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Erez Law Files Claim for LJM Fund Losses by Former IFAM Capital Broker Alan Beugg

Posted on Wednesday, January 29th, 2020 at 9:44 pm    

LJM Capital Preservation and Growth Fund logo

Erez Law recently filed a FINRA arbitration against Purshe Kaplan and Institutional and Family Asset Management, LLC (IFAM Capital) for LJM Preservation and Growth Fund (LJM Fund) investment losses due to investments with broker Alan Beugg (CRD #3004268).

Beugg has been registered with Purshe Kaplan Sterling Investments in Denver, Colorado since 2014. Beugg was dually registered with Purshe Kaplan and IFAM Capital. Purshe Kaplan had knowledge that Beugg was dually registered as an investment adviser with IFAM Capital. As such, Purshe Kaplan had a duty to supervise Beugg’s investment advisory activities during this time. Purshe Kaplan failed to satisfy its duty to supervise Beugg.

The Erez Law clients allege the following in the newly filed FINRA claim:

The clients entrusted Beugg and IFAM Capital with their irreplaceable retirement savings. The clients were risk-averse investors interested in generating income without undue risk of loss of capital. The clients were not interested in high-risk investments or strategies. Despite the clients’ risk aversion, Beugg and IFAM Capital recommended a speculative and unsuitable strategy of investing in a speculative and unsuitable mutual fund with unacceptable results.

It is alleged that Beugg and IFAM Capital invested the clients’ accounts in the speculative and unsuitable mutual fund, the LJM Fund.

According to the claim, Beugg and IFAM Capital knew or should have known that the LJM Fund’s investment strategy exposed investors to an extraordinary degree of risk and that the LJM Capital Fund was unsuitable for the clients. The LJM Fund was not consistent with the clients’ risk tolerance and investment objections. At no time did Beugg or IFAM Capital disclose the enormous risks associated with the LJM Fund he recommended and sold to the clients. Beugg and IFAM Capital did not disclose that a significant increase in volatility could cause the LJM Fund to suffer devastating losses.

LJM Partners is an investment management firm that operates the mutual fund LJM Capital Preservation and Growth Fund (NASDAQ:LJMIX). The investment, “seeks capital appreciation and capital preservation with low correlation to the broader U.S. equity market. Under normal circumstances, the fund invests primarily in purchased (aka ‘long’) and sold (aka ‘short’) call and put options on Standard & Poor’s 500 Futures Index (“S&P”). The fund seeks to achieve its investment objectives by capturing gains on options sold on S&P futures contracts that can be purchased (“closed”) at a later date for a lower price than the price realized when originally sold,” according to U.S. News & World Report.

It is alleged that LJM Capital Preservation and Growth Fund was not focused on capital preservation and instead exposed investors to unacceptably high risk of catastrophic loss by not taking appropriate steps to preserve capital in down markets. Investing in volatility-linked products is extremely complex and risky and likely not a suitable and recommended strategy for the average investor.

On February 5, 2018, the S&P dropped 4.6% and LJM Capital Preservation and Growth Fund dropped from $10.34 on February 1 and then $9.82 on February 2 to $1.94 on February 7, a devastating more than 80% loss. As of October 2017, LJM Capital Preservation and Growth Fund had net assets of $768 million. Assuming that the assets were the same in February 2018, investors may have seen $600 million in losses during the first few days of February.

In addition to the case above, Beugg has been the subject of three additional customer complaints dating back to 2009, according to his CRD report. One case was closed without action and two were settled.

Erez Law represents investors in the United States for claims against brokers and brokerage firms for wrongdoing. If and have experienced investment losses, please call us at 888-840-1571 or complete our contact form for a free consultation. Erez Law is a nationally recognized law firm representing individuals, trusts, corporations and institutions in claims against brokerage firms, banks and insurance companies on a contingency fee basis.