On July 1, the U.S. Securities and Exchange Commission (SEC) announced that the U.S. District Court for the District of Connecticut entered final judgments against Connecticut investment advisory firm Temenos Advisory, Inc. and its former chief executive officer, George Taylor. The SEC charged Temenos and Taylor with misleading retail investors. Temenos and Taylor are to pay the SEC over $2 million.
The SEC alleges that Temenos and Taylor put $19 million of investor money, including elderly investors’ retirement savings and pension plans, into four risky, illiquid private offerings. Temenos and Taylor allegedly did not perform due diligence or disclose the risks and prospects of these investments. The SEC further alleges that Temenos and Taylor concealed from their investors the high commissions they received for selling these investments. Lastly, Temenos and Taylor allegedly significantly over-billed some of their clients.
“Investment advisers must put clients’ interests ahead of their own,” said Paul Levenson, Director of the SEC’s Boston Regional Office. “Temenos violated that duty by placing clients in risky private placements while downplaying the risk of those investments and concealing the financial conflicts that motivated the recommendations.”
Temenos and Taylor consented to the final judgments without admitting or denying the allegations. Temenos is ordered to pay $768,137 in disgorgement, prejudgment interest of $56,706, and a civil penalty of $775,000. Taylor is ordered to pay $321,956 in disgorgement, prejudgment interest of $22,358, and a civil penalty of $179,618.
On August 31, the SEC posted a Notice of Covered Action in reference to the case. This Notice is a signal for individuals who provided the SEC with information on the case to apply for a whistleblower award. Qualified SEC whistleblowers are entitled to a monetary award of 10-30% of the funds recovered by the government in the case.
According to the SEC, so far, this fiscal year, they have granted whistleblower awards to 25 individuals, totaling approximately $123 million. That includes the record-setting $50 million award from this June. In addition to awards, the SEC Whistleblower Program provides anti-retaliation protections to whistleblowers.
Read the SEC Press Release: Temenos Advisory, Inc., and George L. Taylor (Release No. LR-24845; Jul. 1, 2020)