San Clemente Securities Accused of Fraud in NASD Complaint

An Orange County investment firm, already in regulatory hot water in nine states, now faces a fraud complaint filed Friday by the National Assn. of Securities Dealers.

The brokerage industry’s self-regulatory group accused San Clemente Securities Inc., co-owners Cooke Christopher and Thomas Sunderland, and seven sales executives of misleading investors about the fees, returns and safety of certificates of deposit the firm sold.

Regulators also say some investors were falsely promised that their CDs would be insured by the Federal Deposit Insurance Corp.

Officials at the San Clemente-based firm didn’t return phone calls Friday.

It is the second time this year that the NASD has cracked down on the firm. In February, the group fined the company and Christopher $15,000 for failing to maintain sufficient net capital and for failing to report numerous customer complaints.

The action filed Friday focused on “interest-at-maturity” or “zero-coupon” CDs. The NASD said San Clemente Securities generated $2.3 million in revenue through the sale of the CDs between June 1999 and March 2000.

Some of those enticed by the company’s promise of above-average interest rates have been small banks. Earlier this month, the FDIC said one such institution lost 40% of its capital because of undisclosed fees charged by San Clemente Securities.