Barely seven months removed from agreeing to pay $35 million to settle charges it falsely portrayed the performance of its AlphaSector index, F-Squared Investments Inc. filed for bankruptcy protection and agreed for its investment strategies to be managed by a new firm, Broadmeadow Capital.
And, for one pioneering investor, a firm's recommendation that he invest in the risky F-Squared product could land that firm in hot water for alleged inadequate due diligence and suitability violations.
According to the bankruptcy, a slew of lawsuits and similar actions took a toll on F-Squared, which last year faced the Security and Exchange Commission's ire for making false claims about its performance and admitting "that it misled its clients over a number of years about the existence and success of its core strategy," according to one SEC official.
According to its bankruptcy court filings, F-Squared indicated assets of between $1m and $10 million, but liabilities of between $100m and $500 million, including financial obligations to former CEO Howard B. Present (who himself is fighting the SEC over claims he himself engaged in misconduct), credit card bills, legal claims, and hundreds of thousands of dollars in employee contracts.
As it relates to securities investors, an elderly Wells Fargo client filed a claim in June, alleging $100,000 in damages over the firm's apparent failure to conduct adequate due diligence in the F-Squared AlphaSector Allocator Select product, which itself invests in the riskier-than-average exchange traded funds (ETFs).
The 68-year-old widower said Wells Fargo failed to discover key red flags, and that his broker and/or the firm placed itself in a conflict of interest situation because it earned $19,000 in fees and commissions for recommending the ETF-based F-Squared product. He also accused Wells Fargo of recommending an unsuitable product, alleging that F-Squared's AlphaSector Allocator Select is risky and not appropriate for a "moderately conservative investor."
If you have invested in F-Squared's AlphaSector Allocator Select ETF or any other F-Squared product or portfolio, or with a firm or broker whose failure to conduct adequate due diligence or unsuitable recommendations of F-Squared has proven harmful to your investments or interests, please call The Law Offices of Jonathan W. Evans & Associates at (800) 699-1881 for investigation and consultation.