New York, New York based Man Investments Inc. submitted a Letter of Acceptance, Waiver, and Consent in which the firm was censured, fined $125,000, and consented to the described sanctions and to the entry of the Financial Industry Regulatory Authority's findings that it distributed marketing materials that omitted material information, failed to provide a balanced presentation or failed to provide a sound basis for evaluating certain information presented. The marketing materials consisted of quarterly fund updates, annual summaries and printed slide presentations that were prepared by the funds and/or the firm. The findings stated that presentations, used as marketing materials, used selective, positive examples of how activism and event-driven/special situations raise stock prices but omitted negative counter-examples thereby failing to provide a balanced presentation.
FINRA's findings also stated that an investment product brochure, promoting a structured product hedge fund, contained certain risk disclosures but failed to specifically disclose that the fund was speculative and involved a substantial degree of risk. While the brochure contained certain fee information, it failed to specifically disclose that significant fees and expenses would be imposed by the fund and the fact that such fees may offset any profits. The brochure also failed to disclose in close proximity to the discussion of the fund's performance certain material information regarding the fund's performance. The brochure's explanation of the fund's use of leverage and its principal protection feature was incomplete, unbalanced and failed to provide a sound basis for evaluating the merits of investing in the fund. The communication illustrated only potential benefits of the fund's use of leverage while failing to adequately address the risks and additional costs associated with the strategy. In addition, the brochure contained misleading and unwarranted descriptions of the fund's investment objectives by failing to provide a basis for statements regarding the annualized volatility of the fund and by including performance information for a non-U.S. version of the fund, while not clearly identifying the data as related performance.
Moreover, the communication emphasized the investment upside potential of the fund's principal protection feature and included only general statements regarding the negative aspects of a principal protection feature. FINRA found that the firm also distributed communications that contained exaggerated claims. In one instance, a communication made a prohibited performance projection, which implied that past performance will reoccur. The marketing materials have since been amended or are no longer being used by the firm.
FINRA prohibits false, misleading, or exaggerated communications with the public and the omission of material facts or qualifications that would cause a communication to be misleading. All communications must comply with principles of fair dealing and good faith. Therefore, investors who have suffered damages due to their reliance on insufficient and/or misleading marketing materials can bring forth claims to recover losses against broker-dealers like Man Investments, which should have adequately informed its investors of the risks and performance of the subject funds.
The most important of investors' rights is the right to be informed! This Investors' Rights blog post is by the Law Offices of Robert Wayne Pearce, P.A., located in Boca Raton, Florida. Please see our Instablog profile (left column) for ways to contact us and get answers to any of your questions about this blog post and/or any related matter.