LOS ANGELES (CN) – A federal judge ordered the former CEO of Brookstreet Securities to pay the maximum $10 million penalty for securities fraud during the financial crisis, the SEC said.
The SEC sued Brookstreet and its former CEO Stanley C. Brooks for fraud in December 2009, accusing them of “systematically selling risky mortgage-backed securities to customers with conservative investment goals,” the SEC said in a statement.
Brookstreet and Brooks developed a program through which the firm’s registered representatives sold particularly risky and illiquid types of Collateralized Mortgage Obligations (CMOs) to more than 1,000 seniors, retirees, and others for whom the securities were unsuitable,” the SEC said. “Brookstreet and Brooks continued to promote and sell the risky CMOs even after Brooks received numerous warnings that these were dangerous investments that could become worthless overnight. The fraud caused severe investor losses and eventually caused the firm to collapse.”
Brooks also was ordered to disgorge $110,713 in prejudgment interest.
“The SEC is awaiting a court decision in a separate Brookstreet-related enforcement action filed in Federal Court in Florida,” the SEC said in its statement. “In that case, the SEC charged 10 former Brookstreet registered representatives with making misrepresentations to investors in the purchases and sales of risky CMOs. Two representatives settled the charges, and the SEC tried the case against the remaining eight representatives in October 2011.”