July 23, 2014
Jonathan “Jay” Warren Brooks of Aiken, South Carolina, a former stock broker who had been employed by Sicor Securities, Inc. and High Street Securities, Inc. and conducted investment business through his company J. Brooks Financial, Inc., has been involved in an ongoing legal battle for nearly a year. Jay Brooks was arrested in South Carolina in July 2013 on one felony charge of Securities Fraud. Brooks is scheduled to go on trial for that charge in October 2014.
Brooks allegedly sold unregistered securities, without the knowledge of his employing broker-dealers during the relevant time period, known as “selling away,” in an effort to help fund the private charter school that his wife, Tracy Brooks, founded. That school, Compass Academy, is now in receivership, with very few assets available to satisfy the creditors. The number of investors who purchased investments in Compass Academy from Brooks is unknown.
Additionally, it has been alleged that Jay Brooks also solicited investors for investment in an entity called the “Charles Howell Trust.” Unfortunately for those who invested with Brooks, it has been alleged that the “Charles Howell Trust” was fictional and that Brooks instead converted the fund for his own personal use.
During the period of time in which it was alleged that Brooks sold unregistered securities in various “investments,” it seems that he was employed by at least one, or possibly more, brokerage firms. When a broker employed by a FINRA member brokerage firm engages in the sale of securities with the investing public, that broker is acting on behalf of his employer, even if the employing brokerage firm does not know of the broker’s conduct. The brokerage firm has a duty to supervise its brokers. Courts have routinely held that a customer of a broker is a customer of that broker’s employing broker-dealer; ultimately, it is the broker-dealer who is liable for the actions of its broker. However, the last two broker-dealers for whom Mr. Brooks worked have both been shuttered within the last year and are no longer in business.