Peiffer Wolf is investigating FS KKR Capital Corp. (NYSE: FSK), along with its Chief Executive Officer Michael C. Forman and Chief Financial Officer Steven Lilly, for potential violations of SEC Rule 10b-5 and related federal securities laws based on alleged material misrepresentations about the company’s business, operations, and prospects.
FS KKR Capital Corp. is a publicly traded business development company based in Philadelphia, Pennsylvania, that provides credit solutions to private middle-market U.S. companies. A recent federal complaint alleges that the company violated SEC Rule 10b-5 by misleading investors through false and misleading statements about the condition of its investment portfolio, the effectiveness of its restructuring efforts, and the sustainability of its shareholder distributions.
If you purchased FS KKR Capital Corp. securities between May 8, 2024, and February 25, 2026, and suffered losses, contact us as soon as possible for a free case evaluation by submitting an online form or calling 585-310-5140.
Important: The deadline to seek lead plaintiff status in this lawsuit is July 6, 2026.
FSK Stock | What Happened
According to a complaint filed on May 4, 2026, FS KKR Capital Corp. and its senior executives made materially false and misleading statements to investors during the Class Period about the company’s portfolio performance, non-accrual investments, and the sustainability of its distributions. The complaint further alleges that the company misrepresented the progress and effectiveness of its portfolio restructuring while concealing deterioration of the value of its investment portfolio. Specifically, the lawsuit alleges:
- Five Quarters of False Assurances About Portfolio Restructuring – From May 2024 through May 2025, the company repeatedly told investors, through press releases and quarterly reports, that FS KKR Capital Corp. was making progress in restructuring its portfolio and reducing non-accrual assets (assets failing to make interest payments). The complaint alleges that, during this same period, Defendants knew or recklessly disregarded that the portfolio was deteriorating at an accelerating rate.
- Overstated Portfolio Valuations and Valuation Controls – In quarterly and annual filings throughout the Class Period, FS KKR Capital Corp. stated that it maintained effective disclosure controls and fairly valued its investment portfolio. The complaint alleges these statements were materially misleading because Defendants knew the company held a growing number of troubled investments with inflated valuations that did not reflect their true condition.
- Misleading Statements About Distribution Durability – In press releases, the company claimed that its strategy of building “spillover income” during periods of high interest rates supported the continued stability of its supplemental quarterly distributions despite market volatility. The lawsuit further alleges that this statement was materially false and misleading.
On November 5, 2025, CEO Forman promoted a 2026 quarterly distribution strategy expected to produce an annualized yield of about 10% of net asset value (NAV), calling it “attractive on both a relative and absolute basis.” The complaint alleges that this claim lacked a reasonable basis and omitted material adverse facts.
Stock Price Decline and Investor Harm
On August 6, 2025, FS KKR Capital Corp. reported 2025 Q2 results showing a 6.2% decline in net asset value, a $474 million drop in total investment fair value, and an increase in non-accrual investments. FS KKR Capital Corp. management identified four specific troubled companies: Production Resource Group, 48forty, Kellermeyer Bergensons Services, and Worldwise. The stock fell 8.20% the following day.
The full extent of the alleged issues emerged on February 25, 2026, when FS KKR Capital Corp. announced it cut its dividend from $0.70 to $0.48 per share. The next trading day, the stock fell 15.24% and closed at $11.29. During the February 2026 earnings call, Forman also acknowledged that the 2026 dividend, originally projected at 10% of NAV, would likely be reduced to about 9% because of non-accrual challenges. They further admitted that FSK’s non-accrual rate (5.5% at amortized cost) was above the long-term Business Development Company industry average of approximately 3.8%. From its Class Period high of $24.06 per share, FS KKR Capital Corp. stock declined by about 53%.
FSK Lawsuit | Legal Claims
The complaint asserts that the FS KKR Capital Corp., Michael C. Forman and Steven Lilly’s actions violate federal securities laws, specifically:
- Section 10(b) of the Securities Exchange Act of 1934 and SEC Rule 10b-5 — These provisions prohibit the use of any manipulative or deceptive device in connection with the purchase or sale of securities. The complaints allege that FS KKR Capital Corp., CEO Michael C. Forman, and CFO Steven Lilly violated these provisions by making materially false and misleading statements — and omitting material facts — about the company’s portfolio restructuring effectiveness, investment valuations, and distribution durability throughout the Class Period.
- Section 20(a) of the Securities Exchange Act of 1934 (Control Person Liability) — Section 20(a) provides that individuals who control a company can be held liable for the company’s securities law violations. The complaints allege that Forman and Lilly, as CEO and CFO of FS KKR Capital Corp., had the power to control the company’s public statements and are therefore liable for the alleged violations.
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FS KKR Capital Corp. and its senior executives allegedly misled investors by repeatedly assuring them that the company’s portfolio was stable, non-accrual investments were declining, and shareholder distributions were sustainable, even as more portfolio companies experienced significant deterioration. Further, when the company disclosed the extent of its portfolio problems and cut its dividend in February 2026, investors allegedly suffered substantial losses.
Peiffer Wolf is investigating potential Rule 10b-5 claims involving FS KKR Capital Corp. securities. If you purchased FSK securities during the Class Period and suffered losses, contact us for a free case evaluation by submitting an online form or calling 585-310-5140.
Important: The deadline to seek lead plaintiff status in this lawsuit is July 6, 2026.
FAQ
What is the FS KKR Capital Corp. lawsuit about?
A federal securities complaint alleges that FS KKR Capital Corp., CEO Michael C. Forman, and CFO Steven Lilly violated SEC Rule 10b-5 by making materially false and misleading statements about the company’s investment portfolio, restructuring efforts, and distribution strategy. According to the complaint, the company told investors for five consecutive quarters that non-accrual investments were declining and restructuring was progressing while concealing worsening problems at multiple portfolio companies. The complaint also alleges that FS KKR Capital Corp. overstated the effectiveness of its valuation controls and the sustainability of its distributions. After the company disclosed continued portfolio deterioration and cut its dividend in February 2026, the stock fell about 15.24% and was down about 53% from its Class Period high.
Who is included in the Class Period, and what do investors need to have experienced?
The Class Period runs from May 8, 2024, through February 25, 2026. Investors who purchased FS KKR Capital Corp. (NYSE: FSK) securities during that period and suffered losses may be eligible to participate. The deadline to seek appointment as lead plaintiff is July 6, 2026.
What events allegedly impacted the stock price?
The complaint identifies two alleged corrective disclosures. First, on August 6–7, 2025, FS KKR Capital Corp. reported 2025 Q2 results showing a 6.2% decline in net asset value (NAV), a $474 million drop in investment fair value, and an increase in non-accrual assets. The stock fell 8.20% the following day. Second, on February 25–26, 2026, FS KKR Capital Corp. reported 2025 Q4 results disclosing continued NAV erosion, additional challenged investments, non-accrual rates above the long-term BDC industry average, and a dividend cut from $0.70 to $0.48 per share. The stock fell 15.24% the next trading day. From its Class Period high of $24.06, FS KKR Capital Corp. shares declined by about 53%.
Which laws does the complaint allege were violated, and what do they mean?
The complaint asserts violations of:
- Section 10(b) of the Securities Exchange Act and SEC Rule 10b-5, which prohibit making materially false or misleading statements or omitting material facts in connection with the purchase or sale of securities.
- Section 20(a) of the Securities Exchange Act of 1934 (control person liability), which can hold individuals who control a company — such as CEO Michael C. Forman and CFO Steven Lilly — liable for the company’s alleged securities law violations.
How can I get a free case evaluation?
Peiffer Wolf is investigating these claims on behalf of investors who purchased FS KKR Capital Corp. (NYSE: FSK) securities during the Class Period and suffered losses. You can request a free case evaluation by filling out an online form or calling 585-310-5140. The case is pending in the United States District Court for the Eastern District of Pennsylvania. The lead plaintiff deadline is July 6, 2026.
