The US Securities and Exchange Commission (SEC) has filed civil charges against Talimco LLC, a registered investment adviser (RIA), and its former COO Grant Gardner Rogers. The regulator is accusing them both of rigging a commercial real estate auction it held for one client to benefit another client, defrauding the selling client as a result. Talimco and Rogers are consenting to the cease-and-desist orders against them but without denying or admitting to the findings.
The SEC contends that around April 2015, the RIA and Rogers sought to help the selling client—a collateralized debt obligation (CDO)— sell a commercial real estate asset, while intending to help a different client—a private fund that Talimco had created—to acquire the asset. The regulator claims that instead of looking for a number of bidders for the asset that was for sale—it was the firm and Roger’s fiduciary duty to help the CDO client find a number of willing bidders so as to obtain the best price possible—Rogers purportedly only presented the selling client with the affiliated private fund client’s bid and the bids of two other “unwilling” parties. The latter two were assured that their bids would not win.
Because of this alleged “manipulation,” the private fund client’s bid ended up being the highest, and the fund was able to acquire the commercial real estate asset for half of its value at about $28.6M. The fund, with the help of further alleged manipulation by Talimco and Rogers, later sold the asset at a profit for $43.5M.
The regulator’s order also said that Talimco had hired an independent agent to obtain a “much larger number of bidders” than what it had gotten for the CDO client when it came time for the private fund to sell the asset. Prior to the latter’s auction to sell the asset, Rogers purportedly invested $1M in the private fund, and Talimco reportedly solicited more investors for the fund, telling them that they stood to profit from the asset sale.
The SEC said that Roger and the RIA’s actions caused them to “maximize their profit” and the CDO client to lose out on the chance to have multiple genuine bids for its real estate asset and potentially make more money on the sale.
The SEC said that Talimco violated the Advisers Act when it breached its fiduciary duty to the CDO client. It noted that Talimco’s role as investment adviser to both the seller—the CDO client—and the winning bidder—the private fund—was a conflict of interest.
Now, Talimco will disgorge $74K of the fees it received from the auction, prejudgment interest of almost $8800, and a $325K penalty. Rogers, meantime, will pay a $65K fine and serve a yearlong suspension from the securities industry.
Institutional Investor Fraud Claims
At Shepherd Smith Edwards and Kantas, LLP (SSEK Law Firm), our institutional investor fraud lawyers are here to help institutional clients in recouping the losses they suffered due to registered investment adviser fraud, broker-dealer fraud, breach of fiduciary duty, or any other type of securities fraud. Contact SSEK Law Firm to request your free, no obligation, case consultation with one of our investment adviser fraud attorneys.
The information contained in this Website is provided for informational purposes only, and should not be construed as legal advice on any subject matter. No recipients of content from this site, clients or otherwise, should act or refrain from acting on the basis of any content included in the site without seeking the appropriate legal or other professional advice on the particular facts and circumstances at issue from an attorney licensed in the recipient’s state. The content of this Website contains general information and may not reflect current legal developments, verdicts or settlements. The Firm expressly disclaims all liability in respect to actions taken or not taken based on any or all the contents of this Website. Read More.