Losses on mortgage-backed securities have forced an Irvine brokerage firm to begin shutting down its operations, people close to the company said Thursday.
At least some of the losses were said to be incurred by clients of the brokerage, Brookstreet Securities.
Because of the losses, brokerage regulator NASD told Brookstreet this week to limit its activities to liquidating customer accounts, said Scott Brooks, an executive vice president at the firm. NASD officials declined to comment.
"Unfortunately, we are on 'SELL ONLY,' " Stanley C. Brooks, Scott's father and the firm's founder, said in an e-mail sent Wednesday through the company's nationwide network of 600 brokers, many of whom work from their homes. In the e-mail, Brooks said the 17-year-old firm's net worth had fallen from $11 million at the end of May to a negative $2.1 million.
Scott Brooks referred requests for additional comment to his sister, Julie Mains, an attorney at Brookstreet, who he said was trying to work out a deal to save the firm. Repeated efforts to reach Mains were unsuccessful.
The Brookstreet case is another illustration of how weakness in the housing market, which has led to a wave of defaults on loans to high-risk sub-prime borrowers, is spreading financial pain beyond sub-prime lenders and distressed homeowners.Several major investment operations, including two hedge funds managed by Bear Stearns Cos., have been struggling to avoid being forced to shut down in the wake of losses on mortgage-backed investments.
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