Priority Income Fund Investigation: Recovering Investor Losses From Broker Misconduct

Soreide Law Group is investigating potential investor claims involving Priority Income Fund Inc., including possible sales practice violations by brokers and financial advisors who recommended it. The non-traded closed-end fund invests heavily in collateralized loan obligations (CLOs) and senior secured loans. Substantial declines in net asset value (NAV), investment losses, leverage, limited liquidity, and restrictions on selling shares have raised concerns for investors. Here is a closer look at the fund and the issues that may support investor claims.

What Is Priority Income Fund?

Priority Income Fund Inc., a Prospect Capital Fund, is a registered non-traded closed-end investment company. The fund says it aims to invest at least 80% of its assets in senior secured loans, mainly through CLO equity and junior debt tranches that provide exposure to pools of those loans. Many underlying loans may be below investment grade.

Shares were initially offered at $15.00 and do not trade on a public exchange. Investors who want to sell generally rely on the fund’s limited repurchase programs. The fund has also considered listing its common shares on a national securities exchange.

Causes Of Steep NAV Decline

Priority Income Fund’s reported NAV declined from $10.85 per share in June 2024 to $3.15 by July 31, 2026. The fund said elevated loan defaults, distressed exchanges, and declining loan spreads had weighed on its CLO investments. Reported realized investment losses totaled approximately $178 million for the fiscal year ended June 30, 2025, followed by another $82.2 million during the six months ended December 31, 2025.

In a 2026 tender, shareholders submitted more than 10.1 million shares for repurchase, but the fund bought only 1,550,812, resulting in a 15.23% proration rate. A later offer, scheduled to expire October 30, 2026, sought to repurchase up to 1,621,557 shares, approximately 2.5% of shares outstanding, with the price to be based on the fund’s October 31, 2026 NAV.

Other Concerns About Priority Income Fund

Other concerns include substantial leverage, uncertain asset valuations, high fees, conflicts of interest, and limited ability to transfer shares. Cash flows could be interrupted, and there is no guarantee distributions will continue. In its December 2025 semiannual report, the fund estimated that $71.5 million of fiscal 2025 distributions represented return of capital, compared with $11.6 million from earnings. The fund also reported a 23.44% annualized distribution rate based on NAV as of December 31, 2025.

The proposed exchange listing has remained uncertain. In January 2026, shareholders approved proposed restrictions that would allow investors to sell up to 25% of their existing holdings immediately after a listing, another 25% after 90 days, another 25% after 180 days, and the remaining shares after 270 days. These restrictions would apply only if the listing proceeds and the board gives its final approval. The fund also redeemed several preferred-stock series totaling approximately $138 million. The fund completed the redemption of its Series J Term Preferred Stock on April 24, 2026, when the NYSE filed to remove those shares from listing.

Potential Priority Income Fund Sales Practice Violations

Before recommending Priority Income Fund, brokers should have considered whether it was appropriate for each investor’s needs and circumstances. That assessment should have covered its limited liquidity, concentration in CLOs, leverage, credit risk, potential NAV swings, fees, and risk of losing principal. Claims may arise if brokers recommended the fund to retirees, conservative investors, or clients who needed ready access to their principal without adequately weighing those factors.

Claims may also involve allegations that brokers misled investors about distributions, liquidity, expected returns, repurchase opportunities, fees or commissions, or the risks of CLO equity and junior tranches. If actionable broker misconduct occurred, investors may be able to seek recovery through FINRA arbitration or other available legal remedies.

Seeking Help With Priority Income Fund Losses

Investors who suffered losses in Priority Income Fund after a recommendation from a broker or financial advisor may be able to seek recovery, depending on the circumstances. Soreide Law Group has recovered losses for investors throughout the United States. To discuss a potential claim with a securities attorney, contact the firm online or call (888) 760-6552. The firm works on a contingency fee basis and advances all costs.