In early July 2013, the Ohio Division of Securities issued a Cease and Desist Order against Steadfast Income REIT Inc. (“Steadfast”), a nontraded real estate investment trust (“REIT”) for announcing a share price increase before the price change became effective. The Steadfast nontraded REIT invests in multifamily real estate and apartment houses and has $691.4 million in total assets. According to the Cease and Desist Order, on July 12, 2012 Steadfast announced that the value of the nontraded REIT was $10.24 per share, when instead, Steadfast sold shares at $10.00 per share until September 10, 2012. The Order specifically stated, “Steadfast’s decision to publicly announce an offering price increase 59 days prior to implementation of the price increase created a sale period that may have artificially increased investor demand for its securities.” Mark Heuerman, registration chief counsel for the Ohio Division of Securities, made the following statement to the media, “It creates a window for discounted sales price. It’s in the best interest of prior shareholders that the REIT sell shares for what it is worth.” Since the Ohio Division of Securities does not have authority to fine members, investors who incurred losses will unfortunately not recover restitution.
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