Pacific Cornerstone Capital and former CEO Terry Roussel face $750,000 in fines by the Financial Industry Regulatory Authority Industry (FINRA) for making misleading statements and omitting facts in connection with sales of two private placements. FINRA also charged the broker/dealer and Roussel with advertising violations and supervisory failures.
According to a statement by FINRA, Pacific Cornerstone sold private placements in two affiliated companies from January 2004 to May 2009 using offering documents and accompanying sales literature that promised to return an investor’s principal in two to four years, along with generating a return of more than 18%. FINRA says it found no reasonable basis for those statements.
In addition, Pacific Cornerstone offered private placement units of the two affiliated entities, Cornerstone Industrial Properties, LLC and CIP Leveraged Fund Advisors, LLC, to other broker/dealers and investment advisors. They, in turn, sold the units to the investing public. A total of $50 million worth of private placements were sold to nearly 1,000 investors.
During the same period that the private placements were sold, Roussel periodically sent letters to investors to update them on the progress of their investments. According to FINRA, those progress reports painted a positive – albeit unrealistic – future, as well as failed to provide required risk disclosures. FINRA also found that the offering documents neglected to reveal a complete and accurate financial condition of one or both of the companies.