Investor Lawyers Blog
On March 18, 2016, the Securities Commissioner of the State of Texas (“Securities Commissioner”) entered a Cease and Desist Order (“Order”) against Woodbridge Mortgage Investment Fund 3, LLC (“Woodbridge 3” or “Respondent”). Respondent Woodbridge 3 is a Delaware-organized limited liability company formed in or around 2014. Woodbridge 3 is one of a number of mortgage funds offered by the Woodbridge Group of Companies, LLC (“Woodbridge”), the successor firm to Woodbridge Structured Funding, LLC. Woodbridge is headquartered in Sherman Oaks, CA, and its principal and controlling person is Robert H. Shapiro (“Shapiro”).
In connection with the Securities Commissioner’s Order, State of Texas securities regulators made the following findings of fact concerning their investigation into Woodbridge 3:
- The Bureau determined that Respondents Woodbridge 3 and Shapiro offered and sold “First Position Commercial Mortgages” (“FPCMs” or “The Note Program”) to investors in Texas that fell within the definition of a security;
- On July 17, 2015, the Securities Commissioner entered an Emergency Cease and Desist Order (No. ENF-15-CDO-1740) (“Emergency Order”) against Respondents, as well as other parties;
- On or about August 20, 2015, Respondents Woodbridge and Shapiro filed a request to modify or set aside the Emergency Order;
- By virtue of entering into the March 18, 2016 Order, Respondents withdrew their request for an administrative hearing “… as the parties [had] settled all matters in controversy.”
Pursuant to the Securities Commissioner’s findings, it was concluded that the Note Program constituted investments in securities, as defined by Section 4.1 of the Texas Securities Act (the “Act”). Furthermore, the Securities Commissioner concluded that Respondents Woodbridge and Shapiro had allegedly violated Section 7 of the Act by “… offering securities for sale in Texas at a time when the securities were not registered with the Securities Commissioner.” Based upon these alleged violations, the Securities Commissioner ordered that Respondents immediately cease and desist from offering for sale unregistered securities through its Note Program to Texas residents under the Act, until such time as the Note Program became registered in Texas and sold “… pursuant to an exemption from registration under the Texas Securities Act.”
In addition to regulatory scrutiny in Texas, Woodbridge has been subject to investigations by state securities regulators in: Arizona, Colorado, Massachusetts, Michigan, and Pennsylvania. Included among the various Woodbridge entities or mortgage funds are the following:
- WMF Management, LLC;
- Woodbridge Group of Companies, LLC;
- Woodbridge Mortgage Investment Fund 1, LLC;
- Woodbridge Mortgage Investment Fund 2, LLC;
- Woodbridge Mortgage Investment Fund 3, LLC;
- Woodbridge Mortgage Investment Fund 3A, LLC;
- Woodbridge Mortgage Investment Fund 4, LLC;
- Woodbridge Mortgage Investment Fund PA, LLC;
- Woodbridge Group of Companies, LLC (d/b/a Woodbridge Wealth).
Among the many risks associated with investing in securities through a private placement is the potential for fraud or related misconduct. Pursuant to applicable federal securities laws, as well as corresponding state “Blue Sky” laws governing securities — in order for unregistered securities to be sold in a compliant manner — in nearly all instances an exemption to registration must apply. With respect to securities offerings under the Note Program through Woodbridge 3 to Texas investors, it does not appear that offerings to Texas investors were recommended to investors as exempt securities through a permissible private placement offering.
If you have purchased any of the Woodbridge Notes and have suffered losses, you may be able to recover these losses in FINRA arbitration if the investment was based on a recommendation from a stockbroker or financial advisor that lacked a reasonable basis. Investors may contact a securities arbitration attorney at Law Office of Christopher J. Gray, P.C. at (866) 966-9598 or newcases@investorlawyers.net for a no-cost, confidential consultation.