Did you lose money investing in Broad Reach Capital?
Galvin Legal, PLLC is launching an investigation on behalf of investors who suffered losses investing in Broad Reach Capital at the recommendation of their financial advisor. If you suffered losses investing in the investment, then Galvin Legal, PLLC may be able to help you recover your losses in a Financial Industry Regulatory Authority (“FINRA“) arbitration claim against the brokerage firm that recommended the investment.
According to SEC filings, Broad Reach Capital is a Regulation D fund established in February 2016 that was open to accredited investors with a minimum investment of $1 million.
If you suffered losses and would like a free consultation with a securities attorney, then please call Galvin Legal, PLLC at 1-800-405-5117.
UPDATE 6/8/2020:
Broad Reach Capital’s investment fund manager, Brenda Smith, has been indicted by a federal grand jury on six counts of wire fraud and one count of securities fraud for allegedly operating a $68 million investment scheme, according to U.S. Attorney Craig Carpenito in the Newark, New Jersey office. The Securities and Exchange Commission filed a civil complaint against Smith in August 2019 based on the same alleged misconduct.
Brenda Smith and Broad Reach Capital raised nearly $68 million from approximately 40 investors between February 2016 and August 2019, promising to invest in publicly traded securities through various trading strategies that she claimed would provide consistently high returns.
According to documents filed in this case and statements made in court, Brenda Smith allegedly failed to invest the money as advertised and purportedly diverted tens of millions of dollars of investor funds out of Broad Reach Capital for purposes inconsistent with its trading strategies, including for personal use and to pay out millions of dollars to other investors who requested redemptions.
For example, Brenda Smith allegedly transferred tens of millions of dollars out of Broad Reach Capital to entities she controlled, including more than $10 million for mineral mining operations and $2 million for American Express credit card bills.
In addition, she purportedly distributed written materials about Broad Reach Capital to investors and prospective investors that included historical “performance” information, claiming annual returns of more than 33 percent in 2017 and positive monthly returns in 2018. However, the total cash and securities in the Broad Reach Capital bank and brokerage accounts decreased substantially from December 2016 through June 2019. For example, its written materials touted a return of 1.76 percent in February 2018, but prosecutors claim that the accounts lost more than 50 percent of their value.
The wire fraud counts carry a maximum penalty of 20 years and a $250,000 fine, or twice the gross amount of gain or loss from the offense, whichever is greater. The securities fraud count carries a maximum penalty of 20 years in prison and a $5 million fine. The charges and allegations in the indictment are merely accusations, and Brenda Smith is presumed innocent unless and until proven guilty.
If you suffered losses and would like a free consultation with a securities attorney, then please call Galvin Legal, PLLC at 1-800-405-5117.
Due Diligence Requirement
FINRA requires brokerage firms to conduct due diligence on investments and to conduct a suitability analysis when recommending securities to a customer that takes into account the customer’s knowledge and experience. FINRA Rule 2111(a) states that “a member or an associated person must have a reasonable basis to believe that a recommended transaction or investment strategy involving a security or securities is suitable for the customer, based on the information obtained through the reasonable diligence of the member or associated person to ascertain the customer’s investment profile. A customer’s investment profile includes, but is not limited to, the customer’s age, other investments, financial situation and needs, tax status, investment objectives, investment experience, investment time horizon, liquidity needs, risk tolerance, and any other information the customer may disclose to the member or associated person in connection with such recommendation.”
Rule 2111 is composed of three main obligations: reasonable-basis suitability, customer-specific suitability, and quantitative suitability. Brokerage firms that fail to conduct adequate due diligence on investments they recommend, such as Broad Reach Capital, or that make unsuitable recommendations can be held responsible for the customer’s losses in a FINRA arbitration claim.
If you suffered losses and would like a free consultation with a securities attorney, then please call Galvin Legal, PLLC at 1-800-405-5117.
Request a Free Consultation with a Securities Attorney
If you suffered losses investing in Broad Reach Capital and would like a free consultation with a securities attorney, then please call Galvin Legal, PLLC at 1-800-405-5117.
This information is all publicly available and is being provided to you by Galvin Legal, PLLC.
Galvin Legal, PLLC is a national securities arbitration, securities mediation, securities litigation, securities fraud, securities regulation and compliance, and investor protection law practice. For more information on Galvin Legal, PLLC and its representation of investors, please visit www.galvinlegal.com or call 1-800-405-5117.
