Securities Law Prof Blog

Editor: Eric C. Chaffee
Univ. of Toledo College of Law

Monday, August 29, 2011

SEC Finds Broker Misrepresented Risks of Equity-Linked Notes

In an administrative proceeding the SEC and David G. Brouwer settled allegations that during 2007 and 2008, Brouwer recommended equity-linked notes to many of his customers and told customers that the equity-linked notes were safe when in fact they were not.  He also failed to disclose certain of the investment’s material risks and failed to adequately disclose that there was a possibility that the equity-linked notes would convert into the underlying securities at a value less than the invested principal. Further, Brouwer’s recommendations of equity-linked notes were unsuitable for at least two customers, based on their stated risk tolerance, investment objectives and other factors.

Based on the above, the Order bars David G. Brouwer from association with any broker, dealer, investment adviser, municipal securities dealer, municipal adviser, transfer agent, or nationally recognized statistical rating organization, and orders him to pay disgorgement of $33,000 and prejudgment interest of $6,137.25 and a civil money penalty in the amount of $33,000. David G. Brouwer consented to the issuance of the Order without admitting or denying any of the findings.

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