The Securities and Exchange Commission today charged Talimco LLC, a registered investment adviser, and Grant Gardner Rogers, the former chief operating officer of the firm, with manipulating the auction of a commercial real estate asset on behalf of one client for the benefit of another.
According to the SEC’s order, in or about April 2015 while selling a commercial real estate asset on behalf of a collateralized debt obligation client, Talimco and Rogers were aiming to acquire the asset for another client, a private fund. Talimco and Rogers owed its selling client a fiduciary duty, which included an obligation to take steps to use its best efforts to maximize the price obtained for the asset by identifying willing bidders. However, rather than seek out multiple bona fide bidders, the order finds that Rogers used the firm’s affiliated private fund client for one bid and convinced two unwilling bidders to participate in the auction by giving assurances that the bidders would not win the auction. As a result of this manipulation, Talimco’s private fund client was the highest bidder and acquired the asset, only to then later sell it for a substantial profit. Talimco and Rogers’s conduct deprived the selling client of the opportunity to obtain multiple bona fide bids for the asset and maximize their profit.
“By rigging the auction, Talimco and Rogers failed to fulfill their fiduciary duty to their client,” said Daniel Michael, Chief of the SEC Enforcement Division’s Complex Financial Instruments Unit. “Investment adviser firms are expected to