I need to correct my previous post. I was mistaken. The President of Brookstreet said this:
“A group of brokers had client accounts invested in CMO bonds. Some were on margin. The declines in value forced many into negative equity. Those amounts are charged to the firm’s net capital. The accounts were liquidated by the clearing firm which further accelerated the net deficits. Brookstreet went from 17mm of net equity at the end of May to minus 17mm of net equity and the liquidations are not over. Few firms can sustain this devastation. The firm started in 1990 with 16m of capital. It had over 650 registered representatives. It employed 105 staff. We have notified the NASD and SEC that we are out of capital and have been placed on sell only status for client accounts. All client accounts are carried by National Financial, a Fidelity Investments company, and the client assets are safe. This devastation took one week. I have been in the business 30 years, I have never seen anything like this.”
