The Securities and Exchange Commission (SEC) today, January 29th., 2013, on it’s website announced that it has charged a former managing director of Jefferies & Co., Inc. (Jefferies), a New York-based broker-dealer, with making misrepresentations and engaging in misleading conduct while he sold mortgage-backed securities (MBS) in the wake of the financial crisis.

The SEC alleges that Jesse Litvak, a senior trader on Jefferies’ MBS Desk who worked at Jefferies’ office in Stamford, Connecticut, where he bought and sold MBS from and to his customers. From 2009 to 2011, Litvak allegedly lied to, or otherwise misled, those customers about the prices that Jefferies had purchased the MBS before selling it to another customer and the amount of his firm’s compensation for arranging the trades. Litvak also misled his customer into believing that he was arranging a MBS trade between customers, when Litvak really was selling the MBS out of Jefferies’ inventory. Litvak also misled customers about how much money they were paying in compensation to Jefferies. These customers included investment funds established by the United States government in the wake of the financial crisis to help support the market for MBS as well as other investment funds, including hedge funds.

It was also noted in the article on the SEC website that according to the SEC’s complaint filed in U.S. District Court for the District of Connecticut, Litvak engaged in misconduct on over 25 trades. When Litvak offered his customers MBS, he lied to them about how much Jefferies had paid (or was paying) for the securities. On some occasions, Litvak also pretended to be actively negotiating with an outside party to buy a security that he would then re-sell to his customer. But none of these negotiations were taking place; instead, Litvak fabricated the existence of the seller and every detail about active negotiations with it. In fact, as Litvak knew, Jefferies had purchased these bonds days before and already held them in its inventory.

The SEC’s complaint charges Litvak with violating the antifraud provisions of the federal securities laws. The complaint seeks a final judgment permanently enjoining Litvak from future violations of the federal securities laws, ordering him to disgorge his ill-gotten gains plus prejudgment interest, and order him to pay civil penalties.

Securities Lawyer, Lars K. Soreide, of Soreide Law Group, represents clients nationwide before FINRA. If you or a loved one 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: http://www.securitieslawyer.com.

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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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