Brookstreet Securities CEO To Pay $10 Million Penalty In SEC Case

Brookstreet Securities CEO To Pay $10 Million Penalty In SEC Case

LOS ANGELES – Stanley C. Brooks, the former Chief Executive Officer of Brookstreet Securities Corp has been order to pay a $10 million penalty in a securities fraud case.  The order wasinvestment fraud passed by a Los Angeles federal judge, Honorable David O.Carter.  The order was passed on the 1st of March this year and follows a civil injunctive action filed against Brooks.  The action was filed by the SEC in December 2009, for his program of selling risky mortgage backed securities to customers who had conservative investment goals.

The alleged fraud was perpetrated by a program developed by the company and by Brooks that involved registered representatives of the company selling illiquid types of CMOs or Collateralized Mortgage Obligations to senior citizens.  Typically, such risky investments are not meant for senior people and retirees but the firm managed to sell such investments and they continued to do so even after several warnings about the high risk factor of such investments and the possibility of their collapse.  This scheme did result in the collapse of the firm and in bringing a huge amount of loss to the investors as well.

The case is even more noteworthy since every investor firm knows that these high risk investments are not suitable for senior citizens.  The high-risk securities cannot be sold to retirees who are looking for stability rather than risk.  Brokerage firms must adhere to certain principals to ensure there is a match between the customers and the nature of securities they sell to them.

The securities fraud case against Stanley brooks is related to the financial crisis.  Brooks and Brookstreet have violated quite a few provisos under the SEC Act and have now been ordered to pay $110,713.31 as disgorgement and prejudgment interest.  This amount is in addition to the $10,010,000 penalty.

Brooks has been brought to trial for his aggressive promotion and sale of such risky securities, according to Robert Khuzami, Director of the Division of Enforcement in the SEC.

The SEC has also taken action against a Brookstreet related case in Florida.  Here, the SEC has charged 10 ex- Brookstreet registered representatives with misleading investors in connection with the purchase and sale of risky collateralized mortgage obligations.  While two of these registered reps have settled the charges, the case has gone to trial against the remaining 8 in October last year.

 

Enhanced by Zemanta

Leave a Reply

Your email address will not be published. Required fields are marked *