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Articles Tagged with WMF Management

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Building ExplodesThe Securities and Exchange Commission (SEC) recently sought documents form a group of companies known as Woodbridge that has previously been accused of selling unregistered securities by state securities regulators.  Woodbridge, based in California, has reportedly raised over $1 billion from investors- allegedly by offering the sale of unregistered securities through unregistered brokers.  Woodbridge and its agents have also been sanctioned by multiple state regulators for allegedly offering unregistered securities, including a 2015 cease-and-desist order by Massachusetts, a cease-and-desist order against Woodbridge Fund 3 and principal Robert Shapiro imposed by Texas in 2015, and a 2016 complaint filed by Arizona regulators.

Most recently, Colorado regulators reportedly have opened an investigation into Colorado-based alleged Woodbridge brokers including James Campbell of Campbell Financial Group in Woodland Park, and Timothy McGuire of Highlands Ranch.  Woodbridge has reportedly raised $57 million from 450 Colorado investors and continues to solicit investors through online and radio advertising.

Some FINRA-registered stockbrokers and financial advisors have also allegedly sold unregistered Woodbridge securities to clients, including Frank Capuano, who was registered with Royal Alliance Associates in Holyoke, MA.  Capuano was alleged to have sold over $1,000,000 of the private notes to Royal Alliance customers and received over $30,000 in commissions.

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Investors who have lost money in Woodbridge Wealth or in any of the Woodbridge Mortgage Funds may be able to pursue recovery of any losses through securities litigation or arbitration.

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Brokerage firms that sell private placements such as the Woodbridge funds must conduct due diligence on the investment before recommending it to their clients.  The due diligence rule stems from FINRA Rule 2310, the so-called suitability rule, which requires that a brokerage firm must have reasonable grounds to believe that a recommendation to purchase a security is suitable for the customer.   This principle is further explained in National Association of Securities Dealers Notice to Members 03-71, which elaborates that a brokerage firm must perform significant due diligence before recommending a private placement investment to any customer(s).  By recommending a security to customers, the brokerage firm effectively represents that a reasonable investigation of the merits of the investment has been made.

According to a lawsuit filed by the Securities and Exchange Commission (“SEC”), Woodbridge has raised over $1 billion from thousands of investors through various finds.  Some of the Woodbridge investments involve First Position Commercial Mortgages (“FPCMs”), which consists of a promissory note from a Woodbridge Fund, a loan agreement, and a non-exclusive assignment of the Woodbridge Fund’s security interest in the mortgage for the underlying hard-money loan.  These FPCMs are securities in the form of notes, investment contracts, and real property investment contracts.

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