SEC Probes B. Riley Loan to Founder, Deals with Franchise Group

B. Riley Financial Inc., a diversified financial services platform, is facing scrutiny from the U.S. Securities and Exchange Commission (SEC) over its loan to founder Bryant Riley and its dealings with now-bankrupt Franchise Group. The investigation, which was first reported in August 2024, has raised concerns about the company's financial health and stock price.

The SEC is investigating specific aspects of B. Riley's loan to its founder and deals with Franchise Group, including Bryant Riley's personal loan and pledge of shares as collateral, as well as the company's dealings with Franchise Group. The investigation also involves B. Riley's relationship with Brian Kahn, a key figure in the probe who led the management buyout of Franchise Group and has been linked to the collapse of Prophecy Asset Management, a hedge fund that federal prosecutors allege defrauded investors out of $294 million.

The outcome of the SEC probe could have significant implications for B. Riley's financial health and stock price. If the probe finds wrongdoing, it could damage the company's reputation, erode trust with clients and investors, and lead to significant financial liabilities. This could include fines, penalties, and potential lawsuits, which could strain the company's financial health. Conversely, if the probe clears B. Riley of any wrongdoing, the stock price could rebound.

The potential implications for B. Riley's clients and partners, including Nomura and Kahn, are also significant. Nomura, one of B. Riley's biggest lenders, could face reputational risks if it is found to have been involved in any wrongdoing. Kahn, an unidentified co-conspirator in a US Department of Justice criminal case, could also face legal or regulatory consequences if he is found to have been involved in any wrongdoing related to the Franchise Group buyout.

B. Riley's clients may be concerned about the firm's financial health and reputation, given the ongoing investigation and the significant losses and writedowns on some of its investments. The firm's clients may be hesitant to engage in new business with B. Riley until the investigation is resolved and the firm's financial situation stabilizes. B. Riley's partners and investors may also be concerned about the firm's financial health and the potential impact of the investigation on their investments.




In conclusion, the SEC probe into B. Riley's loan to its founder and deals with Franchise Group has raised concerns about the company's financial health and stock price. The outcome of the probe could have significant implications for B. Riley, its clients, and its partners. Investors and clients should closely monitor the situation and consider the potential risks and rewards of engaging with the company during this period of uncertainty.