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Advanced Equities breaks its silence

December 6, 2012: 11:01 AM ET

brandDefunct broker-dealer finally contacts its clients.

FORTUNE -- Yesterday I wrote a blog post titled: Dear Advanced Equities, please call your clients. It seemed that in the three weeks since AEI decided to cease operations, its clients had been unable to get any information on the status of their investments. Not just the dentists with $10,000 or $20,000 invested into companies like Bloom Energy or Fisker Automotive, but also those with millions of dollars at stake. For example, what happens when there are capital calls or distributions (both of which are expected shortly).

One investor told me that he'd gone so far as to try contacting the auditor listed on his quarterly statements, but never received a reply (the auditor, BBD LP, declined to comment yesterday). Multiple investors said they tried contacting Bloom Energy, in which they own stock, but those calls also went unanswered.

Shameful behavior, even in tough times. Luckily, the post may have spurred AE to action (disclaimer: Yes, I'm taking credit without any specific knowledge that it is deserved).

At 6pm last night, AEI sent out a client email with several different pieces of information:

  1. It has filed with FINRA to withdraw its broker-dealer license.
  2. The assets of the LLCs are held by third-party custodians, and the assets are not comingled with those of AEI.
  3. AEI is seeking new managing members to run the LLCs, and has received a number of inquiries from interested potential Managing Members."

That last one should be interesting, since it's not yet clear how much any new manager could be paid (since the LLCs don't generate fees, and the backend for deals like Fisker is very shaky).

In a related aside, a number of readers have asked about the indirect relationship between AEI and venture firms Kleiner Perkins and New Enterprise Associates – both of which have reps on the boards of companies like Fisker and Bloom.

Let me just say this: When AEI agreed to settle with the SEC for defrauding investors on Bloom, I asked both Kleiner and NEA if they would formally ask their portfolio companies to stop doing business with AEI. Neither one would comment. Then Fisker went out and raised more money via AEI (albeit through a process that had begun before the SEC settlement).

Now that AEI is winding down, perhaps KP and NEA will be spared further embarrassment from this relationship (although the SEC is not yet done with AEI – and I'm talking multiple SEC offices). But they each had a chance to get a mulligan, and basically say: "We didn't realize what was happening there, the SEC settlement obviously has changed matters." Why they didn't do so remains beyond my comprehension.

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About This Author
Dan Primack
Dan Primack
Senior Editor, Fortune

Dan Primack joined Fortune.com in September 2010 to cover deals and dealmakers, from Wall Street to Sand Hill Road. Previously, Dan was an editor-at-large with Thomson Reuters, where he launched both peHUB.com and the peHUB Wire email service. In a past journalistic life, Dan ran a community paper in Roxbury, Massachusetts. He currently lives just outside of Boston.

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