Stone & Youngberg LLC (CRD #795, San Francisco, California)

submitted a Letter of  Acceptance, Waiver and Consent in which the firm was censured, fined $350,000 and ordered to pay $206,054.72, without interest, in restitution to customers. Without admitting or denying the findings, the firm consented to the described sanctions and to the entry of findings that it charged excessive markups on collateralized mortgage obligations securities (CMOs) transactions effected for retail customers. The findings stated that the firm failed to establish and maintain a supervisory system and procedures regarding the sale of CMOs to customers to ensure that its markups for retail trades were fair and reasonable. The group supervisor never instructed the trading supervisor, who also served as the firm’s CMO trader, how to assess the reasonableness of CMO markups. The findings also stated that as a result of these procedures, the firm performed CMO transactions with retail customers where the markup the firm assessed exceeded 4 percent of the current market price of the security. The amount of the CMO markups to these customers exceeding 4 percent was $206,054.72. These markups were excessive, in that they were not fair and reasonable when taking into account the circumstances of each trade. The findings also included that the firm failed to provide appropriate guidance regarding how to assess customer suitability for inverse floaters and failed to inform its sales force of Notice to Members (NTM) 93-73 regarding inverse floaters. Because of the firm’s lack of guidance, the firm permitted registered representatives to recommend the purchase of inverse floaters to retail customers who did not understand the risks involved, or whose investment objectives were moderate. FINRA found that the firm did not develop any of its own educational materials regarding CMOs, but purchased educational brochures on CMOs an association authored. At least one of these brochures met the informational requirements of Interpretative Material-2210-8 with respect to CMOs. Although the firm provided registered representatives with access to these brochures, each registered representative had the discretion to decide if and when to offer these brochures to their retail customers.

(FINRA Case #2009017769701) 

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THE FOLLOWING ARTICLE WAS OBTAINED FROM THE SEC’S WEBSITE:

“On March 1, 2012, a federal judge 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.

In December of 2009, the U.S. Securities and Exchange Commission filed a civil injunctive action against Brookstreet Securities Corp. and Stanley C. Brooks, charging them with fraud for systematically selling risky mortgage-backed securities to customers with conservative investment goals. 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. 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 resulted in severe investor losses and eventually caused the firm to collapse.

On February 23, 2012, the Honorable David O. Carter entered an order granting summary judgment in favor of the Securities and Exchange Commission. He found Brookstreet and Brooks liable for violating Section 10(b) of the Securities Exchange Act of 1934 as well as Rule 10b-5. On March 1, 2012, the court entered a final judgment and ordered the financial penalty sought by the Securities and Exchange Commission. In addition to the $10,010,000 penalty, Brooks was ordered to pay $110,713.31 in disgorgement and prejudgment interest. The court’s judgment also enjoins both Brookstreet and Brooks from violating Section 10(b) of the Exchange Act as well as Rule 10b-5.”

THIS ENDS THE SEC’S ARTICLE.

Securities Lawyer, Lars K. Soreide, of Soreide Law Group, PLLC, has represented clients nationwide. If you or a family member have sustained investment losses due to your stock broker or financial advisor’s recommendations, call for a free consultation on how to potentially recover your losses. To speak with an attorney call 888-760-6552, or visit our website at: www.securitieslawyer.com.

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WASHINGTON —On FINRA’s website, it was announced that the Financial Industry Regulatory Authority (FINRA) has fined Northern Trust Securities $600,000 for deficiencies in supervising sales of collateralized mortgage obligations (CMOs) and failure to have adequate systems in place to monitor certain high-volume securities trades.

The article said that FINRA found from October 2006 through October 2009, Northern Trust failed to monitor customer accounts for potentially unsuitable levels of concentration in CMOs, in large part because it used an exception reporting system that failed to capture or analyze substantial portions of the firm’s business, including all CMO transactions, certain trades of 10,000 equity shares or more, and certain trades of 250 or more of fixed-income bonds. FINRA found that from January 2007 to June 2008, 43.5 percent of the firm’s business was excluded from review.

FINRA Executive Vice President and Chief of Enforcement, Brad Bennett said, “Northern Trust’s deficient systems and procedures allowed more than 40 percent of its transactions to proceed without review, which in turn left vulnerable investors exposed to the risk of losing all or a substantial portion of their principal through potential over-concentration in CMOs.”

Additionally, FINRA said that the absence of systems to monitor equity trades of over 10,000 shares or fixed income trades of over 250 bonds also resulted in a failure to review these trades for suitability, concentration, excessive trading, excessive mark-ups or commissions, or for trading in restricted stocks.

In concluding this settlement, Northern Trust neither admitted nor denied the charges, but consented to the entry of FINRA’s findings. This information was obtained from FINRA’s website.

Securities Attorney, Lars Soreide, of Soreide Law Group, PLLC, has represented clients nationwide. If you or a family member feel you have sustained a stock/securities loss through Northern Trust 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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