Franklin Square Capital Partners, a manager of business development companies (BDCs), has unveiled an new structure for non-traded alternative investments that reduces fees and seeks to align the interests of investors, advisors, regulators and sponsors.
The firm recently announced that FS Investment Corporation IV (FSIC IV), an income-focused non-traded business development company (BDC), commenced operations with an industry-leading commission structure that responds to FINRA Regulatory Notice 15-02 (15-02).
The amendments to NASD Rule 2340 presented in 15-02, which take effect on April 11, were designed to, among other things, enhance the disclosure of sales charges on investor account statements. For over 18 months, Franklin Square worked in collaboration with financial advisors and the independent broker-dealer community to design an improved solution for the marketplace.
The result is a distinctive T-share class that lowers the fees investors are charged both upfront and in total over the life of the investment, while addressing the needs of financial advisors as they help their clients access alternative investments. A key distinction is the financing by Franklin Square of a portion of the upfront commission, which serves to reduce the financial impact to investors at the time of sale.
“Providing investors access to transparent, high-quality investments has been a core principle at Franklin Square since our inception,” says Michael C Forman (pictured), Chairman and Chief Executive Officer of Franklin Square. “We took it upon ourselves to dedicate significant effort to arriving at a 15-02-ready solution and we believe our new commission structure will become the industry standard.”
“We explored many options before determining that this solution improves the offering for investors and balances the collective feedback from advisors, clients and regulators,” says Zachary Klehr, Executive Vice President of Franklin Square, who led the firm’s efforts to address 15-02. “We believe the right alternatives can play an important role in diversifying portfolios, and the fundamentals behind those investments will not be affected by the statement changes required by FINRA Regulatory Notice 15-02.