A federal judge has ordered the former CEO of Brookstreet Securities Corp. to pay a maximum $10 million penalty in a securities fraud case related to the financial crisis.
The Securities and Exchange Commission (SEC) started litigation on the case started in December 2009, when the agency charged Stanley Brooks and Brookstreet with fraud for selling risky MBS.
Brookstreet and Brooks developed a program where the firm’s registered representatives sold particularly risky and illiquid types of CMOs to more than 1,000 seniors, retirees, and others for whom the securities were unsuitable.
According to the SEC, Brookstreet and Brooks sold the risky CMOs even after receiving several warnings that these were dangerous investments that could become worthless overnight.
The federal judge entered a final judgment in the case yesterday and ordered the $10,010,000 financial penalty sought by the SEC. In addition, Brooks was ordered to pay $110,713.31 in disgorgement and prejudgment interest.
“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 in a press release. “Those who direct such exploitative practices from the boardroom will be held personally accountable and face severe consequences for their egregious actions.”
The SEC has brought enforcement actions stemming from the financial crisis against 95 entities and individuals, including 49 CEOs, CFOs, and other senior officers.