Recovery Options for FS Energy and Power Fund Investors: Updated January 2022
FS Energy and Power Fund was established in September 2010 in order to invest in income related investments in the energy sector. It is a private placement that has been largely unsuccessful, leading to investor lawsuits and arbitrations. It was a high risk, illiquid fund that should not have been sold to most retail investors. We also believe that many investors were mislead about the risks.
Investors Recovered Millions in 2021 from Lawsuits and Arbitrations
Investors in FS Energy and Power continued to recover millions of dollars from financial advisors who sold this product, as well as others like it. According to statistics from the Financial Industry Regulatory Authority, disputes regarding non-traded REITs and BDCs, like FS Energy, continued to be among the most common arbitration cases filed by investors in 2021.
Our attorneys have helped investors in FS Energy as well as other illiquid private investments, including REITs, BDCs and non-traded REITs. We have helped these investors by filing arbitrations that seek money damages against their financial advisors. Investors in these arbitrations can sue for the value of their principal plus interest and attorneys’ fees. In some situations, interest is calculated by using a benchmarked index. This is known as “well managed damages.” If you have questions about what damages are available in FINRA arbitrations, please contact attorney Marc Fitapelli.
Is Your Financial Advisor to Blame?
Financial advisors must recommend investments that are suitable and in the best interest of their clients. FS Energy was a high-risk investment that was not suitable for sale to most retail investors. If you can answer “YES” to any of the following questions you may be eligible to file an arbitration case seeing damages:
- Do you have a conservative or moderate risk tolerance?
- Did you invest a total of more than 10% of your investable assets in other illiquid investments? (including annuities)
- Were you 65 or older at the time of sale?
Fees, Fees and More Fees
Many of the financial advisors recommended this investment for one reason – commissions. What were the commissions for selling FS Energy? According to the 2016 Registration Statement of FS Energy, the total shareholder transaction costs for purchasing the fund is 11.5%. This means that for every $100 invested $11.50 is used to pay commissions and other fees. In addition to the 11.5% load, investors are also charged ongoing management and other fees of 6.42%. Both the load and the ongoing management fees significantly impair an investor’s return. The fees are also very high when compared to lower cost ETFs that achieve the same result (i.e. income with exposure to energy).
FS Energy Was a Non-Diversified Investment Fund
FS Energy is considered a non-diversified fund. This means its assets are concentrated in only one asset class, energy. Since it is a non-diversified fund, FS Energy should have only been recommended to investors with an otherwise well diversified portfolio. If your portfolio comprises of other illiquid investments like FS Energy, you may have a claim against your financial advisor.
Illiquid Stock that Cannot be Sold
How Can I sell FS Energy? The fund is illiquid, which means that there is no public market for its securities. There are private auction companies that sell the investment, but at a large discount. This discount is usually a reduction of 50% or more from the sponsor’s stated NAV, or net asset value.
Some financial advisors and salespeople may have provided investors with false information about the fund’s liquidity at the time of sale. The truth is that FS Energy and Power warns investors in its offering materials that its shares are “illiquid” and that there can be no future assurances of a liquidity event. In simple terms, this means that there is no guarantee that the investment will: (i) be listed on a national exchange; (ii) merge with a larger publicly traded company; or (iii) even liquidate on a date certain.
Do I have a Case?
Contact us if You Lost Money Investing in FS Energy & Power
Our law firm exclusively represents investors in FINRA Arbitration cases against financial advisors. We work on contingency, which means that we are not paid anything unless we are able to collect money for our clients. Our attorneys have successfully handled numerous cases involving losses related to FS Energy as well as other, equally risky, private placements. If you or someone you know lost money investing in FS Energy, please contact us at (800) 767-8040 for a free and confidential attorney consultation.