FINRA fined and censured Triad Advisors for failing to supervise its representatives' recommendations of LJM Preservation & Growth Fund, an alternative mutual fund that eventually lost most of its value, before liquidating and closing. Investigators cited Triad Advisors for its deficient supervisory system and for permitting the sale of LJM (LJMAX shares) without brokers' reasonable due diligence and understanding of the product's risks and features that relied on the risky strategy of purchasing uncovered options.
In AWC #2019061651201, FINRA states that the supervisory misconduct persisted over a five-year period and pertained to $2.3 million in sales of LJM Preservation & Growth Fund to approximately 58 customers.
LJM Preservation & Growth Fund lost 80% of its value due to extreme volatility in 2018 and the fund ultimately liquidated and closed, resulting in losses totaling several hundreds of thousands of dollars for customers left holding the now-worthless mutual fund. Specifically, when the market experienced increased volatility in February 2018, during which the CBOE Volatility Index (VIX) increased dramatically from 17 to 37, the prices of short option positions sold by LJM also increased dramatically, resulting in massive losses and ultimate liquidation and dissolution.
Investigators alleged that Triad Advisors failed to adequately monitor and supervise registered representatives, and also failed to enforce written supervisory procedures. Triad associates purportedly failed to gather required information from customers that would have helped enable evaluation as to whether recommending or selling LJM to the investors was suitable.
As a result, many customers wound up losing hundreds of thousands of dollars in the risky LJM Preservation & Growth Fund mutual fund that may not have been suitable for them to begin with.
If you invested with Triad Advisors, or with any broker or investment adviser in LJM Preservation & Growth Fund or another alt mutual fund that lost significant value before liquidating and dissolving, and the recommendation to invest in such a risky product was unsuitable in the first place, given your investment preferences or conservative/moderate objectives, please call an experienced FINRA arbitration attorney at The Law Offices of Jonathan W. Evans & Associates at (800) 699-1881 for an investigation and consultation.