Ladenburg Thalmann Financial Services (NYSE: LTS), a publicly traded financial services firm, disclosed in its quarterly financial report that multiple arbitration claims and one class action lawsuit were filed against Triad, one of its broker-dealer subsidiaries, relating to the sale of private placements sponsored by GPB Capital Holdings.
GPB Capital is a New York-based alternative asset management firm, that focuses on acquiring private companies in various industries, including the automotive retail and waste management sectors, and raised more than $1.8 billion in investor equity through various private placement offerings.
Ladenburg noted that from July to October 2019, six customers filed arbitration claims against Triad, alleging negligence in permitting its registered representatives to solicit investments in private placements offered by GPB because of purported excessive risk and unsuitability.
The claims include negligence, breach of contract, failure to supervise, and breach of fiduciary duty, with total compensatory damages of nearly $1.7 million.
Triad was also named as a defendant in a class action lawsuit, as reported by The DI Wire last week, along with 75 other broker-dealers that sold GPB investment products.
The lawsuit was filed in United States District Court for the Western District of Texas in October 2019 and alleges fraud, breach of fiduciary duty, negligence, and violations of the Texas Securities Act. Damages are unspecified, but Triad said that it intends to “vigorously defend against all of these matters.”
The complaint claims that GPB was operating as a Ponzi scheme and charged “exorbitant” fees of up to 20 percent, with sales commissions of approximately 11 percent.
GPB suspended its fundraising efforts and redemptions in August 2018 to focus on accounting and financial reporting on two of its funds, the GPB Automotive Portfolio and the GPB Holdings II. The audited financial statements were expected at the end of September 2019 but were delayed until the end of the year due to “new challenges” facing the company.
In other company news, yesterday, Ladenburg announced that it plans to merge with Advisor Group, one of the nation’s largest networks of independent wealth management firms. Ladenburg agreed to be acquired by Advisor Group through a cash merger, and the combined company will have nine broker-dealers, with nearly 11,500 financial advisors and more than $450 billion in client assets. The transaction is expected to close in the first half of 2020.
Ladenburg’s five independent broker-dealer subsidiaries include Securities America, Triad Advisors, Securities Service Network, Investacorp and KMS Financial Services.