Triad Advisors To Pay $195K Fine and More Than $510K in Restitution For LJM Fund Sales
FINRA Said Triad Brokers Unsuitably Recommended LJM Preservation and Growth Fund
In December 2021, the Financial Industry Regulatory Authority (FINRA) censured and fined Triad Advisors $195K for allegedly failing to supervise its registered representatives that unsuitably recommended the LJM Preservation and Growth Fund (LJM) to customers.
The self-regulatory organization (SRO) contends that the broker-dealer allowed the sales to go through without first conducting the proper due diligence into the LJM Fund – especially while not having enough understanding about the Fund’s features and the risks involved.
This included the fact that the alternative mutual fund employed a very risky strategy that partially depended on buying uncovered options and “shorting volatility.”
As a result, noted FINRA, Triad brokers sold $2,267,000 in the LJM Preservation and Growth Fund to 58 customers. Many of these investors ended up losing a lot of money after the LJM Fund dropped 80% in value in February 2018.
This was due to a spike in the CBO Volatility Index during an event referred to as “Vol-Magedon.” The Fund, which had $805M in assets under management in late January 2018, had just $9.8M by early March of that year. LJM was forced to go into liquidation and shuttered soon after.
FINRA also said that the broker-dealer did not gather certain information from customers that bought private offerings of LJM Partners, Ltd. and LJM Preservation & Growth Fund LP. Additionally, they failed to enforce written supervisory procedures that should have been designed in a reasonable enough manner to ensure the firm collected this information.
What Was the LJM Preservation & Growth Fund?
Launched in January 2013, the Fund claimed to “sell volatility” by making money from the “volatility premium.” According to FINRA’s Letter of Acceptance, Waiver, & Consent, the Fund attempted to achieve this by investing mostly “in purchased (long) and sold (short) call and put options on the S&P 500 futures index.” No underlying stocks were held.
LJM Preservation & Growth Fund investors have since accused the Fund and the broker-dealers that sold them their investments, of making misrepresentations and omissions through false and misleading statements. This included claiming that the LJM Fund was suitable for capital preservation if an investor was looking for conservative growth in their account.
The truth was that the Fund ended up exposing inventors to so much risk that they sustained huge investment losses in just two days during the 2018 event.
Experienced LJM Fund Arbitration Lawyers
Shepherd Smith Edwards and Kantas (SSEK Law Firm at investorlawyers.com) represent investors who have suffered losses because their broker-dealer unsuitably sold them investments in the LJM Preservation & Growth Fund or other LJM offerings.
We also are currently representing investors against Triad Advisors in FINRA arbitration after the firm’s brokers recommended and sold GPB Capital Holdings private placements to customers. GPB is accused of running an over $1.8B Ponzi scam that has defrauded over 17,000 investors.
Call SSEK Law Firm at (800) 259-9010 today. Your initial consultation with us is a free, no-obligation case assessment. Allow our broker negligence lawyers to help you explore your legal options.