Concorde Investment Services, an independent contractor broker-dealer based in Ann Arbor, Mich., is facing scrutiny for selling now defunct private securities deals backed by assisted living developer Inspired Healthcare Capital.
Inspired Healthcare filed for chapter 11 bankruptcy on February 2. The value of the $1.2 billion of private placement, DSTs – Delaware Statutory Trusts – and other private vehicles issued by Inspired Healthcare since 2016 and sold by independent broker-dealers is also in question.
According to court filings, broker-dealers that sold the now defunct private securities deals backed by Inspired Healthcare Capital generated more than $100 million in fees and commissions for securities that no longer issue distributions – think dividends - to clients.
With 145 financial advisors, Concorde Investment Services will be a likely target of customers filing complaints against the firm. Working with plaintiff’s attorney, clients routinely file complaints against firms when high-priced, high-risk private investments fall apart.
Emerson Equity was the managing broker-dealer for Inspired Healthcare products and likely the biggest seller of the dealers.
“We have a couple of Inspired Healthcare cases involving Concorde,” said Kristian Kraszewski, a plaintiff’s attorney. “Were they among the biggest sellers?”
Concorde Investment Services in an email to InvestmentNews said it had limited exposure to the deals, approving for sale just three of the 40 deals sponsored by Inspired Healthcare.
“The assets associated with those programs were performing, operating healthcare facilities at the time of Inspired Healthcare’s bankruptcy filing, with positive net income and strong occupancy,” a company spokesperson wrote in the email. “In 2023, Concorde suspended Inspired Healthcare from its platform and ceased approving any new Inspired-sponsored offerings.”
The firm has had problems in the past with alternative investments, which typically charge clients steeper commissions than plain vanilla mutual funds and exchange-traded funds.
FINRA in 2024 censured and fined Concorde Investment Services $110,000 after an investigation revealed it failed to supervise advisors who recommended excessively risky alternative investments to half a dozen clients.
Meanwhile, Concorde Investment Services is making its argument that the investments it sold clients are solvent and should not be part of the bankruptcy proceedings. It's not clear whether that argument will convince the judge in the case.
Concorde has appeared in the Chapter 11 bankruptcy proceedings and filed objections to prevent assets belonging to the Fort Myers and Augusta Delaware statutory trusts from being used to support unrelated debtor entities, according to the company spokesperson.
“Concorde has also opposed proposed financing arrangements that could encumber the DST assets,” the spokesperson noted. “In addition, Concorde filed a motion seeking dismissal of the bankruptcy filings for the Fort Myers and Augusta DST entities, asserting that the governing trust structures and applicable law do not authorize those entities to seek Chapter 11 protection.”
“Concorde continues to participate in the proceedings and remains focused on preserving the value of the properties and protecting the interests of the investors involved,” the spokesperson added.
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