Available 24/7Even though investors may perceive hedge fund managers as market wizards who always make money, that may be starkly different from the reality you face when you have entrusted your money to one of them.
You may have sustained large losses that are not always the result of natural market forces. You can contact a hedge fund fraud attorney to help determine whether you may be able to file a claim against a broker who guided you to invest in the hedge fund. Call the experienced investment fraud lawyers at Rikard & Protopapas to learn about your legal rights after being the victim of broker misconduct.
How Hedge Funds Work for Investors
Hedge funds are a type of alternative investment that is not available to everyone. A hedge fund is a pooled investment vehicle, run by an asset manager, that seeks to make profits for the investors.
Hedge funds can invest in a wide variety of assets. Some may invest in more traditional equities, while others may place money in higher risk and less transparent assets.
You are placing a great deal of trust in the hedge fund manager. Not only are you relying on their investment expertise, but you are also trusting them to be honest with your money.
Hedge funds investors can lose money in a number of ways, from investment losses to the manager stealing your assets. The Bernie Madoff scandal may be a familiar example to investors, where a well-known fund manager was actually running a giant Ponzi scheme.
Special Requirements to Invest in Hedge Funds
There is a reason why hedge funds are reserved for accredited investors. There are more risks, and hedge funds may not be as regulated as other types of investments. However, people can lose much of their life savings when they invest with the wrong person.
The requirements for investing in hedge fund are that you have either:
- A minimum net worth of $1 million
- An annual income of at least $200,000 (or $300,000 for a married couple)
Once you meet the requirements, all you need to do is be able to invest the minimum amount allowed by the hedge fund.
These days, many more people are able to invest in hedge funds. Since the thresholds for hedge fund investment have not been raised, even as salaries have increased, these investments are more within the range of individual investors who believe that they can earn higher returns.
Brokers Have Obligations When Recommending a Hedge Fund
Even if someone has the money to invest in a hedge fund, it does not mean that it is the best possible investment for them. In addition to having the money, an investor should also possess a certain degree of financial savvy to invest in a hedge fund.
Financial advisers need to consider whether a hedge fund is a suitable investment for their customers under FINRA rules. Advisors can either recommend an unsuitable class of investments, such as hedge funds, or they may steer their clients to funds where due diligence would have revealed potential fraud.
Some advisers may even be paid under the table for steering clients towards particular investments.
Warning Signs of Hedge Fund Fraud
You should always be on the lookout for signs that you may be a victim of hedge fund investment fraud.
Here are some indicators that something may be wrong with a :
- You are receiving very stable returns, regardless of any volatility in the market
- The hedge fund is investing in assets that are outside of the parameters of what you were told when you invested
- You cannot get your money back when you try to make a withdrawal
- You do not get any clear answers when you are trying to ask questions
- A broker engages in high-pressure sales tactics to try to get you to purchase the investment
Make sure to question anything that does not look like it makes sense to you. If you have lost money, and you believe that you have been a victim of fraud, it is essential that you contact an attorney immediately. An attorney may help you take action against the broker who recommended the investment to you as a breach of their own duties that they owed you and securities laws.
When You Can File a Claim Against Your Broker
It may be difficult to get money back from the hedge fund adviser who defrauded you, especially because there may be many other investors who are also in line to financially recover. You may consider filing a claim against your broker who recommended the hedge fund or invested in the fund on your behalf.
You can file a claim against brokers for:
- Recommending an unsuitable investment like a hedge fund
- Failing to disclose the risks of investing in hedge funds in general, and the particular fund where you lost money
- Failing to uphold their fiduciary duty that they owed you
- Making misrepresentations to you when handling your investments
Contact a Hedge Fund Fraud Lawyer Today
If you have been the victim of broker misconduct relating to your hedge fund investment, the attorneys at Rikard & Protopapas can help you take legal action. You may be able to file a FINRA arbitration claim against the broker.
First, reach out to an attorney to discuss your case. You can schedule a free initial consultation with one of our lawyers by calling us today at (803)-805-7546 or sending us a message online. We are not paid until you win your case.