IFAM Capital financial advisor Daniel Gamache (CRD# 5538021) is accused of recommending LJM Capital Preservation and Growth Fund. Gamache is currently registered with and a partner at IFAM Capital in Denver, Colorado since January 2014. Gamache was registered with UBS Financial Services Inc. in Denver, Colorado from 2009 to 2014.
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.
Gamache has been the subject of two customer complaints in 2018, according to his CRD report:
- July 2018. “Allegation of unsuitable portfolio recommendation.” The customer is seeking $86,000 in damages and the case is currently pending.
- June 2018. “Allegation that portfolio held an overweighted position in LJMIX.” The customer is seeking $350,000 in damages and the case is currently pending.
Pursuant to FINRA Rules, member firms are responsible for supervising a broker’s activities during the time the broker is registered with the firm. Therefore, UBS Financial Services Inc. may be liable for investment or other losses suffered by Gamache’s customers.
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