HJ Sims & Co. Inc. (“HJ Sims”) appears to have used Regulation D (“Reg D”) offerings to pass its risk of loss onto its customers while it retained the potential for significant gains. A scheme like this would violate numerous FINRA Rules and regulations, including suitability, Regulation BI (“Reg BI”), and due diligence obligations. See FINRA’s Due Diligence and Suitability of Private Placement. RIK’s investment lawyers are currently investigating potential claims related to HJ Sims’ possible improper sales practices.
Reg D securities are non-public offerings designed to help operating firms raise funding, and are exempt from certain security registration requirements. This type of private placement is offered by the “issuer,” and who, under the rules, is only required to make limited disclosures regarding the price of the offering – making it more challenging for investors to determine a fair price of the private placement when compared to publicly traded investments.
In the past 10 years, HJ Sims sold 93 Reg D Offerings (listed below), where most of the issuers of the Reg D bonds were owned and/or controlled by HJ Sims executives. Because of this, not only did HJ Sims gain commissions and other fees associated with the offerings, “[i]f a Sims’ Reg D offering failed, the executives would suffer a portion of the losses but realize all the gains if an offering succeeded.” See HJ Sims Reg D Offerings: Heads, HJ Sims Wins – Tails, Their Investors Lose. Ultimately, the risks associated with the Reg D offerings were passed onto the customers. As stated by SLCG Economic Consulting, “HJ Sims ability to shift losses to its clients would naturally lead it to invest in riskier projects with unusually high likelihood of failure.” See id.
According to SLCG, out of the 93 offerings sold at HJ Sims, HJ Sims was the sole brokerage firm for 84, and at least 43 have failed to file annual registration forms required by state laws. Many of these offerings appear to have been significantly overvalued and at least 10 have defaulted. Another concern is that, in general, where corporate bonds have defaulted, the price of the bond will drop significantly prior to the first default. This is not the case with HJ Sims’ overvalued Reg D offerings where there was no significant drop in price prior to its default.
With its Reg D Offerings, HJ Sims seems to have made profits from commissions and fees, and had significant potential upside with limited risks whereas their customers were left bearing the risk of significant potential losses without the upside of significant potential gains. This unbalanced ratio may be unsuitable, among other things, for many investors. And, unfortunately for investors, many have losses due to HJ Sims’ Reg D offerings.
Potential Recovery for Losses Sustained from Reg D Offerings
RIK’s investment lawyers have decades of experience helping investors recover losses sustained from unsuitable investments and investment products. RIK has two of the largest customer arbitration awards rendered against financial firms, the largest award rendered against Goldman Sachs, and most recently the largest award against UBS relating to its Yield Enhancement Strategy. If you have losses due to Reg D offerings or other private placements, feel free to contact our lawyers here for a free consultation.
Below is a list of the HJ Sims Reg D Offerings in the last 10 Years:
- Cleveland Thermal, LLC
- Lake County, Florida
- Fountains Acquisition Finance I, LLC
- Elderwood Acquisition, LLC
- Stuart Lodge Living LLC / Stuart Lodge Properties LLC
- Sims Cathcart Funding, LLC
- Cleveland Thermal, LLC
- HBS Acquisition Finance, LLC
- Orchard View Acquisition, LLC
- DRSN Real Estate GP LLC
- MacKenzie Preferred Funding, LLC
- Fox Ridge Finance, LLC
- Heatherwood Acquisition, LLC
- Sims Merrill Gardens III, LLC
- Discovery Funding Sarasota Bay, LLC
- Athena Acquisition VI, LLC
- Epic Finance I, LLC
- Carmel Acquisition, LLC
- Gryphon Finance I, LLC
- Treeo Funding I, LLC
- Hawkeye Village Finance I, LLC
- Fountains of Hope, LLC
- Tuscan Isle Property Company, LLC
- Tuscan Isle Holdings 1, LLC
- Tuscan Gardens of Venetia Bay Properties, LLC
- Gryphon BH Funding, LLC
- Riverchase Funding, LLC
- HJSI Athena Portfolio Finance, LLC
- Meridian Portfolio Funding I, LLC
- Tuscan Isle ChampionsGate Holdings, LLC
- Tuscan Isle ChampionsGate Prop. Co., LLC
- Cypress Point Funding, LLC
- Wakefield Portfolio Funding I, LLC
- Affinity Portfolio Funding, LLC
- BHCP Acquisition, LLC
- Affinity Portfolio Funding II, LLC
- Affinity Portfolio Funding III, LLC
- Affinity Development Funding I, LLC
- Vantage Point Funding I, LLC
- Sante Funding I, LLC
- Tuscan Gardens of Palm Coast Properties, LLC
- Vita Funding I, LLC
- LW Development Funding I, LLC
- Affinity Funding IV, LLC
- NHG Funding I, LLC
- Affinity Portfolio Funding V, LLC
- Affinity Portfolio Funding VI, LLC
- Monarch Funding I, LLC
- Sims Benchmark V, LLC
- TL Funding I, LLC
- Sims Merrill Gardens V, LLC
- Stonebridge Funding I, LLC
- NHG Funding II, LLC
- Riverview ALF Holdings, LLC
- Civitas Funding I, LLC
- Inspirit Venue Funding I, LLC
- Sims High Income Portfolio, L.P.
- Poet’s Walk Funding I, LLC
- NHG Funding III, LLC
- Monarch Funding II, LLC
- DRSN Real Estate GP LLC
- Monarch Funding III, LLC
- Madison Funding I, LLC
- TL Funding II, LLC
- Monarch Funding IV, LLC
- NREA Southeast Portfolio Three, DST
- Links Funding I, LLC
- Family Health Funding I, LLC
- Sims Benchmark VI, LLC
- NREA Retreat, DST
- Sims Merrill Gardens VI, LLC
- Griffin Capital (South Beach – Vegas) DST
- TL Funding III, LLC
- Caraday Funding I, LLC
- Crown Point Funding I, LLC
- Magnolia Funding I, LLC
- Voralto Funding I, LLC
- Links Funding II, LLC
- ALG Funding IX, LLC
- Watermark FL Funding, LLC
- SAL Funding I, LLC
- Commercial Equipment Finance Income Fund, LLC
- TL Funding IV, LLC
- Elevate Funding I, LLC
- Vinebrook Homes Trust, Inc.
- Parliament Credit Opportunities Fund, LLC
- Comprehensive Care Funding I, LLC
- PPG Funding I, LLC
- Hill Valley Funding I, LLC
- Links Funding III, LLC
- PPG Funding II, LLC
- NexPoint Buffalo DST
- NexPoint Hughes DST