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FINRA Disciplinary Panel Fines Brookstone Securities $1 Million for Fraudulent Sales of CMOs to Elderly Customers

A FINRA hearing panel ruled that Brookstone Securities of Lakeland, Florida, together with the firm’s Owner/CEO, Anthony Turbeville, and one of its brokers, Christopher Kline, made fraudulent misrepresentations and omissions of material fact in selling collateralized mortgage obligations (CMOs) to unsophisticated, elderly and retired investors.   The panel fined Brookstone $1 million and ordered it to pay restitution of more than $1.6 million to customers, 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 FINRA hearing panel found that all of the customers involved in this matter were unsophisticated investors who relied on brokers to assist them with their investment needs.  The customers were looking for safer alternatives to equity investments.  Turbeville and Kline led the customers to believe that their portfolio consisted of government guaranteed bonds that preserved capital while at the same time generating 10% to 15% returns.  After a 16-day hearing, the panel found that between July 2005 and July 2007, Respondents made negligent misrepresentations and omissions to elderly and unsophisticated customers regarding the risks of CMOs.  During this period, Brookstone made $492,500 in commissions on CMO bond transactions from seven customers while those same customers lost $1,620,100.

It is unclear at this time whether the FINRA Arbitration process will be appropriate for Brookstone clients.  Any investor interested in speaking with a securities attorney may contact David A. Weintraub, P.A., 7805 SW 6th Court, Plantation, FL  33324.  By phone: 954.693.7577 or 800.718.1422.