Ranieri Partners, the New York-based real estate firm, has agreed to pay a penalty of $375,000 to the Securities and Exchange Commission (SEC) after allegations that the firm failed to adequately monitor, and limit the activities, of one of its consultants.
Ranieri agreed to settle the charges without admitting or denying the allegations. The firm declined to comment.
The allegations accuse Ranieri of using William Stephens, the former chief investment strategist of a San Francisco-based registered investment adviser, to solicit capital commitments from investors despite Stephens not being registered as a broker-dealer under federal securities laws.
Ranieri engaged Stephens to make initial introductions between the firm and potential investors for a fee of 1 percent of all capital commitments he facilitated.
However, the contract between Ranieri and Stephens did specify that he was not permitted to give potential investors private placement memoranda directly or to directly discuss the merits of Ranieri funds, according to the SEC.
The SEC alleged that Stephens went beyond these contractual limitations and charged Ranieri, and Donald Phillips a former senior managing partner of the firm, with failing to oversee Stephens’ activities, claiming the firm should have been aware that he was violating his contract.
According to the SEC Ranieri “received [his] requests for expense reimbursements, which reflected [his] extensive contact with potential investors” and the firm took no steps to monitor or limit his contact with investors.
Stephens has agreed to be barred from the securities industry and the SEC ordered $2.4 million in disgorgement, but this was waived due to Stephen’s statement of financial condition. Phillips agreed to pay $75,000 and be suspended from acting in a supervisory capacity at an investment adviser or broker-dealer for nine months.