Pacific Cornerstone Capital, Inc. of Irvine, California, and it’s CEO were fined a total of $750,000 by the Financial Industry Regulatory Authority (FINRA) for making false and misleading statements to purchasers of Cornerstone Industrial Properties LLC and CIP Leveraged Fund Advisors LLC. The two private placements raised approximately $50 million from 950 investors who purchased them either directly from Cornerstone or through a nationwide network of stockbrokers and investment advisers. Without admitting or denying FINRA’s charges, the firm and its CEO consented to the following findings:
- The firm had no reasonable basis for including representations in its offering documents that the targeted yield for a $100,000 investment was in excess of 18 percent over two to four years
- Periodic update letters from the firm’s CEO gave investors unrealistic performance estimates that misrepresented the true financial condition of each company.
- The firm and its CEO failed to adequately supervise and monitor the sale of the private placement offerings.
FINRA and the SEC have recently stepped up enforcement and oversight activities involving the fraudulent sale of private placement offerings, also known as Regulation D offerings.