Oxford Lane Capital Corp

In 2023, Oxford Lane Capital Corp., a closed-end fund, issued an offering of preferred shares. These preferred shares consisted of collateralized loan obligations. Preferred shares and CLOs each come with their own set of risks. If you lost money on this investment and believe it presented too many risks for your financial goals, consider speaking with a securities attorney.

• Preferred shares are shares that pay dividends to investors. Companies are required to pay their preferred share dividends before they pay ordinary investors’ returns. As interest rates rise and common stock prices increase, these types of investments lose value.
• Collateralized Loan Obligations (CLOs) consist of securitized loans. These loans have collateral and are therefore more likely to be repaid. They need to be repaid in order to generate a return for the investors.

Risks Associated with Oxford Lane Capital Corp Preferred Securities

Brokers sometimes describe preferred securities as “high yield.” When investors hear the term “high yield” they may believe that they are going to receive healthy payments from their investment. The truth is that preferred shares often underperform the S&P. Preferred shares are also callable, meaning they may be redeemed by the issuing company at a predetermined date.

Here are a few more risks identified in the prospectus. Please note that this is not a complete list.

• A downturn in capital markets and credit markets could impair Oxford Lane’s ability to raise capital.
• Oxford Lane has a limited operating history as a closed-end investment company.
• This investment is dependent on Oxford Lane Management’s key personnel for future success. If they could no longer perform their job functions, there was no guarantee that the company could find a suitable replacement.
• Oxford Lane may borrow money to leverage their portfolio, which magnifies the potential for losses.
• The fee structure for calculating the fee payable to Oxford Lane Management may incentivize management to pursue speculative investments and use leverage when it may be unwise to do so.
• The Oxford Lane portfolio of investments may lack diversification among CLO vehicles, which amplifies the chance for losses.
• Increased interest rates means that it may be easier for the investment adviser to receive incentive fees, without necessarily resulting in an increase in net earnings due to the “catch up” feature of the incentive fee.
• The Series 2023 Term Preferred Shares are not rated for creditworthiness.

These are just some of the risks clearly stated in the prospectus. There is no reason that a broker would not be familiar with the risks associated with this investment.

Underwriters for Oxford Lane Preferred Shares

Underwriters earn a fee in exchange for taking on risk when bringing a security to the stock market. The following investment banks served as underwriters for the offering.  

• Ladenburg Thalmann
• Deutsche Bank Securities
• BB&T Capital Markets
• Maxim Group LLC
• National Securities Corporation

Conflicts of Interest Related to Shares of Oxford Lane

Underwriters bring securities to the public and may receive significant fees. Our attorneys have learned that underwriters may have earned fees as high as 7%.

Potentially Unsuitable Investments

Financial professionals should only recommend investments that suit their customer’s risk tolerance. Before they recommend a risky, illiquid investment like Oxford Lane Preferred Shares, brokers also have a duty to determine if there is an investment with similar features that would come with fewer risks for their client.

If you believe your broker may have had a conflict of interest and recommended a share of Oxford Lane Capital Corp that did not suit your financial needs or risk tolerance, contact a securities attorney today. Call (877) 600-0098 or email info@kurtalawfirm.com.