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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In an article from the New York Times, October 18th., 2011, John Wasik writes that if you’re concerned about whether an adviser’s parent firm is going to survive a crisis or if you’re not happy with your portfolio, there are some important questions to ask before you make a change to a new wealth manager. Brand reputation is often the linchpin for advisory relationships. You should expect a wide range of services and extensive handholding from a top-tier firm. But when the company is tarnished, top executives and advisers often resign or are fired.

For example take UBS, the Swiss bank that was once one of the most powerful brands in wealth management. At one point before the 2008 financial crisis, it employed 8,000 advisers. It was one of the largest managers of private wealth, with $1.7 trillion in client assets. Since the crisis, the firm has lost more than 1,000 advisers. After it was revealed that a UBS trader had lost $2.3 billion from unauthorized trading, the company’s chief executive, Oswald Grübel, and other managers resigned.

Wasik asks, if you are with a troubled firm, how do you know whether or when to move on?

The Securities and Exchange Commission (SEC) is writing a rule that will make brokers and advisers become fiduciaries. This means that if they don’t put your interests first, you can sue them, which is not the case with most securities brokers and agents now, as they are governed by a looser standard of whether an investment they recommend is “suitable.”

“Don’t think that brand names are important when the industry is going through a paradigm shift,” says Paula Hogan, a certified financial planner (C.F.P.) and chartered financial analyst (C.F.A.) who is based in Milwaukee. People do not care as much about portfolio returns as they do about maintaining a standard of living for a lifetime, she said, and many high-visibility firms focus more on returns and less on comprehensive financial planning.

The NY Times article goes on to say that finding an adviser who already acts as a fiduciary — while not a fail-safe standard — offers better investor protection than the broker-dealer model. Generally, most fee-only C.F.P.’s, C.F.A.’s, lawyers and accountants who do personal financial advising have a written standard of care that combines a code of ethics with extensive pro-client guidelines.

“Where does your adviser get their compensation from?” Mr. Hogan asks. “Do they own another business that benefits from their recommendations to you, or does the business own them?”

Wasik writes that fees also provide an insight into the relationship you will have with a firm. Do they charge for assets under management or an hourly rate for planning services, or both? Do they earn a commission on their recommendations?

A fiduciary consultant with 3Ethos in Mystic, Conn., Don Trone, said he looked at credentials carefully. He favors C.F.A.’s because of their rigorous training in investment analysis, as well as those who are constantly updating their knowledge “through a commitment to lifelong learning.”

A worthy adviser must also have the ability to listen, Mr. Trone said.

“They should adopt a consultative approach,” he said. “They should sit down and listen to you and write on a legal pad your goals and objectives. I like the 70/30 rule. You should do at least 70 percent of the talking and not vice versa.”

The bedside manner can often cover some huge problems. Just ask the victims of Bernie Madoff. The next level of your inquiry can get at some of the most troublesome conflicts.

Stephen Horan, head of private wealth management for the CFA Institute in Charlottesville, Va., which represents chartered financial analysts, says it would be worthwhile to ask for an adviser’s Security and Exchange Commission’s ADV Form, Part II. This document is supposed to list any potential conflicts of interest and specify how advisers are compensated.

You may grimace at the thought of poring through a disclosure form, but you will learn if the adviser is paid referral fees by financial product firms, information about their transaction costs and where they hold your assets. This last item is critical. Ideally, your money should not be held by the adviser’s firm. You need a trusted third party holding your cash.

The Times artice says that several specialized search engines will check for disciplinary or legal actions and summarize the firm’s record. While it is not possible to know everything about an adviser, you can also learn a lot by how much attention they pay to ethical codes and adherence to tougher global guidelines, including the Global Investment Performance Standards, industrywide ethical benchmarks recognized in 32 countries.

“The world’s imperfect, and you can’t hold an adviser to impossible standards,” Mr. Horan says. “But a code of ethics and standard of practice is important. Just because a broker’s background check comes up clean doesn’t mean it’s a seal of approval.”

Finding the right wealth manager goes beyond what the firm can bring to the table. They need to make the time investment in you and your objectives, and you need to complement the process by asking the right questions before engaging with them.

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