San Clemente, California Man Charged with SEC Fraud

The Securities and Exchange Commission today charged Irvine-based Brookstreet Securities and it’s CEO, Stanley Brooks with Fraud, alleging they sold risky mortgage-backed securities to investors and failed to inform them properly of the risks.

These types of investment vehicles are at the heart of the collapse of the U.S. and global financial system last fall. Crafty Wall Street investment houses figured out how to bundle together all kinds of mortgages, some solid, many high-risk, and then sell them to investors looking to make money on the interest payments. Investment firms all over the United States, California and Orange County got in on the gold rush and sold them along to others.

Many of the people selling these securitized loans didn’t realize what a time bomb they were pushing on unsuspecting clients. Moody’s Investment Service gave many of the bundled loans a high rating, sending a message to the market that the loans were safe. and AIG made side deals to insure the loans, making them appear even more risk-free. An open question is to what degree the packagers were disclosing the contents of the bundled loans, known as tranches.

Brookstreet allegedly sold $300 million dollars worth of these loans. Many of those loans were used for margin trades by another company, further increasing the risk of default.

The case against Brookstreet is a civil one. There have been no criminal filings to date, though that can’t be ruled out. The U.S. Attorney would have to investigate whether the conduct on the part of Brookstreet rose to the level of criminal fraud, Additionally, there may be a better chance for the SEC to recover money in a civil setting than criminal. Additionally, the level of proof is lower in the civil arena, requiring only a preponderance of evidence to show liability vs. proof beyond a reasonable doubt in the criminal context.

White-collar fraud is on the rise as new, arcane and confusing investment vehicles are cooked up out of the sight of the regulators. If you are charged with any type of securities fraud, you will need help dealing with regulators, the SEC and other investigative agencies, as well as the US attorney’s office. Whether you live in Santa Ana, Laguna Niguel or anywhere else in southern california, if you are charged with fraud, call an experienced criminal defense attorney right away to assist you.

If you want to know more about Fraud or your own charges, call Orange County criminal defense attorney William Weinberg @ 949.474.8008 to discuss your matter confidentially.