Did you lose money on ATEL funds bought on the recommendation of a broker or adviser?
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On April 20, 2022 GWG Holdings, Inc. (GWG) filed for bankruptcy in the U.S. Bankruptcy Court for the Southern District of Texas (case 22-90032). According to an article in the Wall Street Journal, published on the same day, the bankruptcy was due to “accounting issues...read more
ATEL Capital group has carved out a niche for itself connecting companies with equipment. And because every business needs some type of equipment—from Internet routers and office desks to airplanes—their funds may look like a safe way to make some money. But for many investors that appearance is deceptive.
In fact, thanks to self-serving practices by brokers and financial advisers, many investors do not understand the nature and the risks of funds like ATEL’s, which belong to a special class of risky, alternative investments known as private placements.
Private placements are not publicly traded and so can be very difficult to unload. What’s more, they pay out slowly and many produce little to no actual profit for investors. Often investors’ funds are never fully returned. Meanwhile, fees and commissions—for which the investor pays—can be quite high. Perhaps for that reason, brokers and advisers sometimes recommend them to clients for whom they are clearly a bad idea. (For a more detailed description of these investments and their risks, read our previous post.)
If you or a loved one has lost money because you invested in ATEL on the recommendation of an adviser or broker, Epperson & Greenidge may be able to help.
ATEL’s recent funds include:
ATEL Growth Capital Fund 8: Established in late 2011, and closed to new investors in August 2014, ATEL Growth Capital Fund 8 provides financing for equipment ranging from computers and furniture to trucks and MRI scanners, according to its prospectus. Its customers are emerging growth companies and established, privately held companies without publicly traded securities. As of September 30, 2018, it had collected approximately $16.2 million of investors’ money.
Only 87 percent of those funds are used directly for financing equipment. Sales commissions amount to 9 percent, while other expenses account for an additional three to four percent.
The fund began paying distributions in November of 2012. These payments, made quarterly or monthly by private placements, are often a source of confusion. In some cases, a broker or adviser may say or imply that they represent investment income and gain. However, that is generally not true. Instead, much or all of a distribution is typically the return of the funds invested.
ATEL 16: Formed at the end of 2012, and closed to new investors in November of 2015, ATEL 16 focuses on acquiring low-tech, low-obsolescence equipment, such as aircraft, bulldozers, marine vessels and office furniture and then leasing it to companies. It also provides financing for public and private companies, its prospectus says. Sales commissions and expenses eat up 10 percent of capital invested, while other costs account for an additional three percent.
As of September 30, 2018, ATEL 16 had collected approximately $42.9 million in investors’ money. The distributions it has been paying for the previous four years contained no income and gain, only return of principal.
ATEL 17: Formed in April of 2015, and closed to new investors in early 2018, ATEL 17, like its predecessor, focuses on acquiring mostly low-tech, low-obsolescence equipment to lease to corporate clients. It also provides financing to public and private companies, according to its prospectus. As with the two previous funds, investors can expect to see only 87 percent of their money used directly for these activities, with the rest consumed by sales commissions and fees.
As of September 30, 2018, ATEL 17 had collected approximately $25.7 million in investors’ money. The distributions it has been paying for the previous two and a half years contained no income and gain, only return of principal.
What you can do:
Investors who lost money after purchasing one of these ATEL funds on the recommendation of a broker or adviser may be able to recover their losses through a specialized area of the law called FINRA arbitration.
The attorneys at Epperson & Greenidge have extensive experience within FINRA and we specialize in bringing these claims on behalf of investors. We accept all cases on a contingency basis: we only get paid if and when you collect money. Time to file your claim may be limited, so call 877-445-9261 now to speak to an attorney for a free consultation.