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TAG | Brookstone Securities

Mar/13

20

FINRA Fined and Suspended Palm Harbor Rep

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The following information is from FINRA’s website under “Disciplinary and Other FINRA Actions, March, 2013.”

Jim Eugene Scala Jr. (CRD #2493873, Registered Representative, Palm Harbor, Florida)

was fined $5,000 and suspended from association with any FINRA member in any capacity for 15 business days. FINRA gave Scala credit for serving a suspension imposed by his member firm while it investigated his private securities transactions. Without admitting or denying the findings, Scala consented to the described sanctions and to the entry of findings that he engaged in private securities transactions when he sold shares he owned in an alternative energy company to individuals that included customers of his firm. The findings stated that Scala was required to give his firm prior written notice and obtain prior written approval to sell his shares of the company and he failed to do so.

The suspension was in effect from February 19, 2013, through March 11, 2013. (FINRA Case #2011025846001)

It is listed on FINRA’s BrokerCheck that Jim Eugene Scala Jr is currently employed by and registered with the following FINRA Firm(s):

DALTON STRATEGIC INVESTMENT SERVICES INC.
2690 CORAL LANDINGS BLVD
UNIT 728
PALM HARBOR, FL 34684
CRD# 23485
Registered with this firm since: 8/11/2010

Jim Scala was previously registered with FINRA at the following brokerage firms:

BROOKSTONE SECURITIES, INC.
CRD# 13366
LAKELAND, FL
06/2008 – 07/2010

BROOKSTONE SECURITIES, INC.
CRD# 13366
BOCA RATON, FL
03/2008 – 04/2008

GUNNALLEN FINANCIAL, INC
CRD# 17609
BOCA RATON, FL
02/2008 – 03/2008

This ends the information from FINRA’s website.

If you have experienced a financial loss due to your broker/financial advisor’s recommendations, call Soreide Law Group for a free consultation with an attorney at: 888-760-6552.

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Jun/12

6

FINRA Fines Brookstone Securities Inc Over Sale of CMOs

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In May, a FINRA arbitration panel fined Brookstone Securities Inc., $1 million over the sale of risky CMOs (collateralized mortgage obligations) and said they made “fraudulent misrepresentation and omissions of material fact in selling complex, esoteric and risky tranches of [CMOs] to unsophisticated, elderly and retired investors.”  The FINRA panel also ordered its chief executive, Antony Lee Turbeville, along with a broker, Christopher Dean Kline barred from FINRA registered broker-dealers.

Brookstone and Antony Turbeville were jointly ordered to pay clients restitution of $440,600, while Brookstone and Christopher Kline were jointly ordered to pay $1,179,500 in restitution.

It was said in FINRA’s decision, that Turbeville and Kline “preyed on their elderly customers’ greatest fears,” such as losing their all of their savings to nursing homes and becoming penniless, thus enticing them into risky CMOs.

“Brookstone, Mr. Turbeville and Mr. Kline intentionally or recklessly misrepresented the CMO investments to their customers as a safe way, through government-backed bonds, to obtain a high rate of return on their investments,” according to the FINRA decision. “In reality, the CMOs the brokers purchased for the customers were high-risk investments whose returns were not assured, but instead, because of interest rate changes, were subject to dramatic changes in maturity, cash flow and value.”

According to FINRA, between July 2005 and July 2007,  Brookstone earned $492,500 in commissions over that time on CMOs, and investors lost $1.62 million.

Seven clients,  between 61 and 91, claimed they did not understand how CMOs worked and were not sophisticated investors, according to the FINRA decision.  FINRA has a long-standing warning to firms and advisers about selling CMOs, since 1993, when the CMO market collapsed. Finra, formerly NASD, warned that “in light of the complexity and the varying risk characteristics of CMOs, member must be conversant in all of the characteristics of CMOs to assess adequately the suitability of CMOs for their customers. Moreover, members must ensure that their customers understand the characteristics and risks associated with CMOs.”

Securities Lawyer, Lars K. Soreide, of Soreide Law Group, PLLC, has represented clients nationwide.  If you or a loved one experienced a loss through Brookstone Securities, Inc., or another broker/dealer on the sale of CMOs, for a free consultation with an attorney on how to potentially recover your losses, please call 888-760-6552, or visit our website at: http://www.securitieslawyer.com.

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Nov/11

15

FINRA Takes Actions Against Brookstone Securities, Inc., of Lakeland FL and Three of It’s Representative

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Brookstone Securities, Inc. (CRD® #13366, Lakeland, Florida), David William Locy (CRD #4682865, Registered Principal, Overland Park, Kansas), Mark Mather Mercier (CRD #1884246, Registered Principal, Lutz, Florida) and Antony Lee Turbeville (CRD #1721014, Registered Principal, Lakeland, Florida)

submitted Offers of Settlement in which the firm was censured and fined $200,000; Locy was fined $10,000 and suspended from association with any FINRA member in any principal capacity for three months, Mercier was fined $5,000 and suspended from association with any FINRA member in any principal capacity for three months, and Turbeville was fined $10,000 and suspended from association with any FINRA member in any principal capacity for three months. Mercier’s fine must be paid either immediately upon his reassociation with a FINRA member firm following his suspension, or prior to the filing of any application or request for relief from any statutory disqualification, whichever is earlier.

Without admitting or denying the allegations, the respondents consented to the described sanctions and to the entry of findings that registered representatives, while associated with the firm, made misrepresentations or omissions of material fact to purchasers of unsecured bridge notes and warrants to purchase common stock of a successor company.

 These findings stated that the registered representatives guaranteed customers that they would receive back their principal investment plus returns, failed to inform investors of any risks associated with the investments and did not discuss the risks outlined in the private placement memorandum (PPM) that could result in them losing their entire investment.

These registered representatives had no reasonable basis for the guarantees given the description of the placement agent’s limited role in the PPM. The findings further stated that the registered representatives provided unwarranted price predictions to customers regarding the future price of common stock for which the warrants would be exchangeable and guaranteed the payment at maturity of promissory notes, which led customers to believe that funds raised by the sale of the anticipated private placement would be held in escrow for redemption of the promissory notes. The findings also stated that the firm, acting through a registered representative, made misrepresentations and/or omissions of material fact to customers in connection with the sale of the private placement of firm units consisting of Class B common stock and warrants to purchase Class A common stock; the PPM stated that the investment was speculative, involving a high degree of risk and was only suitable for persons who could risk losing their entire investment.

These findings also included that the representative represented to customers that he would invest their funds in another private placement and in direct contradiction, invested the funds in the firm private placement.

2 Disciplinary and Other FINRA Actions
 
FINRA found that the representatives recommended and effected the sale of these securities without having a reasonable basis to believe that the transactions were suitable given the customers’ financial circumstances and conditions, and their investment objectives. FINRA also found that the representative recommended customers use margin in their accounts, which was unsuitable given their risk tolerance and investment objectives, and he exercised discretion without prior written authorization in customers’ accounts.
 
Additionally, FINRA determined that the firm, acting through Locy, its chief operating officer (COO) and president, failed to reasonably supervise the registered representative and failed to follow up on “red flags” that should have alerted him to the need to investigate the representative’s sales practices and determine whether trading restrictions, heightened supervision or discipline were warranted.  FINRA found that despite numerous red flags, the firm took no steps to contact customers or place the representative on heightened supervision, although it later placed limits only on the representative’s use of margin. The firm eventually suspended his trading authority after additional large margin calls, and Locy failed to ensure that the representative was making accurate representations and suitable recommendations.
 
Also, FINRA found that Turbeville, the firm’s chief executive officer (CEO), and Locy delegated responsibility to Mercier, the firm’s chief compliance officer (CCO), to conduct due diligence on a company and were aware of red flags regarding its offering but did not take steps to investigate. The findings also stated that the firm, acting through Turbeville, Locy and Mercier, failed to establish, maintain and enforce supervisory procedures reasonably designed to prevent violations of NASD Rule 2310 regarding suitability; under the firm’s written supervisory procedures (WSPs), Mercier was responsible for ensuring the offering complied with due diligence requirements but performed only a superficial review and failed to complete the steps required by the WSPs; Locy never evaluated the company’s financial situation and was unsure if a certified public accountant (CPA) audited the financials, and no one visited the company’s facility.
 
These findings also included that neither Turbeville nor Locy took any steps to ensure Mercier had completed the due diligence process.
FINRA found that Turbeville and Locy created the firm’s deficient supervisory system; the firm’s procedures were inadequate to prevent and detect unsuitable recommendations resulting from excessive trading, excessive use of margin and over-concentration; principals did not review trades or correspondence; and the firm’s new account application process was flawed because a reviewing principal was unable to obtain an accurate picture of customers’ financial status, investment objectives and investment history when reviewing a transaction for suitability. FINRA also found that the firm’s procedures failed to identify specific reports that its compliance department was to review and did not provide guidance on the actions or analysis that should occur in response to the reports; Turbeville and Locy knew, or should have known, of the compliance department’s limited reviews, but neither of them took steps to address the inadequate system.
 
Mercier’s suspension is in effect from October 3, 2011, through January 2, 2012. Locy’s and Turbeville’s suspensions are in effect from October 17, 2011, through January 16, 2012. (FINRA Case #2009017275301)

This information appeared on FINRA’s website under ‘Disciplinary Actions.’

Securities Attorney, Lars Soreide, of Soreide Law, PLLC, has represented clients nationwide. If you or a family member have experienced a loss through Brookstone Securities, Inc., David William Locy, Mark Mather Mercier, or Antony Lee Turbeville, call a Securities Arbitration Lawyer for a free consultation on how to potentially recover your losses. To speak with an attorney, call 888-760-6552, or visit www.securitieslawyer.com.

Soreide Law Group, PLLC., representing investors nationwide before FINRA the Financial Industry Regulatory Authority.

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Oct/11

19

Brookstone Securities Fined Again by FINRA

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Brookstone Securities, Inc. (CRD #13366, Lakeland, Florida)
 
submitted a Letter of Acceptance, Waiver and Consent in which the firm was censured and fined $15,000. Without admitting or denying the findings, the firm consented to the described sanctions and to the entry of findings that it failed to disclose and to timely disclose material information and an arbitration on Forms U4, and failed to timely disclose arbitrations on registered representatives’ Uniform Termination Notices for Securities Industry Registration (Forms U5).
 
These findings stated that the firm received separate complaints against a registered representative and reported the statistical and summary information regarding the complaint to FINRA via an NASD Rule 3070 filing, but failed to disclose that the representative was the subject of both complaints. (FINRA Case #2009016158302)

This information appeared on FINRA’s website “Disciplinary Actions” for October, 2011.

Securities Attorney, Lars Soreide, of Soreide Law, PLLC, has represented clients nationwide. If you or a family member have experienced a loss through Brookstone Securities, Inc., call a Securities Arbitration Lawyer for a free consultation on how to potentially recover your losses.  To speak with an attorney, call 888-760-6552, or visit www.securitieslawyer.com.  

Soreide Law Group, PLLC., representing investors nationwide before FINRA  the Financial Industry Regulatory Authority.

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Oct/11

11

Brookstone Securities, Inc. and Brokers Censured and Fined by FINRA in Two Separate Cases Involving Private Placements

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The following appeared on FINRA’s website in the ’Disciplinary Actions.’

Brookstone Securities, Inc. (CRD #13366, Lakeland, Florida) and David William Locy (CRD #4682865, Registered Principal, Overland Park, Kansas)

the firm and Locy were censured and fined $25,000, jointly and severally. Without admitting or denying the findings, the firm and Locy consented to the described sanctions and to the entry of findings that the firm, acting through Locy, did not have WSPs addressing due diligence requirements for third-party placements.

 These findings stated that the firm, acting through Locy, failed to conduct an adequate due diligence of a third-party private placement offering before Locy approved the offering of shares to customers. The findings also stated that Locy’s due diligence efforts did not include any investigation into an equity fund, despite acknowledging that he knew very little about it or the third-party placement and could not get any solid information about the fund, including pending litigation or financial statements.

These findings also included that Locy knew nothing about the fund that was not contained in a PPM the issuer prepared, but accepted that the firm representatives forming the offering had conducted due diligence and relied on their opinion of the fund.

Additionally, FINRA found that Locy acknowledged  the representatives had limited, if any, experience forming a private placement. FINRA also found that firm representatives sold or participated in sales of shares to customers without notifying Locy or anyone else at the firm, which caused those sales to not be recorded on the firm’s books and records.      (FINRA Case #20090198373)

 

Brookstone Securities, Inc. (CRD # 13366, Lakeland, Florida), Richard Joseph Buswell (CRD #4770105, Registered Representative, Lafayette, Louisiana) and Herbert Steven Fouke (CRD #5523938, Registered Representative, Lafayette, Louisiana)

 

 respondents in a FINRA complaint alleging that the firm, acting through Buswell andFouke, made misrepresentations and/or omissions of material fact in connection with the sale of unsecured bridge notes and warrants. The complaint alleges that Buswell and Fouke, acting on the firm’s behalf, told purchasers of the bridge notes that they were guaranteed without any reasonable basis given the description of the placement agent’s limited role in the Private Placement Memorandum (PPM) and disclosed no risks regarding the financing or financial health of the placement agent or the issuer of the bridge notes and warrants.

Additionally, the complaint alleges that Buswell and Fouke provided unwarranted price predictions to customers regarding the future price of common stock for which warrants would be exchangeable. The complaint further alleges that Buswell and Fouke, acting on the firm’s behalf, guaranteed the payment at maturity of promissory notes although the PPM made clear that the placement agent had no commitment to provide financing for the private placement or a later public offering.

The complaint alleges that Buswell and Fouke, acting on the firm’s behalf, recklessly or knowingly failed to disclose the risk that the financing would not occur and recklessly or knowingly failed to disclose the other risks outlined in the PPM. The complaint alleges that Buswell and Fouke, acting on the firm’s behalf, guaranteed to customers that they would receive back their principal investments plus returns, failed to inform investors of any risks associated with the investments and did not discuss the risks outlined in the PPM that could result in investors losing their entire investment. The complaint also alleges that the firm, acting through Buswell, made misrepresentations and/or omissions of material fact in connection with the sale of the private placement of firm units consisting of Class B common stock and warrants to purchase Class A common stock to customers; the PPM for the firm self-offering stated that the investment was speculative, involving a high degree of risk and was only suitable for persons who could risk losing their entire investment, and the PPM also stated that the investment was illiquid, contrary to Buswell’s representations.

Also, the complaint further alleges that Buswell represented to customers that he would invest their funds in another private placement, and in direct contradiction, invested the funds in the firm’s private placement. In addition, the complaint alleges that the firm, acting through Buswell and Fouke, recommended and effected the sale of securities without having a reasonable basis to believe that the transactions were suitable given the customers’ financial circumstances and conditions; Buswell recommended a trading strategy that relied upon frequent trading, use of margin and concentration of the accounts in a small number of financial stocks. The complaint alleges that Buswell exercised discretion in customers’ accounts without the customers’ prior written authorization or the firm’s acceptance of the accounts as discretionary. The complaint also alleges that the firm, acting through its chief executive officer (CEO) and its president, failed to reasonably supervise Buswell, and failed to follow up on red flags that should have alerted them to the need to investigate Buswell’s sales practices and determine whether trading restrictions, heightened supervision or discipline were warranted. The complaint further alleges that the firm, acting through its CEO, president and chief compliance officer, failed to establish, maintain and enforce supervisory procedures reasonably designed to prevent violations of NASD Rule 2310 regarding suitability; the firm’s procedures were also inadequate to prevent and detect unsuitable recommendations resulting from excessive trading, excessive use of margin and over-concentration. The complaint alleges that the firm’s new account application process was flawed so that a reviewing principal was unable to obtain an accurate picture of customers’ financial status, investment objectives and investment history when reviewing a transaction for suitability. The complaint also alleges that the firm’s procedures failed to identify specific reports that its compliance department was to review and provided no guidance on the actions or analysis that should occur in response to the reports.(FINRA Case #2009017275301)

This information appeared on FINRA’s website in the ‘Disciplinary Actions, 2011.’

Securities Attorney, Lars Soreide, of Soreide Law, PLLC, has represented clients nationwide. If you or a family member have experienced a loss through Brookstone Securities, Inc., and/or David W. Locy, Richard J. Buswell, Herbert S. Fouke, call a Securities Arbitration Lawyer for a free consultation on how to potentially recover your losses.  To speak with an attorney, call 888-760-6552, or visit www.securitieslawyer.com.  

Soreide Law Group, PLLC., representing investors nationwide before FINRA  the Financial Industry Regulatory Authority.

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