The FS Energy & Power Fund was a speculative and high risk investment which was structured as a Business Development Company. Typically Business Development Companies (BDCs) are not registered with the SEC, and they are not publicly traded or listed on public exchanges. According to the SEC, BDCs “are a category of closed-end funds that are operated for the purpose of making investments in small and developing businesses and financially troubled businesses.” The sponsor of the BDC typically sells a limited partnership share at $10/share, but deducts substantial amounts of the investment made to pay for offering costs. The sponsor then invests the remainder of the money in a financially troubled, developing, or small business opportunity. For FS Energy and Power Fund, the investment policy was to invest at least 80% of its assets into Energy companies.
As of June 2021, secondary market data indicates the FS Energy and Power Fund has recently sold at auction for as low as $2 or even less. Investors who purchased the FS Energy and Power Fund at $10 a share could have suffered losses of 80% or more of the principal they invested. The significant losses in the FS Energy and Power Fund have devastated many retirees and retail investors.
BDC sponsors like FS Energy and Power deduct extremely high fees, up front and annually. For instance, the FS Energy and Power Fund charged over 11% of upfront commissions and fees, meaning only 88.5% of the investors capital was actually used for an investment. Thus, in order to just obtain the principal back, the investor would need to experience a 13% return. However, the BDC also charged annual expenses on an ongoing basis, over 6% on the net assets of the BDC. Thus, even if the Fund had positive “returns” those returns could be entirely eaten up by fees and expenses. The substantial up-front and ongoing fees charged by BDCs are the result of serious conflicts of interest. Financial Advisors who sell these investments are awarded significant commissions, and the sponsors charge significant fees to line their own pockets.
There is little to no active secondary market for the shares of BDCs, and, as a result, the investments lack any significant liquidity. The FS Energy and Power Fund was no different. Retail investors had no way to independently judge or question the prices set by the sponsor or brokerage firm. The lack of oversight and secondary market creates a scenario that encourages inefficient and self-serving management that would otherwise not exist in a publicly traded market.
The FS Energy and Power Fund was also a blind pool. This mean that the Fund and the Fund’s advisor, FS Advisor, had not identified, made investments, or contracted to make investments when they began offering shares of the Fund. Thus, it was not possible for an investor or advisor to evaluate the economic, transaction, financial, or operational merits or data concerning the investments. Making matters worse, FS Energy was a new company that had no operating history when its shares were first operated.
The FS Energy and Power Fund had particular risks, and it only should have been sold and recommended by financial advisors to a narrow group of investors (if any investors) and only after the risks were fully disclosed. Our investigation has found numerous investors who were recommended the FS Energy and Power Fund along with other illiquid, high fee, and high risk products to retirees and conservative or moderate investors. If your broker or advisor sold you the FS Energy and Power Fund or other similar investments, you may have a legal right to recover your losses. We represent investors on a contingency fee basis, meaning there are no upfront costs or fees to you. We may be able to file a FINRA Claim to recover damages you suffered due to the negligent or unsuitable recommendations from your broker.
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At a time in our life when we were most vulnerable we lost control of our finances. We fell victim to a broker that took huge commissions and did not disclose that we were not able to access our money. Peter Mougey and his wonderful staff worked with us to make us whole again and got our money released. I cannot say enough about their work ethic, professionalism, and kindness during this stressful time for us. We had a 100% positive conclusion to our case and we strongly recommend Peter and the firm. We can now sleep at night! Fred & Pat H.
My husband and I were very pleased with the work that Peter and his team provided. He was very knowledgeable of the circumstances of our case and kept us informed throughout the process. He is extremely qualified and worked diligently on our behalf. We are positive that this case would not have been resolved in our favor had it not been for Peter's expertise and his passion. He definitely cares about his clients and we sincerely appreciate his efforts. Rachel C.
FRS is a governmental body. FRS retained the services of Peter Mougey of the LP law firm in a multimillion dollar lawsuit involving extremely complex issues. Mr. Mougey quickly mastered the issues and gave advice that was vital in bringing about a successful resolution. Two of the most important features of Mr. Mougey’s representation was his understanding of government and his ability to communicate complicated legal concepts to a 10-member board of trustees in language that was easily understood by all. I did not know Mr. Mougey before FRS retained him and, fortunately, have not experienced circumstances where the system would need his services again. However, if needed, I would have no hesitation in retaining his services again. Please let me know if you need any additional information or assistance. Steven S.
Edison's famous adage can't ever be ignored of course: 1 part inspiration and 99 parts perspiration. However the two attitudes must be present indissolubly--both are essential--if results are to be obtained. Peter Mougey’s group is aware of such a requirement, they work very hard at the latter, and the former comes easily to them, a rare combination anywhere to be found indeed. Raphael B.
I would like to express my sincere gratitude to Peter Mougey and your entire team on behalf of my family for the amazing job done during your representation. From day one I received kindness, rapid responses to all of my questions, with polite and patient encounters with all of your staff assistants. You are the best- and I will be eternally grateful to you and your entire team. Michelle E.