Broker-Dealers Collectively Will Pay $550K Fine and Over $3.3M in Restitution
The Financial Industry Regulatory Authority (FINRA) has fined and censured three brokerage firms after finding that they failed to supervise recommendations of the LJM Preservation and Growth Fund (LJMIX, LJMCX, LJMAX) and did not conduct the proper due diligence into the alternative mutual fund:
- Cambridge Investment Services will pay a $400K fine plus more than $3M in restitution
- Securities America’s fine is $100K with nearly $236K in restitution
- J.W. Cole Financial will pay a $156K fine and $163K in restitution
All three broker-dealers settled but without admitting to or denying FINRA’s findings.
The LJM Preservation and Growth Fund has been the subject of numerous investor fraud claims after it dropped in value by 80% in 2018 during “volmageddon” when the Dow experienced a record plunge that decimated 98% of the fund’s assets. The alternative mutual fund had $805M in assets under management (AUM) in late January 2018. By early March, its AUM declined to $9.8M. Investment manager LJM Partners was forced to liquidate the fund and shutter its doors.
Our alternative investment fraud lawyers have been investigating losses suffered by investors who were persuaded by their broker or investment advisor to buy LJM Preservation and Growth Fund shares. Contact Shepherd Smith Edwards and Kantas (SSEK Law Firm at investorlawyers.com) today if you suffered losses in this fund that was marketed to you by your financial advisor and their firm.
Failure to Supervise and Unsuitability Alleged
According to FINRA investigators, Cambridge Investment Research sold $18M of shares in the LJM Fund to 550 clients.
Meanwhile, it not only failed to supervise these recommendations but the broker-dealer did not properly train its registered representatives in design due diligence, alternative mutual funds, or suitability review.
The firm’s clients that were holding shares from this fund lost 80% of their investments on Feb 6, 2018. To date, Cambridge has paid $740K in restitution to customers that were harmed by their LJM Preservation and Growth Fund losses.
In FINRA’s case against J.W. Cole Financial, the self-regulatory organizations (SRO’s) investigators found that one J.W. Cole broker was involved in 60% of the firm’s $1M in sales of LJM Preservation and Growth Fund shares.
The SRO said that broker-dealer lacked its own system to determine what was an alternative or complex investment and failed to properly train its brokers or supervise recommendations that were made to customers. Instead, J.W. Cole fully relied on the due diligence conducted by a clearing firm.
As for Securities America, FINRA found that while the independent broker-dealer designated the LJM Preservation and Growth Fund as an alternative mutual fund, it failed to properly train its brokers on the fund’s suitability for certain investors and did not conduct a heightened strategy review. The SRO said that one Securities America broker sold $616K of the alternative mutual fund’s share to 33 customers.
Experienced LJM Preservation and Growth Fund Fraud Lawyers
Many of those that invested in the LJM Fund are saying that they were never apprised of the fact that this alternative investment engaged in a “shorting volatility” strategy. Investors claim that they thought the Fund would allow them to preserve capital as opposed to exposing them to so much market volatility and risk.
Retail investors, sophisticated investors, and others have suffered significant financial losses in the LJM Preservation and Growth Fund. Call SSEK Law Firm and ask to speak with one of our seasoned alternative investment fraud lawyers at (800) 259-9010.