Growth Capital Services Fined $35,000 for Distributing Misleading Description of Risky Private Placements and Disclosure Failures

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FINRA censured Growth Capital Services of San Francisco, California and fined the firm $35,000 for filing to timely file private placement regulatory documents and for violating content standards related to sales material communications with customers, such as omitting material information and providing a misleading description of a risky private placement.

In AWC #2019060721801, FINRA cited Growth Capital for distributing or otherwise making available to potential investors offering documents, web pages, presentations, and other materials related to seven private placement offerings that were misleading or otherwise violated FINRA's content standards.

According to regulators, Growth Capital's sales material failed to include reasonable risk disclosures and failed to specify that one offering was speculative, illiquid, and could result in a total loss of the investment.

Additionally, Growth Capital purportedly presented information from less risky investments for two offerings that were actually more risky, while failing to disclose these material differences, described one offering as having "enhanced liquidity" when the product was actually illiquid, and published a misleading description of another offering's use of funds in technology companies when in reality the funds were to be invested in another LLC that itself invested in tech companies.

Investigators found that Growth Capital failed to "provide a sound basis for evaluating the proposed investments."

FINRA also found that several offering documents contained performance projections of effective and annualized yields (e.g., "Non-Sponsor Members returns are expected to equal [approximately] 34.5% IRR an over 2.7x multiple on investment"), which violates FINRA rules regarding sales document standards.

Regulators also admonished Growth Capital for failing to timely file required documents related to 11 private placement offerings that it sold.

If you have invested with Growth Capital Services, headquartered in Northern California, or with any broker-dealer, financial adviser, or representative whose misrepresentations, omissions, or unsuitable recommendations have proven harmful to your investments or interests, please call an experienced FINRA arbitration attorney at The Law Offices of Jonathan W. Evans & Associates at (800) 699-1881 for an investigation and consultation.

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