NAV Declines, Distribution Cuts, and Restricted Liquidity Raise Questions About Brokerage Sales

By August M. Iorio | Iorio Law PLLC | October 8, 2026

Iorio Law PLLC is investigating the sales practices of broker-dealers and financial advisors that recommended Priority Income Fund common shares, including recommendations through the Cetera Financial Group network. Our investigation concerns whether the investment matched customers’ financial needs and whether its risks, liquidity restrictions, costs, and distribution characteristics were adequately explained.

Recent disclosures raise serious questions for investors who expected dependable income and preservation of principal. Priority has reported substantial declines in net asset value, reduced monthly common-share distributions, and a July tender that purchased only a fraction of the shares investors submitted. Another limited tender is currently scheduled to expire October 30, 2026. [1–6]

If a Cetera-affiliated advisor or another financial professional recommended Priority Income Fund and you have experienced losses or difficulty accessing your investment, contact Iorio Law PLLC at (646) 330-4624 for a free consultation.

What Is Priority Income Fund?

Priority Income Fund, Inc. is an externally managed, registered closed-end investment company that began operations in May 2013. Its investment adviser is Priority Senior Secured Income Management, LLC. This investigation focuses on its non-traded common shares; the fund’s exchange-listed preferred securities have different rights and risks. [1, 9]

The fund invests primarily in equity and junior debt tranches of collateralized loan obligations, or CLOs. These structures hold pools of loans, generally to below-investment-grade corporate borrowers. Although underlying loans may be senior secured, a CLO’s equity and junior debt sit below more senior claims. That distinction can materially affect an investor’s exposure to credit losses and interrupted cash flows. [2, 9]

An investment in Priority common shares therefore should not be confused with directly holding a diversified portfolio of senior secured loans. The fund’s own materials warn of substantial investment risk and limited liquidity. Common shareholders lack a public trading market and cannot assume that a reported NAV is a price they can obtain when they need to sell. [2, 9]

Priority’s NAV Has Fallen Sharply

Priority’s annual report and subsequent NAV updates show the following per-share values: [1, 2]

The June 2026 NAV was approximately 70.7% below the June 2024 figure. The modest increase from July to August did not reverse that deterioration. A NAV decline is not the same as every shareholder’s realized loss: individual results depend on purchase price, sales charges, cash distributions, reinvestments, and eventual sale proceeds.

For the fiscal year ended June 30, 2026, Priority reported approximately $153.9 million in net realized investment losses and a negative 36.20% total return at NAV. The preceding fiscal year’s NAV total return was negative 34.21%. These fund-level returns assume distribution reinvestment and exclude sales loads; they are not calculations of any particular investor’s loss. [1]

Monthly Distributions Were Cut in June 2026

Priority’s published distribution history shows a monthly common-share payment of $0.05833 in May 2026, followed by $0.03333 in June. The lower amount continued through September. That represents an approximately 42.9% reduction in the monthly payment. [3]

The September 29 distribution announcement promoted a 12.4% annualized cash distribution rate, calculated using $0.40 in annualized distributions and the August 31 NAV of $3.23. That percentage describes cash distributions relative to a particular NAV. It is not a total return, a yield on every investor’s original purchase price, or a guarantee of future payments. [4]

A high distribution percentage can coexist with a falling investment value. Investors who relied on the advertised income rate may have faced both reduced cash payments and diminished principal. Our investigation will examine whether advisors explained this distinction when recommending the fund.

Priority also reported approximately $64.7 million in fiscal 2026 common-share distributions and expected all of them to be classified as return of capital for tax purposes, subject to final determination when its tax return is filed. Tax classification alone does not establish how a payment was funded or prove misconduct. It does reinforce the need to distinguish distributions from investment earnings and total return. [1]

July Tender Results Show the Limits of Investor Liquidity

The July tender expired on July 31, 2026. According to the final results filed August 13, investors tendered 10,184,037 shares, but Priority purchased only 1,550,812 shares at $3.15 each, for approximately $4.9 million. The filing reported 15.23% proration, with qualifying odd-lot holders receiving priority. [5]

Those results show substantial unmet demand to exit. Submitting shares in a tender did not mean that an investor could sell the entire position. Investors may remain exposed to the fund after a liquidity request is only partially fulfilled.

An October Tender Is Open, but Acceptance and Price Are Limited

Priority’s September 18 offer seeks to purchase up to 1,621,557 common shares, equal to 2.5% of shares outstanding as of June 30, 2026. The scheduled deadline is October 30, 2026, at 4:00 p.m. Eastern Time, unless extended. The purchase price will be NAV as of October 31, 2026; it is not fixed at the latest published $3.23 NAV. [6]

The offer can be subject to proration and other stated conditions. It provides an opportunity for limited liquidity, not a guaranteed exit for every shareholder. Investors considering the tender should review the actual offer, submission requirements, and any updates rather than treating this article as tender instructions.

Cetera Financial Group and Priority’s Distribution Network

A Priority subscription package hosted by Preferred Capital Securities expressly states “OFFERED AT CETERA FINANCIAL GROUP.” This establishes that a Cetera-specific offering package existed. It does not, by itself, identify the particular Cetera-affiliated broker-dealer responsible for a customer’s purchase or establish a completed sale by every firm in the network. [7]

Iorio Law is investigating sales practices involving Priority recommendations through Cetera Financial Group and other participating selling broker-dealers. Investors’ purchase confirmations, subscription records, and account statements can identify the legal entity that made or processed a particular recommendation and sale.

Preferred Capital Securities, LLC is separately confirmed in an SEC-filed issuer release as Priority’s dealer manager. That distribution role should be distinguished from the retail brokerage firm that recommended shares to an individual customer. We are examining participating firms’ sales communications, due diligence, compensation, and supervision. [8]

Why Priority Income Fund May Not Have Been Suitable for Some Investors

An investment may be inappropriate for a particular customer even when offering documents disclose its risks. Our review focuses on the recommendation, the customer’s circumstances, and the information reasonably available at the time. Later losses alone do not establish that a sale violated an obligation.

Investors Seeking Capital Preservation

Priority may have been a poor fit for investors who sought to preserve principal or understood the investment as a conservative income holding. We are examining whether sales presentations adequately explained the difference between senior secured loans, subordinated CLO investments, and the risks borne by common shareholders.

Retirees and Investors Who Needed Access to Their Money

A customer who needed readily available funds for retirement spending, healthcare, or foreseeable expenses may have been unable to tolerate the fund’s limited exit opportunities. Our investigation includes whether advisors described optional, limited tenders as if they provided reliable redemption access.

Customers Relying on a Stated Distribution Rate

We are reviewing whether advisors distinguished cash payments from earnings and total investment return. An income recommendation should account for the possibility of reduced payments and principal losses, particularly when a customer depends on the investment to meet recurring expenses.

Investors Exposed to Excessive Concentration or Sales Costs

The amount invested matters as much as the product’s general characteristics. We are examining recommendations that concentrated customers’ savings in Priority, CLO funds, or other illiquid investments, and whether advisors considered the customer’s remaining liquid assets.

The October 2024 prospectus disclosed sales commissions of up to 6% and dealer-manager fees of up to 0.75% for Class R purchases, subject to applicable terms and waivers. Other purchase designations had different charges. Our review will consider the actual costs and compensation associated with each investor’s transaction and how those costs affected the recommendation. [9]

What Iorio Law Is Investigating

Our investigation includes whether selling firms and financial professionals:

• Reasonably evaluated Priority’s CLO exposure, financial condition, liquidity provisions, and offering materials before recommending it.
• Matched the recommendation and investment amount to the customer’s objectives, risk tolerance, liquidity needs, and time horizon.
• Accurately explained distributions, potential principal losses, and the limits of NAV-based valuations and issuer tenders.
• Disclosed relevant costs and conflicts and supervised sales presentations and recommendations.

For retail brokerage recommendations subject to Regulation Best Interest, the SEC requires consideration of risks, rewards, and costs in light of the customer’s investment profile. Applicable obligations depend on the date and nature of the recommendation and the professional’s role. [10]

This investigation is not a finding that Cetera Financial Group, Preferred Capital Securities, or another firm engaged in misconduct. Assessing a potential claim requires the customer’s records and the circumstances surrounding the recommendation.

Contact Iorio Law About a Priority Income Fund Investment

Depending on the facts, investors may have claims involving unsuitable or otherwise improper recommendations, misleading statements or omissions, or inadequate supervision. Brokerage disputes are commonly pursued through FINRA arbitration. Neither declining NAV nor a restricted tender alone guarantees a claim or recovery.

Preserve purchase confirmations, subscription agreements, brokerage statements, offering materials, advisor emails and texts, risk questionnaires, and tender notices. Records of the original investment, fees, distributions, and unsuccessful exit requests can help explain the recommendation and its consequences.

Iorio Law PLLC represents investors nationwide in disputes involving brokerage firms and financial professionals. If a Cetera-affiliated advisor or another broker recommended Priority Income Fund and you have concerns about losses, liquidity, or the sales presentation, call (646) 330-4624 or visit www.iorio.law/contact-us/ for a free consultation.

This investigation is part of the Iorio Law Distressed Securities Monitor, which tracks material financial and liquidity developments in investments distributed through brokerage and advisory channels.