An investment adviser and its former chief operating officer agreed to settle SEC charges for manipulating an auction of a commercial real estate asset.
The proceedings concern the actions of investment advisor Talimco, LLC ("Talimco") in connection with the sale of a mortgage loan participation by one of its collateralized debt obligation clients to another of its clients, a commercial real estate investment fund (the "Fund"). According to the SEC Orders (see here and here), Talimco owed a fiduciary duty to both the seller and buyer, and breached its duty to the seller by neglecting to "seek out willing bidders for the asset" to maximize the selling price. The SEC stated that during the sales process, Talimco's chief operating officer persuaded two "unwilling" parties to consent to bid on the asset by telling them that the Fund would not win the auction. The SEC said that as a result of the rigged auction, the collateralized debt obligation client did not have the chance to receive "multiple bona fide bids for the asset." The Fund won the auction and subsequently sold the asset at a profit, which led Talimco to reap performance and management fees.
To settle the charges, Talimco agreed to a cease-and-desist order, a censure, disgorgement of the $74,000 in fees it received, and a penalty of $325,000. Mr. Rogers consented to a cease-and-desist order, a $65,000 penalty, and a 12-month industry suspension. Both settlements were entered on a neither-admit-nor-deny basis.
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