Class Action Complaint Filed Alleging Violations of Federal Securities Laws
On February 9, 2018, a class action lawsuit was filed on behalf of LJMIX investors alleging that Defendants violated provisions of the Securities Act by issuing false and misleading statements to investors, including in filings with the SEC. Specifically, it is alleged that Defendants made false and/or misleading statements or failed to disclose that LJMIX was not focused on capital preservation and left investors exposed to an unacceptably high risk of catastrophic losses. In addition, it is alleged that Defendants violated the law by failing to disclose that LJMIX had not taken appropriate steps to preserve capital in down markets.
“Clearly, the process failed.”
LJM is described as a class of mutual fund pitched as bringing hedge fund-like strategies to a broader swath of investors. It used options to bet on markets remaining calm and told investors that the strategy offered an alternative to traditional stock and bond investing.
According to media reports, “The [portfolio manager] described to us several processes he had in place at the open-end fund that would limit losses,” said Gretchen Rupp, an analyst at Morningstar. “We discussed the risk management process with the PM and their risk officer at length. Clearly, the process failed.”
The fund had proved popular in recent months, attracting more than $100m in new cash in December alone, according to Morningstar data.
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