Department of Financial Institutions
· Deborah Bortner, Director Of Securities
Ph: 360-902-8797, firstname.lastname@example.org
· Scott Kinney, Communications Director
Ph 360-902-0517, email@example.com
For immediate Release:
seattle investment company faces loss of license, $50,000 fine
Pacific Coast Investment Company (PCIC) has been given notice by the Department of Financial Institutions (DFI) that it may lose its Securities and Broker-Dealer licenses and be ordered to pay a $50,000 fine.
PCIC, with headquarters in Seattle, is in the business of selling “participation interests” in mortgages. PCIC and companies like it either acquire or originate loans to borrowers, funding them with money from investors. Each investor is then due a fraction of the loan interest, proportionate to their share of the total funds invested. As Securities Division Director Deb Bortner states, “It is not uncommon for businesses in this industry to sell hundreds of interests in a single loan with a principal amount exceeding millions of dollars.”
After soliciting investors, PCIC is required to hold their money in trust while proceeding with the underlying loan transaction. The company must record investors’ interests in the underlying property prior to disbursing money from the trust account.
“The purpose of the trust account rules in this industry is to protect investors,” Bortner states. “Tying up investor funds in trust, or disbursing those funds before recording an investor’s property interest, places investor funds at risk.”
In its administrative order, the Securities Division alleged that PCIC failed to follow these trust account rules. The Division also alleged that PCIC made materially false statements as to how it would manage investor funds. “Investors are entitled to complete and accurate descriptions of how their money will be handled,” Bortner states.
The Division has given PCIC notice of its intention to suspend or revoke its securities and broker-dealer registrations, require it to use an independent escrow agent, and impose fines. PCIC has the right to request a hearing in the case before any sanctions are imposed by the agency.
Investors who have questions about buying participation interests in mortgages or any other type of investment are encouraged to call DFI's toll-free number, 1-877-RING DFI (1-877-746-4334).