Municipal bonds are often a preferred investment option for individuals who are risk-averse and looking for modest, steady, tax-free income. Unfortunately, not all municipal bonds are as predictably safe as their reputation would suggest, as investors in Easterly ROCMuni funds recently learned. If you are among the many investors who suffered municipal bond losses following the ROCMuni value crash, you should consult with an experienced FINRA arbitration lawyer at DIMOND KAPLAN & ROTHSTEIN, P.A. as soon as possible to discuss the legal options available to you to potentially recover your losses.
Understanding Municipal Bonds
Municipal bonds, or “munis,” are debt securities issued by states, cities, counties, or other government entities to finance public projects such as schools, roads, and hospitals. “High-yield” municipal bond funds invest in municipal bonds that offer higher interest payments because of a perceived greater credit risk and typically are issued by government entities with lower credit ratings or less financial stability. Such high-yield bonds often are referred to as “junk bonds.”
Investors often are drawn to “munis” because of the tax advantages and the reputation for stability, offering an opportunity to generate tax-free income with relatively little risk. By comparison, high-yield municipal bonds can be enticing to investors because of the potential for greater tax-free income. The trade-off, however, is an increased likelihood of price volatility that can result in a greater risk of default.
Easterly ROCMuni Losses
Established in 2017, the Easterly ROCMuni High Income Municipal Bond Fund (RMHIX) was described as a “diversified, high-yield portfolio comprised of undervalued, overlooked sectors with rigorous credit analysis and relative value-based security selection” by its parent company, Easterly Funds. In June of this year, ROCMuni took a nosedive, losing almost half its net asset value (NAV).
Financial experts now allege that while Easterly ROCMuni was marketed as a relatively safe and stable municipal bond fund, it actually held significantly riskier bonds.
Who Is Responsible for the ROCMuni Municipal Bond Losses?
Shortly after the value of the Easterly ROCMuni fund dropped precipitously, allegations of misrepresentation began to surface. Managers of the fund allegedly misrepresented important aspects of the fund’s portfolio, including the risk level, degree of diversification, and the asset valuation methodologies, ultimately leading to a dramatic decline in the fund’s net asset value (NAV). Among other things, it has been alleged that the Easterly ROCMuni fund:
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used “[a] fundamentally flawed pricing and valuation methodology” that “systematically inflated” the fund’s net asset value;
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“was more heavily invested in illiquid assets than disclosed in its Offering Materials”;
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marked “assets at artificially inflated prices that did not reasonably reflect the fair value of those assets;” and
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held “assets were more closely correlated and less diversified than disclosed in its Offering Materials”.
The above allegations could give rise to liability to the brokerage firms that sold the Easterly ROCMuni fund to investors.
Investigations into Easterly ROCMuni are ongoing, and the full scope of the allegations of relating to the Easterly ROCMuni fund may not yet be known. If the allegations against the fund are substantiated, the fund, its managers, and the brokerage firms that sold the fund to investors may be held responsible for losses suffered because of the misrepresentations and misconduct.
How Can a FINRA Arbitration Lawyer Help Me?
It is believed that brokers and financial advisors at brokerage firms Stifel Nicolaus & Company, Osaic Wealth, and Janney Montgomery may have recommended the Easterly ROCMuni fund to their clients. The ROCMuni may not have been unsuitably risky for certain investors, however, If you suffered Easterly ROCMuni losses, you should contact an experienced FINRA arbitration lawyer to discuss your rights and your ability to pursue a claim to recover your investment losses.
The Financial Industry Regulatory Authority (FINRA) is a self-regulatory organization that oversees brokerage firms and registered financial professionals in the United States. One of FINRA’s central functions is to provide arbitration and mediation services to help resolve disputes between investors and brokerage firms. Arbitration is a form of private alternative dispute resolution in lieu of a lawsuit filed in court. Any claim of $100,000 or more would be ruled on by three independent arbitrators who fill the roles that a judge and jury would serve in a traditional lawsuit. The arbitrators will listen to testimony and review evidence, after which a final decision will be issued by the arbitrators. Unlike a trial court verdict, which can be appealed, arbitration results in a decision that is binding on the parties.
Contact a FINRA Arbitration Lawyer Today
If suffered $100,000 or more in losses from your investment in the Easterly ROCMuni fund, you may be entitled to pursue a FINRA arbitration claim to recover some or all your losses. There are important statute of limitations and arbitration deadlines that you must be aware of, however, to preserve your ability to pursue a claim. Consulting with an experienced FINRA arbitration lawyer as soon as possible is the best way to ensure that your rights are protected.
A FINRA arbitration lawyer at DIMOND KAPLAN & ROTHSTEIN, P.A. can discuss your legal options with you. Contact us today by calling 888-578-6255 or filling out our online contact form to schedule a confidential consultation to discuss your legal options.
