The Securities and Exchange Commission recently announced a settlement with an investment adviser based on alleged fraud in a real estate investment offering.
From April to September 2011, Robert C. Acri was the controlling manager of Kenilworth Asset Management LLC, a registered investment adviser. The SEC contended that Acri defrauded Kenilworth’s clients in the offer and sale of $240,000 in promissory note securities of Prairie Common Holdings LLC by informing clients that their investment would help develop retail property in Indiana, and would be secured.
According to the SEC, Acri misappropriated $41,250 of Kenilworth clients’ funds and never secured their investment as promised. In addition, Acri allegedly failed to disclose material information, such as a conflict of interest stemming from his motivation to secure investments to help other Kenilworth clients recover on a delinquent loan of $500,000 to an entity related to Prairie. The SEC also contended that Acri failed to inform clients of the property’s distressed financial condition, as well as the five percent commission ($13,750) Kenilworth would receive for the sale of the securities.
The SEC found that Acri violated Section 17(a) of the Securities Act of 1933, Section 10(b) of the Securities Exchange Act of 1934, Rule 10b-5, and Sections 206(1) and (2) of the Investment Advisers Act of 1940. As part of the settlement, which did not require factual admissions, Acri agreed to a permanent industry bar, disgorgement of $55,000, prejudgment interest of $4,478.96 and a civil monetary penalty of $55,000.
In the Matter of Robert C. Acri, A.P. File No. 3-15926 (June 11, 2014).
Robert Cohen, a summer associate, contributed to this article.