Tag Archives: Stockbroker negligence

Unsafe SPACs – FINRA Targets with Exams

SPACs are inherently unsafe.  Individuals suffering losses in SPACs who thought they were getting moderate or low risk investments should call 303-300-5022 for a free and confidential consultation about their options to recover losses.

There has been a groundswell of SPACs since 2019.  The substantial trend has caught the attention of FINRA, the Financial Industry Regulatory Authority.  FINRA has begun to target the sale of SPACs with its exams.

In 2019 there were approximately 50 SPACs.  Next year there are anticipated to be over 500 SPACs.

FINRASPACs are shell companies created to acquire unknown private-equity companies.  These entities essentially circumvent the diligence of companies going public by denying analysis of the underlying assets.  The investments create the risk of investing in a private-equity company without the safeguards created to protect average investors from the owning of private-equity companies.

These entities are often referred to as “blank check” companies.   They raise money without ever identifying where the funds will be invested.  This allows it to go public without the scrutiny of underlying assets that is given to a normal IPO.  This saves costs to the SPAC, but these costs are there for a reason.

Reasonable due diligence of an investment involves the analysis of the underlying assets.  This helps identify what the ultimate value of the investment will be and whether the investment is even a legitimate investment.  This safeguard is missing from an SPAC.

Regulators don’t want to get caught flat-footed on the SPAC boom the way they were during the dotcom surge.  FINRA knows that these investments are high-risk and unsuitable for your average investor saving for retirement.  For some investors, it may be too late.  

Attention Kenny Kim, IFG Investors

If you were an investor of Kyusun “Kenny” Kim of IFG, please call 1-866-817-0201 to speak to an attorney about your rights for recovery.  Most cases are handled on a contingency basis, where the attorney does not receive fees unless there is a recovery.

Mr. Kim has been accused, and ultimately barred from the securities industry, by regulators  for systematically committing securities violations in the accounts of senior investors for the time period of 2006 through 2015.  He is accused of both of recommending unreasonably risky, or unsuitable investments, to senior investors, and of falsifying the documents of the investors to allow him to convey to his supervisors that the recommendations were suitable.

Invest photo 2As a broker, Mr. Kim’s actions are governed by the Financial Industry Regulatory Authority (FINRA).  FINRA has a suitability rule that requires that a broker have a reasonable basis for believing that a recommended transaction or investment strategy is suitable for the customer based on the customer’s investment profile, which includes, among other factors,
the customer’s age, financial situation and needs, investment experience, and risk
tolerance.

Kim was selling alternative investments to seniors.  Alternative investments are investment other than stocks, bonds and mutual funds.  They include REITs that do not trade on a stock exchange and structured notes.  Though structured notes may look like bonds or mutual funds, such investments contain a derivative component that make the investment extremely risky and speculative in nature.  An investor may need to speak to an attorney just to confirm an investment is actually a structured note.  Such recommendations were improper for investors with conservative or moderate risk tolerances.

Adding to the risk, Kim improperly recommended that many of the investors unreasonably concentrate their portfolios in these alternative investments.  This only increased the level of speculation in the portfolio.

This is only the latest chapter in a long history of regulatory actions and customer lawsuits.  FINRA has indentified 23 investor lawsuits, either filed or threatened, concerning Kim.

While Mr. Kim has been expelled from the securities industry, this does little to compensate investors who have lost their life savings.  Jeffrey Pederson has represented investors across the country in similar suits in front of FINRA.  Please call for a free and confidential consultation.