Stoltmann Law Offices, P.C. continues to investigate, file, and prosecute cases on behalf of investors that were burned in the volatility spike from early February 2018, including the Frontier Permo Fund. A few mutuals funds, like LJM Preservation and Growth Fund which invested in uncovered S&P 500 index options, were absolutely crushed in a matter of hours as the United States equity markets swung hundreds of points in minutes, sending the VIX into chaos and creating havoc for those holding options exposed to this volatility. Many other investments, including hedge funds and private placement funds, also had shocking losses in reaction to this volatility spike. One of those private funds was the Frontier Permo Fund.
The Permo Fund, offered in several iterations like the Esulep LLC Permo Fund, (Esulep is the name of the company’s CEO – John Peluse – spelled backwards, how clever) or the Frontier Permo Fund, LLC. Whatever the name, Esulep Management LLC has at all times been the manager and owner of the fund company. Permo Fund markets itself as an absolute return, pooled investment fund utilizing a proprietary trading strategy to maximize value and performance for its investors. The fund generally invested in index options in February 2018, when the volatility spike caused serious dislocation in the market for S&P 500 index options. So much money had piled into short-VIX related options, that those same investors tended to be long the S&P 500. Because of Permo Fund’s exposure to S&P 500 index options, amongst other issues, the Permo Fund saw whipsaw losses of approximately 36% in days.
Frontier Wealth Management, a fiduciary Registered Investment Advisory firm headquartered in Kansas City, Missouri, contracted with the Permo Fund in 2017 to raise capital for a pooled investment vehicle for their advisory clients to access the Permo Fund. According to a Form D filed with the Securities and Exchange Commission, this private offering raised at least $27,900,000 from 148 investors, all likely fiduciary clients of Frontier Wealth Management. This offering was dated March 13, 2017 and less than a year later, the fund plummeted. Clients of Frontier Wealth Management who were sold private placement interests in the Frontier Permo Fund may have claims to pursue against Frontier to recover those losses.
Registered Investment Advisors like Frontier Wealth Management are fiduciaries to their clients as a matter of law. Frontier admits this in their Form ADV which is filed with the SEC and distributed to their clients. The legal fiduciary duty standard, not to be confused with the lesser “suitability” or “best interest” standards applicable to financial advisors/stock brokers, is founded in the Investment Advisors Act of 1940, 15 U.S.C.§80b-l, et seq., which was one of numerous sweeping legislative acts passed by the Federal government in the wake of the Great Depression. In 1963, the United State Supreme Court in Securities and Exchange Commission v. Capital Gains Research Bureau, Inc. et al., 375 U.S.180 (1963), held that as a matter of federal law, investment advisors registered pursuant to the Investment Advisors Act of 1940 were fiduciaries to their clients.
If you were a client of Frontier Wealth Management and were sold an investment in the Frontier Permo Fund, please call Stoltmann Law Offices at 312-332-4200 for a no-obligation consultation with an experienced securities attorney. Our Chicago-based law firm represents clients nationwide, including in Kansas, Missouri, Iowa, and Nebraska. Stoltmann Law Offices is a contingency fee law firm which means we do not get paid until you do.