The financial stratosphere is nothing short of a wilderness. Even with Covid 19 leaving deep bruises on the pockets, the competition level remains high. Thus, finding your way through this wilderness can become tricky at times; as there is this scary fact at the back of your head that one wrong step can lead you towards some irreversible damage. It must be noted that competition isn’t the only area of concern for a company. There are all sorts of components that form a business environment, and to ensure harmony in this intense environment, we have a cluster of governing bodies. When a huge amount of money is at stake, things can get heated really quickly, hence needing an unbiased intervention from the regulators. Furthermore, you realize the importance of proper regulation when you see certain organizations keeping the ethical rulebook aside and taking unlawful routes to better profits. The latest case involving LJM Funds gives you just the right idea about it.
As per some reports that surfaced recently, Security and Exchange Commission of U.S. accused a Chicago-based Investment Advisors’ group, LJM Funds, of ‘misleading’ the investors regarding the level of risk in their portfolios. LJM’s financial guidance led to “catastrophic trading losses” worth more than a whopping 1 billion US dollars during a volatile market period back in 2018.
Once their final report was official, SEC filed an action demanding a jury trial against LJM Funds management, LJM partners, and company’s portfolio managers, Anthony Caine and Anish Parvateneni.
One of the core accusations in the SEC complaint concerns the lie told by fund managers to their clients about risks on their funds being offset. In addition, it was claimed that the managers also provided false information when asked to crunch out estimates about potential worst-case scenario for daily losses. The commission believes that the company didn’t use their fund stress test results to ascertain any estimations, but arrived on the 20% figure (as told by the managers) just by picking up fund’s worst single-day performance (9%), doubling it, and rounding it to 20%.
While the fate of LJM is up in the air, SEC continues to encourage stringent actions against the company through permanent injunctions for the accused, along with disgorgement of civil penalties.
LJM, on the other hand, has categorically denied the allegations, claiming that charges of against the organization have no factual basis.