Fund Sponsor Must Offer Investor Refunds for Using Misleading Valuations
A private fund sponsor agreed to offer rescission to all investors and pay a fine in connection with misleading statements made in the relevant private placement memorandums. The SEC charged that the PPMs used real estate valuations obtained from an internet service that grossly over-valued the funds’ holdings. The SEC alleges that the fund sponsor knew that local real estate broker valuations were far lower. The SEC also charges that the fund sponsor materially misled investors by suggesting huge gains upon sale without any significant factual support. The SEC also charges that the fund sponsor violated Regulation D because it sold limited partnership interests at meetings open to the public.