The principal of an adviser formed to manage private funds was barred from the industry and fined for misleading clients by touting a promised capital infusion. According to the SEC, the respondent recklessly believed that a third party would invest a large amount of capital, thereby allowing the fund to expand investment activities. Although the third party had executed a non-binding letter of intent, the transaction was never consummated. Nevertheless, the respondent continued to promise investors that it had hundreds of millions in committed capital. The SEC also charges the respondent with a series of related misrepresentations as well as lying on Form ADV and illegally registering with the SEC.
Don’t make promises based on a promise. It appears that the respondent genuinely believed the money was coming, but, unfortunately, the third party never legally committed. As the old saying goes, “If wishes were fishes, we’d all have a fry.”