SEC Charges 10 Brokers With Fraud

curities and Exchange Commission (SEC) has charged 10 brokers with fraud for falsely marketing investments in derivatives of mortgage-backed securities as safe and suitable for retirees and others with conservative investment goals. The SEC alleges that the brokers enriched themselves with millions of dollars in commissions and salaries while the investors suffered millions of dollars in losses. According to the SEC's [u][link=]complaint[/link][/u], filed in the federal district court in West Palm Beach, Fla., the 10 brokers worked for Irvine, Calif.-based Brookstreet Securities Corp., which has since gone out of business. The SEC alleges that the brokers did not clearly define the risks to customers before investing their money in particularly risky collateralized mortgage obligations (CMOs). The SEC's complaint charges Florida residents William Betta Jr., James J. Caprio, Troy L. Gagliardi, Barry M. Kornfeld, Clifford A. Popper, Alfred B. Rubin and Steven I. Shrago, as well as Travis A. Branch of Kailua, Hawaii; Russell M. Kautz of Medford, Ore.; and Shane A. McCann of Florence, Mont. "These brokers disguised the risks of investing in these derivatives of mortgage-backed securities, exposing their customers to substantial losses as the subprime crisis emerged," says Robert Khuzami, director of the SEC's Division of Enforcement. "They disregarded their customers' needs and used deceptive and misleading tactics to enrich themselves at their clients' expense." According to the SEC's complaint, the defendants portrayed particularly risky types of CMOs as secure investments to defraud more than 750 customers, ultimately costing them more than $36 million in losses. Meanwhile, the 10 brokers received $18 million in commissions and salaries related to their customers' investments in CMOs. SOUR


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