The Securities and Exchange Commission charged a Connecticut-based investment advisory firm and its chief executive officer with putting $19 million of investor money in risky investments and secretly pocketing hefty commissions from those investments.
The SEC’s complaint alleges that Temenos Advisory Inc. and George Taylor steered advisory clients and other investors — including senior citizens and individuals approaching retirement — into four risky, illiquid private offerings.
While Temenos and Taylor charged advisory fees for unbiased financial advice, they allegedly concealed from their clients the high commissions they were pocketing from these risky and unsuitable investment recommendations, including cash and ownership stakes in the private companies they recommended. According to the SEC, Temenos and Taylor fraudulently misled clients about the risks and prospects of the investments.
The SEC also alleges that Temenos and Taylor grossly overbilled some of their advisory clients.
“Investment advisors must put clients’ interests ahead of their own,” Paul Levenson, director of the SEC’s Boston Regional Office, said in a statement. “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.”
According to the SEC, Temenos and Taylor failed to conduct even the basic due diligence necessary to determine whether the private placement investments were suitable for its clients.
“Although their due diligence was inadequate, their financial incentives to recommend these private securities offerings were not,” the SEC complaint states.