The allegations read: Without admitting or denying the findings, pellegrino consented to the sanctions and to the entry of findings that he distributed a retail communication to retail investors, which promoted an investment in a short-term, high yield contract issued by a limited liability company that contained misleading statements, improper projections of future performance, and omitted material information. The findings stated that the issuer pooled investor monies and distributed the funds to small businesses as a merchant cash advance. The investors expected investment returns based on a percentage of the merchants' future revenues. Although the communication stated that the product was not a security, it promoted a financial instrument and referenced the member firm. The communication made investment projections by multiple references to 6-10 percent investment returns. The communication further used the terms consistent, predictable, and high yield contract when describing the investment. This language was misleading because the product provided no contractual obligation for the issuer to distribute any investment returns. The use of these terms was further misleading because of the significant risk that the small businesses would be unable to generate revenue. The communication additionally stated that the investment would be backed by collateral and would involve no stock market or interest rate risk. The communication's references to collateral were misleading because the collateral was not a tangible asset, rather an interest in merchant cash advance contracts and future proceeds that would only be paid at the issuer's discretion. By claiming that the investment involved no stock market risk, the communication incorrectly suggested that the investment was risk averse. Finally, the communication omitted material information regarding the risks and features of the investment, causing it to be misleading. Specifically, the communication failed to include any statements that investing in cash advances could result in complete loss of principal, that the investment was illiquid, automatically renewed, had fees, and relied upon revenues from small businesses that often use merchant cash advances as a funding option of last resort.
