Proceeding Number 2007011413501
Extended Hearing Panel Decision in Department of Enforcement v. Brookstone Securities, Inc., Antony Lee Turbeville, Christopher Dean Kline, and David William Locy
May 31, 2012
For violating Section 10(b) of the Exchange Act and Rule 10b-5 thereunder, as well as Rules 2120 and 2110, by making fraudulent misrepresentations and omissions of material fact in selling complex, esoteric, and risky tranches of collateralized mortgage obligations (“CMOs”) to unsophisticated, elderly, and retired investors, Brookstone was censured and fined $500,000, and Turbeville and Kline were barred from associating in any capacity with any FINRA-regulated firm. The Second Cause of Action, which alleged, in the alternative, that Brookstone, Turbeville, and Kline acted negligently, was subsumed by the fraud charge. For violating Rules 2310(a) and 2110 by making unsuitable recommendations of CMOs, Brookstone was fined $300,000, and Turbeville and Kline were barred from associating in any capacity with any FINRA-regulated firm. For violating Rules 2210(d)(1)(A) and 2210(d)(1)(B) by making misrepresentations, omitting material facts, and using misleading statements in letters to customers, Brookstone was fined $50,000. For violating Rules 2510(b) and 2110 by failing to review customer discretionary accounts, Brookstone was fined $50,000, and Locy was barred from acting in any supervisory or principal capacity with any FINRA-regulated firm. For violating Rules 3010(b) and 2110 by failing to adequately supervise customers’ CMO accounts and transactions, and by failing to safeguard customer information, Brookstone was fined $100,000, and Locy was barred from acting in any supervisory or principal capacity with any FINRA-regulated firm, suspended from associating with any FINRA-regulated firm in any capacity for two years, and fined $25,000. Brookstone also was ordered to pay restitution in the amount of $1,620,100 with $440,600 of that amount imposed jointly and severally with Turbeville, and the remaining $1,179,500 imposed jointly and severally with Kline. The Respondents were also ordered to pay the hearing costs, which were assessed jointly and severally.
This decision has been appealed.
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