Erez Law is currently investigating Cambridge Investment Research, Inc. financial advisor John Pronovost (CRD# 1990612) regarding unsuitable investments and misrepresentations. Pronovost has been registered with Cambridge Investment Research, Inc. in Watertown, Connecticut since 2008.
It is alleged that Pronovost recommended his customer invest in 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 three customer complaints in 2018, one of which was denied, according to his CRD report:
- April 2018. “Client alleges a mutual fund purchased in 2016 is unsuitable for high risk tolerance. Alleged activity occurred between January 2017 and February 2018.” The customer is seeking $150,000 in damages and the case is currently pending.
- March 2018. “Clients allege the RR misrepresented a mutual fund.” The customer is seeking $41,870.44 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, 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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