sale, under section 1031 of the United .States Internal Revenue Code, by purchasing another
property with the sale proceeds. This type of transaction is known as a "1031 exchange." The
Roberts sought Donnerstag's assistance to identify potential replacement properties for the 1031
exchange.
Donnerstag informed the Roberts about DBSI's tenancy in-
- common investment program,
and Robert Roberts expressed interest. Donnerstag then e-mailed DBSI, stating that the Roberts
were interested in learning about DBSI's investments. -A DBSI sales executive, David Rottman,
worked with the Roberts to find a suitable investment, and the Roberts decided that DBSI North
Stafford had what they sought in an investment property. The Roberts engaged an attorney for
legal advice about the potential investment. They also consulted their son, Brad Roberts, an
insurance broker experienced in buying and selling securities with the assistance of securities
3 DBSI, Inc. was a real estate management company.
2
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brokers. Believing the information provided by DBSI was sufficiently informative, the Roberts
signed several transactional documents and invested in DBSI North Stafford without further
consulting Donnerstag. After DBSI sold North Stafford to the Roberts, CB Richard Ellis, Inc.
and Donnerstag received a $72,856 fee from the Roberts.
After DBSI went bankrupt, the Roberts sued Donnerstag and others for violating the Act.
They claimed that Donnerstag, as a seller of the DBSI investment, (1)misrepresented and
omitted material information regarding the sale, 2
( )sold an unregistered security, and (3)acted