The Securities and Exchange Commission (SEC) on Tuesday slapped the now-defunct Brookstreet Securities Corp., Irvine, Calif., with civil fraud charges, accusing it of causing "substantial investor losses" on the sale of $300 million worth of CMOs.
The SEC also charged company CEO Stanley C. Brooks with fraud for selling risky mortgage-backed securities to more than 1,000 customers that had "conservative investment goals."
The SEC said the fraud cost Brookstreet investors their savings, homes and retirement money. The government says the company collapsed in 2007 because of these bad investments and continued to sell risky CMOs to retail investors even after Brooks received numerous indications and personal warnings that these were "dangerous" investments.
One trader even called Brookstreet's program a "scam." At press time, Brooks could not be reached for comment.