroker, or other financial professional recommended and sold you shares in Business Development Corporation of America (BDCA) and you suffered significant losses or are in doubt regarding the value of your BDCA investment, please contact us at (305) 402-9050 or contact@levinlawpa.com. Recently, investors believe that they have suffered significant losses from their BDCA investments, particularly when their advisors have recommended that they place a significant percentage of their portfolio assets in BDCA or other business development companies.

Business Development Corporation of America is a Risky and Complex Investment

BDCA is a non-traded business development company, also known as a BDC and provides financing to small companies.  BDCA first offered shares in 2011 and raised $1.9 billion at $11.15 per share.  BDCA’s current stated share value is significantly lower than its offered amount.  Further, it is believed that BDCA’s shares trade on the secondary market at approximately 50% of the initial price.

Non-traded BDCs like BDCA do not trade like a stock or a bond on a national exchange. They generally are considered a risky, complex, and illiquid, private placement investment.  Thus, BDCA shares can be difficult to sell because BDCA investors can typically only sell their shares through redemption with the issuer or through a fragmented secondary market.  In addition, non-traded BDCs such as BDCA have high up-front fees — typically as high as 10% — which are paid as commissions or sales credits to the broker or broker-dealer.

BDCs may promise high returns to investors.  Because many BDCs use significant amounts of leverage, however, uninformed investors may come to learn too late that their investment carries considerable risk.  BDC assets generally are made up of financially distressed companies or brand new, unproven small to mid-size businesses and are thus risky investments. The companies that make-up BDCs are not market-tested, so there is uncertainty in how they will perform. An investor may not have access to all the information regarding the underlying assets that make up a BDC’s portfolio. Furthermore, BDCs may overvalue the companies in their portfolio, a material fact of which investors are not informed.  Without transparency regarding the underlying investments that make up a BDC, there is no way for an investor to know what kind of risk they are taking.

BDC assets generally are made up of financially distressed companies or brand new, unproven small to mid-size businesses and are thus risky investments. The companies that make up BDCs are not market-tested, so there is uncertainty in how they will perform. An investor may not have access to all the information regarding the underlying assets that make up a BDC’s portfolio. Furthermore, BDCs may overvalue the companies in their portfolio, a material fact of which investors are not informed.  Without transparency regarding the underlying investments that make up a BDC, there is no way for an investor to know what kind of risk they are taking.