SEC sues Rancho Santa Fe financial adviser for allegedly making false statements to investors
Federal securities regulators filed a complaint Friday accusing a Rancho Santa Fe financial advisory firm and two of its executives of making false statements to investors, among other deceptive acts.
The lawsuit alleges that Cornerstone Acquisition & Management, Chief Executive Derren Lee Geiger and Chief Financial Officer She Hwea Ngo engaged in a scheme to deceive investors in two of Cornerstone’s private funds that invested in oil companies and gas.
The lawsuit also alleges Cornerstone provided false information about Cornerstone’s ownership structure to investors to hold back and appease customers, and Cornerstone and Ngo created inaccurate books and records.
U.S. Securities and Exchange Commission seeks permanent injunction against future violations of securities laws, reimbursement of at least $3.3 million in advisory fees, and unspecified civil penalties against all parties .
Reached Friday evening, Geiger said the SEC’s claims were false. “We look forward to defending ourselves,” he said. “We believe the SEC’s allegations are without merit. We intend to vigorously defend our business.
The alleged misrepresentations to investors involved funds for which Cornerstone served as an adviser and received management fees from 2011 to 2021 – including a Bermuda-based fund for tax-exempt US investors and non-US investors.
The Bermuda fund has invested in oil and gas royalties and other instruments through promissory notes. The SEC alleges that Cornerstone falsely asserted in written materials that these loans were secured by collateral, which was not the case.
This lie “fundamentally misrepresented the nature and risks of investing in the fund,” according to the lawsuit.
In early 2017, the former owner of Cornerstone passed away and investors expressed concern about the ownership structure going forward. The SEC alleges that Geiger and Ngo each acquired a stake in the company from the former owner’s estate in 2018.
But in communications with investors and in reports filed with the SEC, Geiger was represented as the sole owner of Cornerstone.
The SEC launched a compliance review of Cornerstone in July 2019, which found weaknesses in its compliance controls.