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Brookstreet, Served Again

The Securities and Exchange Commission charged the now defunct Irvine, Calif.-based Brookstreet Securities Corp. and its President and CEO Stanley C. Brooks with fraud for systematically selling risky mortgage-backed securities to customers with conservative investment goals. The SEC first hit 10 former Brookstreet brokers with fraud charges in May.

The SEC complaint, filed in federal district court in Santa Ana, Calif., alleges that Brookstreet and Brooks developed an internal program through which the firm's reps sold particularly risky and illiquid types of Collateralized Mortgage Obligations (CMOs) to more than 1,000 seniors, retirees, and others for whom they were unsuitable. The SEC further alleges that Brooks knew, or was reckless in not knowing, that Brookstreet and its reps were selling unsuitable CMOs to retail customers. Brookstreet customers invested approximately $300 million through the firm's CMO program between 2004 and 2007.

Another Esq. Nabbed in Insider Trading Ring

The SEC brought charges against another attorney who worked at international law firm Ropes & Gray LLP in the agency's ongoing investigation into a $20 million insider trading ring involving Wall Street traders, lawyers, and hedge fund managers. The SEC alleges that Brien P. Santarlas of Hoboken, N.J., offered nonpublic information about confidential proposed corporate acquisitions by firm clients to a network of others in exchange for kickbacks. Santarlas worked with another former attorney in Ropes & Gray's New York office, Arthur J. Cutillo, to access and misappropriate the confidential information.

SEC Halts Nascent Ponzi

The SEC halted a Ponzi scheme involving New York-based Rockford Funding Group, which solicited money for investment in personal injury lawsuit settlements but shipped the money to banks in Latvia and Hong Kong instead. The SEC obtained a court order freezing the assets of the firm, its president, and several companies holding money from the scam that began several months ago.

According to the SEC's complaint, filed in U.S. District Court for the Southern District of New York, the Rockford Group used cold calling and a Web site to raise at least $11 million from more than 200 investors in 41 different states and Canada since March 2009. Rockford Group falsely touted itself as a leading private equity firm with an $800 million pipeline of investments and many Fortune 500 companies as clients, told investors their money would be safely invested in structured settlements in private lawsuits and claimed annual returns of at least 15 percent.

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