Cambridge Investment Research, Inc. broker John Pronovost (CRD# 1990612) is accused of recommending unsuitable investments in LJM funds. Pronovost has been registered with Cambridge Investment Research, Inc. in Watertown, Connecticut since 2008. If your Pronovost sold you the LJM Funds without disclosing the risks of the fund, Erez Law may be able to help you recover your 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.
Pronovost has been the subject of five customer complaints in 2018, three of which were denied, according to his CRD report:
- December 2018. “Clients allege the sale of LJM funds was unsuitable.” The customer is seeking $75,000 in damages.
- July 2018. “Clients allege advisor sold them an unsuitable investment.” The customer sought $511,085 in damages and the case was settled for $250,000.
- June 2018. “Clients allege the sale of LJM funds was unsuitable.” The customer is seeking $70,000 in damages and the case is currently pending.
- May 2018. “Clients allege misrepresentation and suitability of mutual fund.” The customer sought $50,000 in damages and the case was settled for $20,000.
- April 2018. “Client alleges a mutual fund purchased in 2016 is unsuitable for his risk tolerance. Alleged activity occurred between January 2017 and February 2018.” The customer sought $150,000 in damages and the case was settled for $75,000.
- March 2018. “Clients allege the RR misrepresented a mutual fund.” The customer sought $41,870.44 in damages and the case was settled for $41,270.44.
- March 2018. “Client alleges the fund was misrepresented and unsuitable for her needs.” The customer sought $26,044.79 in damages and the case was settled for $16,000.
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, Cambridge Investment Research, Inc. may be liable for investment or other losses suffered by Pronovost’s customers.
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.
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