Another midsize independent broker-dealer has closed, this time weeks after a regulatory panel hit the firm, its owner and a broker with $2.6 million in fines and restitution over sales of collateralized mortgage obligations.
Adding insult to injury, the firm, Brookstone Securities Inc., failed to pay its 198 affiliated reps and advisers Friday, said two industry recruiters who have spoken with several Brookstone Securities reps and who asked not to be named. “The brokers are livid,” one recruiter said.
Brookstone Securities chief financial officer Dave Locy confirmed that the firm closed last night but declined to say why. He was not immediately available to comment at 12 p.m. ET Friday on whether the company failed to pay its reps this morning.
A Financial Industry Regulatory Authority Inc. hearing panel in May fined Brookstone Securities $1 million over the sale of risky tranches of CMOs. The panel also ordered the firm, its majority owner and ex-chief executive, Antony Lee Turbeville, and a broker, Christopher Dean Kline, to pay a total of $1.62 million in restitution to elderly clients who bought the CMOs.
Brookstone Securities made “fraudulent misrepresentation and omissions of material fact in selling complex, esoteric and risky tranches of [CMOs] to unsophisticated, elderly and retired investors,” according to the Finra panel.
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A Finra spokeswoman, Michelle Ong, said the organization would not comment about the firm's closing.
At the time of the decision, Brookstone Securities executives said they planned to go toe-to-toe with Finra in an appeal.
That strategy will continue, the firm's lawyer said.
Brookstone Securities “will continue to pursue the appeal of the nonfinal decision” by the Finra panel, said Mark Abramson, the firm's outside counsel.
Brookstone Securities, headquartered in Lakeland, Fla., was a substantial midsize firm which in 2011 had total revenue of $27.3 million.