Recently in IMH Secured Loan Fund Category

April 26, 2013

Securities America Fined $100,000 Over IMH Secured Loan Fund & Medical Capital Sales Practices

Thumbnail image for Thumbnail image for Thumbnail image for FINRA-1.gifSecurities America, Inc. has entered into a settlement with the Financial Industry Regulatory Authority (FINRA) and will pay a fine of $100,000 in connection with the sale of two private placements. As part of the settlement, Securities America agreed to the following findings:

  • The firm failed to have a supervisory systems in place designed to identify misrepresentations or misleading statements made to customers regarding two private placements: (1) the IMH Secured Loan Fund and (2) Medical Provider Funding Corporation (aka "Medical Capital").

  • Securities America's email monitoring system failed to identify several emails that misrepresented the liquidity and safety of the IMH Secured Loan Fund.

  • One particular email exaggerated the safety of IMH by describing it as a "very safe, sleep at night investment."

  • Other emails used the words "principal protection" in describing the risk to principal for both IMH and Medical Capital.

In addition to the $100,000 fine, Securities America must conduct a comprehensive review of its supervisory system and make necessary revisions to prevent similar violations.

April 2, 2012

What are IMH Financial Corporation Shares Worth?

On March 30, 2012, IMH Financial Corporation (formerly known as the IMH Secured Loand Fund) filed their Annual Report with the Securities & Exchange Commision ("SEC"). (Click here to read IMH's Form 10-k.) The company made the following disclosure regarding the purported $9.79/share book value of the Class B and C common stock shares:

In connection with the Conversion Transactions, we issued 3,811,342 shares of Class B-1 common stock, 3,811,342 shares of Class B-2 common stock, 7,721,055 shares of Class B-3 common stock, 627,579 shares of Class B-4 common stock and 838,448 shares of Class C common stock. We have not determined a specific value for the aggregate shares issued in connection with the Conversion Transactions. However, based on our net tangible book value of approximately $165.3 million as of December 31, 2011, the current estimated book value per share for the shares issued in connection with the Conversion Transactions is $9.79 per share.

Recent IMH Blog Posts:

February 26, 2012

Tentative Settlement Reached in IMH Class Action

The following is a copy of an SEC filing recently submitted by IMH Financial Corporation (formerly IMH Secured Loan Fund) in connection with a proposed class action settlement:

On January 31, 2012, IMH Financial Corporation ("IMH") reached a tentative settlement in principle to resolve all claims asserted by the plaintiffs in the putative class action lawsuit captioned In re IMH Secured Loan Fund Unitholders Litigation ("Litigation"), pending in the Court of Chancery in the State of Delaware against IMH, certain affiliated and predecessor entities, and certain former and current officers and directors of IMH, other than the claims of one plaintiff. The tentative settlement in principle, memorialized in a Memorandum of Understanding ("MOU"), is subject to certain class certification conditions, confirmatory discovery and final court approval (including a fairness hearing). The MOU contemplates a full release and settlement of all claims, other than the claims of the one non-settling plaintiff, against IMH and the other defendants in connection with the claims made in the Litigation.

The following are some of the key elements of the tentative settlement; however, please see the Form 8-K and corresponding exhibits for full details:

·IMH will offer $20.0 million of 4% five-year subordinated notes to members of the Class in exchange for 2,493,765 shares of IMH common stock at an exchange rate of $8.02 per share [See related blog post: IMH Financial Corporation's CEO Shane Albers unloads stock at a premium of $8.02 per share]

·IMH will offer to Class members that are accredited investors $10.0 million of convertible notes with the same economic terms as the convertible notes previously issued to NWRA Ventures I, LLC

·IMH will deposit $1.645 million in cash into a settlement escrow account (less $300,000 to be held in a reserve escrow account that is available for use by IMH to fund its defense costs for other unresolved litigation) which will be distributed (after payment of notice and administration costs and any amounts awarded by the Court for attorneys' fees and expense) to Class members in proportion to the number of IMH shares held by them as of June 23, 2010

·IMH will enact certain agreed upon corporate governance enhancements, including the appointment of two independent directors to the IMH board of directors upon satisfaction of certain conditions (but in no event prior to December 31, 2012) and the establishment of a five-person investor advisory committee (which may not be dissolved until such time as IMH has established a seven-member board of directors with at least a majority of independent directors)

·Provides additional restrictions on the future sale or redemption of IMH common stock held by certain IMH executive officers

IMH has vigorously denied, and continues to vigorously deny, that it has committed any violation of law or engaged in any of the wrongful acts that were alleged in the Litigation, but believes it is in the best interests of IMH and its stockholders to eliminate the burden and expense of further litigation and to put the claims that were or could have been asserted to rest.

There can be no assurance that the court will approve the tentative settlement in principle. Further, the judicial process to ultimately settle this action is estimated to take a minimum of six to nine months or longer. If not approved, the tentative settlement as outlined in the MOU may be terminated and IMH will continue to vigorously defend this action. The foregoing description of the tentative settlement in principle and MOU are qualified in their entirety by reference to the MOU which is available on the SEC's website, attached as Exhibit 99.1 to the Form 8-K furnished on February 6, 2012.

Click here to view copy of the Memorandum of Understanding ("MOU") filed with the SEC.

Click here for all IMH blog postings.

January 9, 2012

SEC Adopts Regulations to Preclude the Sale of Private Placements to Small Investors

As repeatedly reported here in the California Securities Fraud Lawyer Blog, we have seen an exponential growth in investor complaints involving the sale of private placements. For those of you unacquainted with the term "private placement," click here.

swim at own risk.jpgIn a nutshell, private placements are illiquid non-publicly traded investments that are exempt from registration requirements under the Securities Exchange Act. For this reason, only wealthy and sophisticated investors, referred to as "accredited investors," are allowed to invest in them. In order to qualify as an accredited investor, an individual must have a net worth of $1 million or more. However, this does not mean that it is fair game for stockbrokers and investment advisors to sell private placements to anyone with a paper net worth of $1 million. See related blog posting: Even for Accredited Investors, Stockbroker Recommendations to Buy Private Placements Are Subject to the Suitability Rule.

In an effort to protect smaller investors whose only significant asset is their home, the Securities and Exchange Commission ("SEC") recently took steps to limit Regulation D of the Securities Exchange Act of 1933 to exclude an investor's primary residence from the $1 million net worth calculation. Although the rule became effective February 27, 2012, the net worth prohibition actually took effect back in July 2010 when President Obama signed off on the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2009. See blog post: Investor Home Equity to be Excluded from $1 Million Minimum Net-Worth Requirement for Accredited Investors

The Bottom Line

We recommend extreme caution to anyone contemplating an investment in a private placement that is limited to accredited investors. Don't be fooled by your financial professional's sales pitch. No matter how you slice it, private placements are illiquid and risky investments. As stated in the fine print: These investments are only appropriate if you are willing to lose your entire investment. Still not convinced? I've got a backlog of cases where clients wrongfully assumed that they could get out of their investment anytime they wanted. They are still waiting.

Related Blog Postings:

November 18, 2011

Ameritas Investment Corporation Suing Its Own Brokers Over Customer Losses in Sale of Private Placement

As noted in a previous blog posting, ALF is pursuing an arbitration claim against Ameritas Investment Corporation on behalf of an investor who borrowed funds to invest in the IMH Secured Loan Fund (now known as IMH Financial Corporation). In an unusual move, Ameritas responded by filing a cross-claim against the broker who sold the investment seeking "contractual and/or common law contribution and/or indemnity" on the basis that any harm or damage suffered was the result of acts or omissions of the broker. It is believed that the broker in question was, at the time, acting in the capacity of an agent or employee of David White & Associates based in San Ramon, California.

As a result of these developments, ALF is stepping up their investigation into this matter and is reaching out to other IMH investors who purchased through brokers employed or affiliated with Ameritas Investment Corporation and/or David White & Associates. ALF is also interested in speaking with current or former brokers employed or affiliated with Ameritas and/or David White & Associates.

Related Blog Posts:

November 7, 2011

IMH Secured Loan Fund: Here Come the Lawyers!

A number of our California securities law firm clients who suffered investment losses in the IMH Secured Loan Fund (now known as IMH Financial Corporation) have reported receiving a mass-mailed solicitation letter from a law firm located in Florida. California investors should think twice before hiring an out of state law firm to handle their case. For more information, see related blog posting: Why having a California licensed securities arbitration lawyer is so important

More IMH Blog Posts:

August 15, 2011

IMH Financial Corporation's CEO Shane Albers unloads stock at a premium of $8.02 per share

IMH Secured Loan Fund / IMH Financial Corporation Update

IMH just disclosed in the company's latest filing with the Securities Exchange Commision (SEC), that former CEO Shane Albers transferred 313,484 shares of stock to NW Capital as part of his separation agreement with IMH at a price of $8.02 per share. According to the SEC filing, NW Capital paid Albers $1.2 million over and above the estimated fair value for the IMH stock. By my calculation, this means the "fair value" given to Albers' IMH stock was approximately $4.25 per share. IMH investors who purchased ownership units for $10,000/each, paid the equivalent of $45.38 per share--thus, according to these latest figures, IMH has declined by more than 90%.

There are several lawsuits pending against IMH and the original principals of the company, including a class action lawsuit. In addition, numerous investors have filed lawsuits and securities arbitration claims against their stockbrokers or financial advisors who recommended IMH. In fact, our securities law firm is currently representing a group of investors who filed an arbitration claim against Scottsdale, Arizona, financial advisor Randolf Albers who recommended and sold IMH to his clients through Albers Financial Group and Sunset Financial Services, Inc. Randy Albers is the father of IMH's former CEO Shane Albers.

Click here for more blog postings about IMH Financial Corporation (formerly known as the IMH Secured Loan Fund, LLC)

April 25, 2011

IMH Financial Corporation Planning a $50 Million Recapitalization Loan and Shareholder Tender Offer

According to IMH Financial Corporation's latest SEC filing, the company entered into a funding commitment letter with NWRA Ventures I, LLC on April 20, 2011 to obtain a $50 million loan from MWRA for a period of five years at a rate of 17% per year. Under the terms of the arrangement, Shane Albers will resign from the company and receive a $550,000 severance payment, a renewable $20,000 per month "transitional consulting" fee and more than $200,000 in expense reimbursements.

In addition, IMH reported that NWRA plans to submit a cash tender offer to purchase up to $10 million worth of Class B or Class C shares from IMH stockholders. According to the SEC filing, the offer price is expected to be at "a substantial discount to the current book value per share of our common stock."

Following completion of the loan closing, the company also intends to offer existing investors the opportunity to purchase an aggregate of $10 million of convertible notes.

For more information:

April 17, 2011

Investor Sues Ameritas Over Recommendation to Use Real Estate Loans to Invest in Private Placements

home loan.jpgOur law firm recently filed a securities arbitration claim before the Financial Industry Regulatory Authority (FINRA) on behalf of a Northern California woman who was encouraged by her investment advisor at Ameritas Investment Corporation to take out real estate loans so that she could invest in the IMH Secured Loan Fund, a private placement that was exempt from Federal securities registration requirements. The mistaken assumption in many of these cases is that the high yield offered by the investment can be used to pay the mortgage. Unfortunately for our client, a few months after she made her investment, the fund stopped making interest payments and accepting liquidation requests from investors.

As our client's case illustrates, using a home loan to make investments is usually a bad idea and, when the investment is a speculative private placement that cannot be publicly traded or easily liquidated, it is never a good idea. [Click here for more information about private placements.] This isn't the first time that Ameritas has run into trouble for inducing customers to take out additional mortgages and home equity loans to invest. In August 2009, FINRA fined Ameritas $100,000 for failing to adequately supervise a broker who used misleading financial plans to recommend that customers refinance their homes or take out home equity loans to pay for the purchase of securities. FINRA fined the broker $60,000 and suspended her for 60 months.

When it comes to investing in securities, always invest within your means and never bet the farm.

Related Blog Posting:

Even for Accredited Investors, Stockbroker Recommendations to Buy Private Placements Are Subject to the Suitability Rule

April 15, 2011

IMH Financial Corporation's Latest SEC Filing Reflects a 73% Decline in Value

Thumbnail image for cards.jpg Although there is no news to report regarding the proposed IPO from IMH Financial Corporation, the company did file a new Form 10-K with the Securities and Exchange Commission (SEC) today. According to the SEC filing, the book value for IMH Financial Corporation shares (as of December 31, 2010) was $11.98 per share, which represents a 20% decrease from the company's previously reported book value of $15.05 per share.

Under IMH's new valuation, a $100,00 investment in IMH is now worth approximately $26,397, which gives new meaning to the company's motto:

Don't lose the money

Since IMH Financial Corporation stock is not publicly traded, investors are unable to sell their stock at any price.

Customers who purchased IMH Secured Loan Fund units through a securities broker may be able to recover damages by pursuing an arbitration claim before the Financial Industry Regulatory Authority (FINRA).

Related Entry:

Investor Sues Ameriprise Over Recommendation to Use Real Estate Loans to Invest in Private Placements

January 24, 2011

Is the IMH IPO Going Forward?

IMH Financial Corporation Files Amended Preliminary Prospectus with the SEC in Anticipation of Pursuing an IPO

Today, IMH filed an amended preliminary prospectus with the Securities Exchange Commission (SEC). Click here to view IMH's Form S-11/A. The prices and terms for the IPO have yet to be determined. Interested investors are urged to carefully read all 27 pages of the "Risk Factors" discussed in the company's prospectus.

January 19, 2011

IMH's Financial Troubles Reported in Today's Wall Street Journal

news.jpgToday, the Wall Street Journal published an article summarizing the state of affairs for IMH Financial Corporation, formerly doing business as the IMH Secured Loan Fund (the acronym I-M-H stands for "Investors Mortgage Holdings").

Click here to view the WSJ article. [Subscription required to read the entire article]

For those of you who do not have a subscription to the Journal, here are a few highlights mentioned in the article:

  • IMH's prospectus assured investors that the fund had built in safeguards to mitigate risk, such as securing personal guarantees from borrowers.
  • However, IMH's motto: "Rule 1: Don't lose the money. Rule 2: Don't lose the money. Rule 3: Don't forget Rule 1 and Rule 2" was no match for the downturn in the real estate market.
  • IMH's managers earned nearly $93 million in loan origination and modification fees between 2004 and 2009.
  • IMH's managers also received $14 million in stock as a result of the conversion.
  • IMH incurred costs of $6.2 million to prepare the IPO; however, IMH is unable to offer shares to the public due to an ongoing investigation by the SEC.

Click here to view all IMH blog postings.

January 10, 2011

IMH Financial Corporation Shares Valued at 1/3 the Original Purchase Amount

cards.jpgNow that the conversion of IMH Secured Loan Fund units into shares of IMH Financial Corporation is complete, brokerage firms have begun quietly disseminating the bad news to their customers. When they open their monthly statements, many IMH investors will be surprised to learn that their investment has fallen in value by more than 66%. As of December 28, 2010, the estimated price given to shares of IMH Financial Corporation common stock was $15.0500 per share. However, even though the shares have been given an estimated value, IMH's stock is still illiquid and cannot be publicly sold. As previously reported in this blog, the IPO has been placed on indefinite hold.

Click here for more blog postings about the IMH Secured Loan Fund and IMH Financial Corporation.

November 22, 2010

IMH Initial Public Offering (IPO) Put on Hold

Thumbnail image for whoa.jpgShareholders in the IMH Financial Corporation (formerly known as the IMH Secured Loan Fund) hoping to cash in on the promised initial public offering (IPO) should take note of the following information that was recently included in the Form 10-Q filed by IMH Financial Corporation on November 22, 2010:

We received notice on June 8, 2010 that we were the subject of an SEC investigation. After consultation with our potential underwriters, legal counsel and others, we believe that it is not probable at this time that we will be in a position to complete an IPO until matters concerning the SEC's investigation are clarified or resolved and market conditions are more favorable. We cannot determine at this time when matters before the SEC will be clarified or resolved.
October 27, 2010

IMH Financial Corporation Files for IPO

On October 27, 2010, IMH Financial Corporation filed an initial registration statement with the Securities & Exchange Commission (SEC) seeking approval from the SEC to pursue an initial public offering (IPO). In a letter to shareholder's IMH conservatively reported:

The registration statement is not yet effective, is subject to customary review by the SEC, and we expect to file various amendments to the registration statement in the course of the SEC review process. The size, timing and ability to complete the proposed offering are subject to and contingent upon marketing considerations, including financial market conditions, the timing of effectiveness of the registration statement and other risks, uncertainties and considerations.

Additional Information:

Download the October 27, 2010 registration statement

View all IMH filings with the SEC

View all IMH blog postings