Galvin investigating 63 broker-dealers selling private placements from GPB Capital

The firm sells illiquid, high-risk and high-commission alternative investments

Sep 12, 2018 @ 2:53 pm

By Sarah Min

Massachusetts Secretary of the Commonwealth William Galvin announced a sweeping investigation Wednesday into 63 broker-dealer firms selling private placements from GPB Capital Holdings.

The Massachusetts Securities Division, which Mr. Galvin heads, is investigating sales practices regarding GPB after receiving a tip from an independent firm, according to a statement from his office. The New York-based GPB, which sells illiquid, high-risk and high-commission alternative investments, has recently stated that it has stopped raising funds and is suspending redemptions to concentrate its efforts on financial reporting.

As InvestmentNews reported in July, two GPB private placements, GPB Automotive Portfolio and GPB Holdings II, are required because of their size to file statements with the Securities and Exchange Commission. However, both missed the deadlines to file, according to Mr. Galvin's office.

(More: Investors wait for financial statements from leading seller of alternative investments)

Meanwhile, the company is also pursuing a private lawsuit with a former business partner in relation to a $40 million auto dealership sale.

"GPB Capital Holdings, LLC is aware that certain broker-dealers have received requests for information from the Commonwealth of Massachusetts. GPB Capital is not in a position to comment on that matter. 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," a spokesperson said in a statement made on behalf of GPB Capital.

"While my Securities Division's investigation is in the very nascent stages, recent activity within GPB raises red flags of potential problems," Mr. Galvin said.

The division is requesting documents in relation to sales activity in Massachusetts, marketing documents provided to investors, and information regarding investor suitability.

"I must also express my serious concerns regarding the expected proposal by the SEC to expand who can participate in private securities offerings," Mr. Galvin said. "Without a strong fiduciary rule to prevent sales practice abuses, it is utter folly not to know that Main Street investors will be hurt."

(More: Top private placement manager GPB Capital halts sales to review accounting)


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