In early January, Aequitas was continuing to accept new investments, but days later told advisors that it didn’t have sufficient cash to make payments on private notes that were coming due.
Even then, Bean alleges that Aequitas was reassuring investors. In a face-to-face meeting with company executives in mid-January, he was told that Aequitas was facing temporary cash-flow problems that would soon be settled.
At the end of January, Aequitas laid off 30 of it’s employees. Days later, in early February, the company announced that it was cutting nearly 75 percent of its workforce—a company that had over 120 employees at the beginning of the year dwindled to 40 staff members. In recent weeks, two of the company’s senior partners have resigned.
“Aequitas Capital Management is taking aggressive measures to address the challenges facing the firm and investors in fund managed by affiliates of the firm,” an Aequitas spokesperson said in a Tuesday statement. “ACM has decreased operating expenses by, among other things, reducing headcount at ACM and other operating affiliates.”
Last week, Aequitas announced that it is liquidating two mutual funds, the Aequitas Income Fund and the Aequitas Income Opportunity Fund to repay investors, but the process could take up to two years. What was once a fully functioning, interactive website has been replaced by a static graphic with Aequitas’s contact information.
Aequitas says it is forming an advisory panel of investors and RIAs to help liaise between itself and investors and to assist in charting a course forward.
“RIAs seem to think that they are going to get a vote in what course of action Aequitas takes moving forward,” Banks says. “That’s what they’re telling their clients, and they’re putting it in writing. I’m not sure that’s prudent. It seems like a lot of people are panicking right now.”
The SEC and the Consumer Financial Protection Bureau are allegedly investigating Aequitas. An SEC spokesperson declined to comment on the matter.
As of Wednesday, Aequitas has not publicly commented on the cause of its financial woes or admitted any wrongdoing.
“We regret that we trusted these people,” says Bean.”At this point, we’re going to work with the liquidation firm to maximize our investors’ return and recovery.”