Cambridge Investment Research working on Finra settlement over alt fund sales

Cambridge Investment Research working on Finra settlement over alt fund sales
Finra's department of enforcement has investigated Cambridge's due diligence of the sale of the defunct LJM Preservation and Growth Fund.
MAR 11, 2021

Cambridge Investment Research Inc., one of the largest independent broker-dealers in the industry, revealed last month in a filing with the Securities and Exchange Commission that it was being investigated by regulators for its sales of a small alternatives fund that blew up in 2018 and is now defunct.

According to the firm's Focus Report from Feb. 25, Cambridge has been facing an investigation by the Financial Industry Regulatory Authority Inc.'s enforcement department into its "due diligence and supervision" related to the sale of the LJM Preservation and Growth Fund.

Cambridge Investment Research "denied any wrongdoing" in its legal defense and is in negotiations for a resolution, according to the Focus Report.

LJM Partners Ltd. was a Chicago-based money manager that took bets on stock market swings and shut its doors in February 2018 in the wake of a spike in market volatility, according to a report from Reuters.

An affiliate of LJM Partners ran LJM Preservation and Growth Fund, a mutual fund aimed at a retail audience which lost half its value earlier that month as volatility in trading spiked, according to the Reuters report. The fund then lost much of its remaining value soon after as it unwound holdings at unfavorable prices to raise cash at the insistence of its broker.

The LJM affiliate-managed mutual fund held assets worth $812 million at the beginning of February 2018 but that shriveled to just $14 million a few weeks later, according to Reuters.

Cambridge Investment Research in the past has usually avoided legal complaints and regulators' attention from sales of alternative investment products. It is not clear from the SEC filing if Cambridge will in the end reimburse clients who bought the LJM fund.

"We do not comment on pending regulatory matters," a spokesperson for Cambridge Investment Research said.

According to InvestmentNews Data, Cambridge Investment Research generated $1 billion in total revenues at the end of 2019 and had 3,400 registered reps and financial advisers on its platform.

<iframe height="200px" width="100%" frameborder="no" scrolling="no" seamless src="https://player.simplecast.com/ac88d2bd-651a-4a78-81aa-0a2a8c1c5a4

Latest News

Goldman gets shareholder backing on $80M executive bonus packages
Goldman gets shareholder backing on $80M executive bonus packages

The approval of the pay proposal, which handsomely compensates its CEO and president, bolsters claims that big payouts are a must in the war to retain leadership.

Integrated Partners, Kestra welcome multigenerational advisor teams
Integrated Partners, Kestra welcome multigenerational advisor teams

Integrated Partners is adding a husband-wife tandem to its network in Missouri as Kestra onboards a father-son advisor duo from UBS.

Trump not planning to fire Powell, market tension eases
Trump not planning to fire Powell, market tension eases

Futures indicate stocks will build on Tuesday's rally.

From stocks and economy to their own finances, consumers are getting gloomier
From stocks and economy to their own finances, consumers are getting gloomier

Cost of living still tops concerns about negative impacts on personal finances

Women share investing strengths, asset preferences in new study
Women share investing strengths, asset preferences in new study

Financial advisors remain vital allies even as DIY investing grows

SPONSORED Compliance in real time: Technology's expanding role in RIA oversight

RIAs face rising regulatory pressure in 2025. Forward-looking firms are responding with embedded technology, not more paperwork.

SPONSORED Advisory firms confront crossroads amid historic wealth transfer

As inheritances are set to reshape client portfolios and next-gen heirs demand digital-first experiences, firms are retooling their wealth tech stacks and succession models in real time.