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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