SEC, Finra investigating GPB fund raising: sources

Regulators are making inquiries into GPB and the broker-dealers that sold their fund shares, according to sources

Dec 18, 2018 @ 2:05 pm

By Bruce Kelly

In the wake of a state investigation into broker-dealers selling private placements by GPB Capital Holdings, the Financial Industry Regulatory Authority Inc. and the Securities and Exchange Commission have launched their own investigations, according to sources.

In September, Massachusetts Secretary of the Commonwealth William Galvin announced a sweeping investigation into 63 broker-dealer firms selling private placements from GPB Capital Holdings, which primarily buys auto dealerships.

Since then, both Finra and the SEC have made similar inquiries of broker-dealers, said one brokerage executive who asked not to be identified.

The SEC has also started looking under the hood at GPB Capital, said another industry executive, who also asked not to be identified. The focus of the SEC's questions is the accuracy of disclosures made to investors, the performance of various funds and the distribution of capital to investors, according to the executive.

It is common for national regulators like Finra and the SEC to launch their own investigations after one or more states announce an investigation.

GPB has raised $1.8 billion from investors who bought the high-commission private placements. Another brokerage executive, who also asked not be named, said that the loads for the private placements were 12% with two parts: a 10% commission to the broker and broker-dealer and 2% in offering and organization costs.

A spokeswoman for GPB, Dana Taormina, said the firm had no comment about any investigations launched by Finra and the SEC. Both regualtors also declined to comment.

GPB was launched in 2013 and became one of the fastest growing private placement firms that sell shares in their funds through independent broker-dealers.

GPB has spent much of this year dealing with a variety of problems.

Two of GPB's private placements are required to file financial statements with the SEC, and both earlier this year missed filing deadlines.

The firm is also facing a private lawsuit with a former business partner who allegedly failed to follow through with a $40 million auto dealership sale.

And i— August, the firm said it was taking a break from raising new money to focus on straightening out the accounting and financial statements of its two large funds. Soon after, it said it was restating 2015 and 2016 financial statements of certain funds as part of an accounting review. Last month, the firm's auditor, Crowe LLP, resigned.

0
Comments

What do you think?

View comments

Recommended for you

Featured video

INTV

Why millennial demand for ESG is falling on deaf ears

Editorial director Fred Gabriel and senior columnist Jeff Benjamin say there's a disconnect between the big appetite for environmental, social and governance funds in 401(k) plans and their offering.

Latest news & opinion

Principal-Wells Fargo retirement deal would be among largest ever

Acquisition would be in line with trend of record keepers seeking to gain scale to combat fee reduction.

ESG options scarce in 401(k) plans

There's growing interest among plan participants, but reluctance to add funds that take into account environmental, social and governance factors persists.

Ameriprise getting ready to launch its bank

Firm's advisers will soon have access to lending products such as mortgages.

Envestnet acquires MoneyGuide for $500 million

Deal will allow Envestnet to deepen integrations between MoneyGuide and its other wealth management solutions.

Genworth move could signal big shift in distribution of long-term-care insurance

Insurers may turn to direct-to-consumer sales only, bypassing brokers and insurance agents.

X

Hi! Glad you're here and we hope you like all the great work we do here at InvestmentNews. But what we do is expensive and is funded in part by our sponsors. So won't you show our sponsors a little love by whitelisting investmentnews.com? It'll help us continue to serve you.

Yes, show me how to whitelist investmentnews.com

Ad blocker detected. Please whitelist us or give premium a try.

X

Subscribe and Save 60%

Premium Access
Print + Digital

Learn more
Subscribe to Print