Brookstreet CEO Ordered to Pay $10 Million Penalty in SEC Case

By: Esther Cho 03/05/2012

Former CEO of Brookstreet Securities Corp. was ordered by a federal judge to pay a maximum $10 million for securities fraud, the Securities and Exchange Commission (SEC) announced Friday in a statement.

The SEC charged Stanley C. Brooks and Brookstreet in December 2009 with fraud due to the sale of risky mortgage-backed securities to customers who were not looking to purchase risky investments. The more than thousand customers who bought the risky Collateralized Mortgage Obligations through Brookstreet included seniors and retirees.

In addition to investor losses, the fraudulent sales also led to the firm’s collapse.

“Brooks’ aggressive promotion and sale of risky mortgage products to seniors and other risk-averse investors deserves the maximum penalty possible, and that is what he got,” said Robert Khuzami, director of the SEC’s Division of Enforcement. “Those who direct such exploitative practices from the boardroom will be held personally accountable and face severe consequences for their egregious actions.”

A judge in federal court ruled in favor of the SEC on February 23, finding Brookstreet and Brooks liable for violating Section 10(b) of the Securities Exchange Act of 1934, as well as Rule 10b-5. A final judgment was entered March 2 in which the financial penalty was announced. Brooks was also ordered to pay $110,713.31 in disgorgement and prejudgment interest in addition to the $10 million.

The SEC is awaiting another court decision for a Brookstreet-related enforcement action filed in federal court in Florida. For this case, the SEC charged 10 former Brookstreet registered representatives with making misrepresentations to investors in the purchases and sales of risky CMOs. While two representatives settled the charges, the SEC tried the case against the remaining eight representatives in October 2011.