Rich, Intelisano & Katz Lawyers Investigate Regulation D Offerings Issued by HJ Sims & Co. Inc.

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