On May 29, 2012, the Securities & Exchange Commission charged a hedge fund adviser from Miami for deceiving investors by leading them to believe that Quantek executives had made personal investments in a Latin-American focused hedge fund. Here is a link to the SEC release.
Think about it, what is more convincing to a prospective investor than to hear from the selling broker that the broker (or his mother, father, etc) has personally invested in the investment he is pitching? It is a time worn technique that no doubt will continue to be used by unscrupulous brokers. In this case, investors were told that fund managers had “skin in the game”.
The SEC found that Quantek lead executive Javier Guerra, operations director Ralph Patino and former parent company Bulltick Capital Markets Holdings LP misled investors about the investment process as well as certain related-party transactions.
They agreed to pay more than $3.1 million in disgorement and penalties to settle the charges. Guerra and Patino agreed to securities industry bars.
“When making an investment decision, private fund investors are entitled
to the unvarnished truth about material information such as
management’s skin in the game or the adviser’s handling of related-party
transactions,” said Bruce Karpati, Co-Chief of the SEC Enforcement
Division’s Asset Management Unit. “Quantek’s investors deserved better
than the misleading information they received in marketing materials,
side letters, and other fund documents.”
Brokers owe a duty to investors to tell the whole truth about potential investments they are recommending and to make only suggestions that are suitable for the particular investor. Age, health and financial sophistication, or lack thereof, are all to be taken into consideration by the broker.
If you have questions about losses in your brokerage account, do not hesitate to contact us. You may be able to recover your losses through FINRA arbitration.
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