If you are have suffered losses in Essex Capital Corporation, you may be able to pursue recovery of your losses through securities arbitration or litigation. Please call Kons Law Offices at (312) 757-2272 for a FREE, NO OBLIGATION consultation to discuss your investment loss recovery options.
Essex Capital Corporation Investors Can Pursue Recovery of their Losses
If you have suffered losses in the Essex Capital Corporation you may be able to pursue recovery of those losses through securities arbitration or litigation due to the lack of due diligence on Essex Capital Corporation, or an inappropriate level of risk that you were exposed to in the Essex Capital Corporation.
According to recent news reports, the Securities and Exchange Commission charged Essex Capital Corporation, an equipment leasing company and its founder Ralph Iannelli with defrauding investors in connection with sales of over $80 million in promissory notes.
According to the SEC’s complaint, between 2014 and 2017, Essex Capital Corporation and its founder, Ralph T. Iannelli, made a series of false and misleading statements and illusory personal guarantees to registered investment advisers to induce them to invest millions of dollars of their clients’ money in Essex’s failing equipment leasing business. The SEC alleges that Essex and Iannelli provided one investment adviser with fake financial statements that overstated Essex’s assets by more than $20 million and falsely told another investment adviser that Essex would assign equipment leases to its clients when the same leases had already been pledged as collateral for bank loans. The SEC’s complaint further alleges that as Essex’s finances deteriorated, the company resorted to frequent Ponzi-like payments, paying interest and principal to existing Essex investors with funds raised from newer investors. At the same time, Iannelli allegedly paid himself millions of dollars in bonuses and siphoned millions of dollars out of Essex through interest-free loans with no maturity date. According to the SEC, Iannelli personally owes the company over $6.4 million.
Investment Advisory Firms Had a Duty to Conduct Proper Due Diligence on Essex Capital Corporation
Securities broker-dealers and investment advisory firms have a regulatory duty to ensure that any investments they recommend to customers are suitable for them. This is especially important for brokerage and investment advisory firms selling promissory note investments like the Essex Capital Corporation.
FINRA rules and common law fiduciary duties require that securities broker-dealers and investment advisers conduct a suitability analysis when recommending securities to investors that will take into account the investors’ knowledge and experience. The brokerage or investment advisory firm must make reasonable efforts to gather and analyze information about the customer’s other holdings, financial situation and needs, tax status, investment objectives and such other information that would enable the firm to make its suitability determination. For investment advisers, they are required to make sure that the investment is in the best interests of the client.
In addition to ensuring that securities are suitable for its customers on an individual level, FINRA Rule 2111 (NASD Rule 2310) also states that a securities broker must have reasonable grounds to believe that a recommendation to purchase, sell or exchange a security is suitable for the customer. This “reasonable-basis” suitability requirement means that in the context of complex investments like the Essex Capital Corporation.
Investment advisors, brokers, brokerage firms “may not rely blindly upon the fund manager for information concerning the fund,” nor may it rely on the information provided by the fund manager lieu of conducting its own reasonable investigation. Investment advisory and brokerage firms can be held liable for investment losses that stem from a failure to conduct adequate due diligence, or for breach of fiduciary duty.
Essex Capital Investors May Be Able to Pursue Recovery of their Losses through Securities Arbitration
Fortunately for investors, they may be able to recover their investment losses in the Essex Capital Corporation through securities arbitration or litigation against the investment adviser, stockbroker, brokerage firm that recommended the Essex Capital to them.
If you are have suffered losses in Essex Capital Corporation, you may be able to recover your losses through securities arbitration or securities litigation. Please call Kons Law Offices at (312) 757-2272 for a FREE, NO OBLIGATION consultation to discuss your investment loss recovery options.
Kons Law Offices represents investors nationwide in securities arbitration and litigation matters. To learn more about the Firm’s securities litigation and FINRA arbitration practice, please visit www.investmentlossattorney.com.