Alternative Mutual Fund Fraud

Alternative mutual funds (“Alt Funds” or “Liquid Alts”) are mutual funds marketed as a way to invest in actively-managed hedge fund-like strategies which promise to perform well in various market environments or provide access to non-traditional investments/asset classes. Alt Funds are marketed as providing stability, diversity and high-yields, all while offering daily liquidity. The popularity of Alt Funds have increased dramatically in the last several years. Despite any benefit they may provide, Alternative Mutual Funds should be viewed critically (specifically when compared to conventional mutual funds). Securities regulators have been concerned that neither customers – nor their financial advisors – fully understand how Alternative Funds will react in various market environments and that alt funds may therefore be unsuitable for many investors. Consistent with this concern, FINRA has already found that some firms were negligent (e.g. did too little due diligence on such funds) prior to allowing their brokers to recommend them to customers. FINRA outlined its concerns in a recent Regulatory Notice, available here, noting that firms have an obligation to establish and maintain supervisory systems to comply with sales practices obligations related to Alt Funds. This is especially true where an alternative investment carries special risks for customers.

If you have suffered loss in an alternative mutual fund and have been defrauded/misled about its risk, contact the attorneys at PCJ Law for a free, informative consultation at 901-820-4433.

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