In one case, the investors’ trust interviewed multiple money managers and investment firms including Credit Sussie, CitiGroup, Deutsche Bank, LaSalle Bank and Goldman Sachs. All of these firms recommended diversification across traditional asset classes, such as bonds and equities, as well as selective investments in alternative products for special situations.

However, the claim asserts that GenSpring stood out because of its unique approach which would provide better downside protection and better returns through the use of Multi-Strategy Hedge Funds, such as Silver Creek Funds, instead of the bond or fixed income portion of client portfolios. Allegedly, GenSpring officials claimed that their approach, which had been tested thoroughly, would behave like traditional bonds in terms of asset class correlation and volatility while providing returns across all market cycles that were superior to traditional bonds. The trust invested approximately $10 million and stated its primary goal as capital preservation.

In another case, trustees stated that they would need access to the funds within 6 to 18 months for business opportunities and, thus, needed safe, liquid investments. They invested $25 million with GenSpring, using primarily Multi-Strategy Hedge Funds.

In both cases, the Multi-Strategy Hedge Fund investments plummeted with the stock market in late 2008 and early 2009. Traditional bonds, however, rose more than 5 percent. According to stock fraud lawyers, the firm’s clients are at a continued risk of liquidity damage because they are unable to liquidate their very large investments.

Securities fraud attorneys say that there was no reasonable basis for GenSpring to believe that the Multi-Strategy Hedge Funds would provide adequate diversification or perform like bonds.

If you are an ultra-high-net-worth investor who suffered significant losses because of GenSpring’s recommendation of Multi-Strategy Hedge Funds, you may be able to recover your losses through securities arbitration. To find out more about your legal rights and options, contact a securities arbitration lawyer at Law Office of Christopher J. Gray., P.C. at (866) 966-9598 for a no-cost, confidential consultation.

The FINRA investigation determined that SunTrust RH became aware of stresses in the ARS market in late summer 2007. These stresses increased the risk of auction failure. SunTrust Bank instructed SunTrust RH to reduce the usage of the bank’s capital and began examining their financial capabilities. These stresses continued to increase. The firm’s sales representatives were not adequately informed of the risks and were simultaneously encouraged to sell SunTrust RH-led ARS issues.

FINRA Executive VP and Chief of Enforcement, Brad Bennett, stated “SunTrust Robinson Humphrey and SunTrust Investment Services withheld information about the ARS market which prevented their sales representatives from making proper recommendations and their customers for making informed decisions about ARS. Because of that, the customers were left holding illiquid securities when the auctions failed.”

SunTrust RH did not cease supporting the ARS auctions until February 2008. SunTrust RH shared material non-public information on February 13, 2008, when it assured SunTrust Bank it would most likely be able to discard the illiquid ARS on the same day that they were refinanced in the event that the auction market froze. Additionally, advertising and marketing materials did not adequately disclose all of the ARS risks.

Without admitting or denying wrongdoing, SunTrust RH and SunTrust IS consented to the FINRA ruling and voluntarily repurchased a total of $643 million of ARS between the two firms, and will participate in a FINRA-administered arbitration program. This program is for eligible investors to resolve claims for damages related to the ARS.

The FINRA investigation was supervised by Enforcement Chief Counsel and Associate Vice President Jim Day, and was conducted by Michael Choi, Erin Lynch and James Ruppert.