Have you suffered losses as a result of your investment in IMH Financial Corporation, formally known as IMH Secured Loan Fund? If so, the securities attorneys at The White Law group may be able help you recover your losses through a FINRA arbitration claim against the brokerage firm that sold you the investment.
According to IMH Financial’s annual report (Form 10-K) ending Dec. 31, 2012, the estimated book value of the “Conversion Transactions” of IMH has dropped substantially. The Conversion Transaction refers to the conversion of IMH Secured Loan Fund into a Delaware corporation. (IMH apparently intended the Conversion Transactions “to position the Fund to become a publicly traded corporation listed on a stock exchange,” however IMH has yet to go public.)
In addition, the annual report estimated “net losses of $32.2 million, $35.2 million, and $117.0 million for the years ended December 31, 2012, 2011 and 2010, respectively.”
While the overall tone of IMH’s annual report is intended to paint an optimistic picture regarding future performance, the report is filled with troubling news for investors. In addition to the decreased share price, seven out of nine loans acquired by IMH are in default with an outstanding principle balance totaling $119.0 million. For many investors, this is not the performance they expected from a corporation that has a primary focus on acquiring, originating, marketing and selling commercial mortgage loans.
Though, IMH recently announced in a letter to shareholders that the SEC had completed its investigation, it is unclear whether the courts approved the tentative settlement agreement that was reached on Jan 31, 2012 regarding three combined class action lawsuits filed in 2010.
The terms of the tentative settlement appears to offer members the opportunity to exchange IMH shares for Shareholder Notes at an exchange rate of one share per $8.02 in Shareholder Notes. Unfortunately for investors looking for liquidity, shareholder Notes will apparently take 5 years to mature and a multitude of additional terms will affect potential redemption. Given the terms of the settlement and IMH’s performance record, many investors are likely skeptical that IMH will have the cash available to redeem the notes upon maturity. To read the tentative settlement in full, visit Memorandum of Understanding <http://www.sec.gov/Archives/edgar/data/1397403/000114420412006002/v301296_ex99-1.htm>.
For investors unhappy with the proposed class action terms, there are additional litigation options.
From what is known about IMH Corporation and the IMH Secured Loan Fund investment many investors may not have been fully aware of all the risks. While IMH spends approximately 20 pages in their annual report discussing risks factors, it is the responsibility of brokerage firms to ensure an investment is in-line with a clients risk tolerance when making investment recommendations.
Prior to making financial recommendations to a client, brokerage firms are required by the Financial Industry Regulator Authority (FINRA) to perform adequate due diligence to determine suitable recommendations given the clients age, investment objectives, liquidity needs, risk tolerance, net-worth, and investment experience.
Brokerage firms and financial advisors that breach their fiduciary duty and fail to perform adequate due diligence may be held liable for losses through a FINRA arbitration claim.
If you have suffered significant losses as a result of your investment in IMH and would like to discuss your litigation options, please contact The White Law Group at 312-238-9650 for a free consultation.
The White Law Group, LLC is a national securities fraud, securities arbitration, investor protection, and securities regulation/compliance law firm with offices in Chicago, Illinois and Boca Raton, Florida.
For more information on the White Law Group, visit www.whitesecuritieslaw.com.