Seek the Advice of a Skilled Attorney Who Understands These Complex Investments
Hedge Funds Are Not Suitable For All Investors
Hedge funds are very sophisticated investments that are typically reserved for high-net-worth investors with a high risk tolerance. It is a very narrow category of investors who are suitable for these types of investments, and brokers need to be extremely careful about who they solicit to invest in them. Almost all hedge funds are private investment funds, meaning they are not registered with the U.S. Securities and Exchange Commission (SEC) and do not disclose anything to the public about management, their financial condition or the investments made by the hedge fund managers. In the last decade, there have been numerous instances of hedge fund fraud, where managers have misrepresented themselves or the performance of the hedge funds. Some hedge fund managers have diverted investors’ funds to themselves and perpetrated Ponzi Schemes by making returns to older investors with new investors’ money deposited into the hedge funds.
Funds Of Hedge Funds Are Just As Risky
An investment in hedge funds was generally limited to the very wealthy and most sophisticated investors and large financial institutions. Many investors were unable to participate in what they misperceived to be well managed investments with high returns. So Wall Street created investment companies to invest in hedge funds and offered investments in their companies to the less wealthy and unsophisticated investors to meet that demand (Funds of Hedge Funds). While most of these Funds of Hedge Funds are registered with the SEC and have publicly available information about them, little is known about the underlying hedge funds in which they invest. The managers of the Funds of Hedge Funds are often kept in the dark like the others by the managers of the hedge funds. These investments are just as complex and illiquid as the hedge funds themselves and even more expensive in terms of management fees because you have two sets of managers taking their cut before investors get their share of profits.
Structured Product Investors Are Easily Mislead By Brokers And Advisors
Unlike hedge funds, almost all structured products are registered with the SEC and sold sometimes by brokers and advisors using the brokerage firm’s fancy brochures. But who really understands those structured product disclosures? Here is how one brokerage firm attempted to answer the simple question:
What Are Structured Products?
In very general terms, structured products are securities whose value is derived from, or based on, a reference asset, market measure or investment strategy. Reference assets and market measures may include a single equity or debt securities, indexes, commodities, interest rates and/or foreign currencies, as well as baskets of these reference assets or market measures.
Do you understand structured products now? Of course not, and FINRA has been cautioning brokerages and investors about structured product sales abuses for years, but the firms keep churning them out and the sales force keeps pushing them on investors seeking to protect their investment capital and earn more income.
Retail investors, mostly seniors seeking to protect their retirement savings and support themselves with investment income, are easily mislead into making these investments by omission; that is, the broker or advisor failing to understand and make a “balanced presentation” of the true nature, mechanics and risks of the investment. These investments are unsuitable for most retirees because there are real risks: the loss of all your principal despite being called “100% Principal Protected Notes” (Remember what happened to investors in the Lehman Bros. notes? Worthless!); the market prices are not stable and fluctuate based upon the many factors affecting the underlying assets; credit risk; the issuers can redeem or “call” many of them at their discretion at a price less than what you paid; and even at maturity, you may not receive back all of your investment capital. Most structured products are sold in the secondary market without written disclosures, and if your broker or advisor recommended any structured product without a full explanation of the true nature, mechanics and risks, you probably have a good structured product fraud claim to file and recover your investment losses.
Private Placement Investments Are Not Exempt From Fraud Claims
Private placements of securities are supposed to be investments that are only offered to wealthy or sophisticated people known as “accredited investors.” If the company and salespersons offering the securities follow the rules, the securities can be sold lawfully without registering them with the SEC or state securities regulators where they are sold. While they may be exempt from the registration provisions, they are not exempt from the anti-fraud provisions of the Federal or state securities laws.
The common fraud associated with private placements is a broker or advisor misrepresenting an investor’s income, net worth or investment experience to the issuer in order to qualify the investor for participation in the offering. So be careful what you sign and make sure the investor questionnaire is an accurate portrayal of you as an investor. Next, be aware of the fact that the private placement offering mechanism is generally used by start-up companies with little or no history of operations, and any broker who makes investment performance projections is probably doing so without any reasonable basis and perpetrating a fraud. These investment vehicles are not supposed to be solicited by any broker, so be wary of “cold call” solicitations of private placement investments because they are probably coming from a “boiler room” loaded with unscrupulous salespersons whose only motivation is the high sales commission associated with these private placement investments.
LOOKING TO LEARN MORE: Click here for related articles about Hedge Funds.
Hear From Our Clients
At The Law Offices of Robert Wayne Pearce, P.A., we believe the ultimate barometer of our success is surpassing the expectation of our clients.
The following clients have direct knowledge of our firm's processes from the inside and experienced our fierce advocacy.
Hear From Our Clients
"Bob Pearce is the real-life Marvel Hero who fights for small investors against brokerage institutions who manage investors’ hard-earned money carelessly, and even worse, conduct fraud outright."
Bob Pearce is the real-life Marvel Hero who fights for small investors against brokerage institutions who manage investors’ hard-earned money carelessly, and even worse, conduct fraud outright. For years, we were misled by a brokerage firm who told us they would correct the wrong or compensate us for their mistakes. Only after we started working with Bob, we realized how powerful and wonderful it is to have a top legal expert by your side. Bob is immensely detail oriented, knowledgeable, professional, and confident. We are more than happy with the outcome Bob achieved for us within just a few months. Thank you, Bob!- Q Wang -
“Robert Pearce is part of that unusual breed of lawyers that are able to create empathy with clients and thoroughly adopt their cause”
No half efforts here. He and his group of professionals are outstanding strategists that can execute with precise fervor and unyielding determination. Theirs is a huge wave of facts, research, precedents and preparation, that has impressed me in its thoroughness and creativity, and most importantly with the results. No stone goes unturned and no effort is ever spared. In my book, he and they are those of a very rare kind that one wants to keep for a very long time.- Ramon Flores-Esteves -
“Just like the song from HAMILTON, it's so nice to have Bob Pearce on your side.”
Just like the song from HAMILTON, it's so nice to have Bob Pearce on your side. He is the consumate plaintiff's lawyer: smart. dedicated, fully able to try a case but a great negotiator in a mediation. He did a wonderful job for us, fully supporting us through the process and more than holding his own against a large national law firm.- Maurice Z. -
"Mr. Pearce and his staff exceeded all of our expectations."
Mr. Pearce and his staff exceeded all of our expectations. We were able to reach a settlement that was of our complete satisfaction, all within a very smooth, professional and efficient process. Mr. Pearce is now not only our lawyer but our family friend. We highly recommend him and his team!- Severiano L. -
"For the best fighting chance, Robert Pearce is the lawyer you want in your corner."
This law firm is the real deal. We were so lucky that they took our case as they have so much experience in securities and all the wrongdoing that happens in these investment companies where they mislead you and your money (as in our case) into schemes that are not what you think they are. Mr. Robert Pearce is one of the best lawyers around, a truly professional who will fight for you and will tell you as it is all the time. We could not have gone thru this experience if it was not for all the advice, guidance and support he and all of his staff and associates brought to the game. For the best fighting chance, Robert Pearce is the lawyer you want in your corner.- Astrid M. -
"He never felt intimidated and his study of the case and perseverance prevailed at all times."
Attorney Robert Pearce was our lawyer in a case against a Brokerage Firm and I'm witness to his ability and intelligence to deal with lawyers from the most prominent law firm in New York which was the key to recovering much of our losses cheered by their negligence. He never felt intimidated and his study of the case and perseverance prevailed at all times.- Jose A. C. -
"In the end, Bob and I had the last laugh when the arbitrators awarded me almost 6 million dollars."
No lawyer except Bob said I had a chance of winning. When UBS Lawyers laughingly offered me zero to settle the dispute, Bob became even more determined to prove everybody wrong. Bob was extremely prepared, and always a step ahead of the opposing attorneys throughout the arbitration. In the end, Bob and I had the last laugh when the arbitrators awarded me almost 6 million dollars.- J. Blanco -
"Every meeting and phone call was made with dedication and desire to help our family every step of the way."
Robert's team is excellent. They are very competitive in what they do and they are very responsible. Every meeting and phone call was made with dedication and desire to help our family every step of the way. Their professionalism, responsibility and empathy assured us that we were in good hands. Recommend to everyone.- Mayra A. -