World Group Securities Inc. charged with securities fraud

The brokers -- Guillermo Haro, Kederio Ainsworth, Jesus Gutierrez, Gabriel Paredes and Angel Romo -- worked out of Los Angeles. The SEC alleges the five paid themselves high commissions on both the subprime mortgages and the securities purchases. The customers generally were of modest means, had little prior investment experience, and had little or no formal education beyond high school. Some of the investors did not speak English fluently or at all.Securities and Exchange Commission has charged five California brokers who worked for Duluth, Ga.-based World Group Securities Inc. with securities fraud, alleging they put customers at risk by refinancing their homes with subprime mortgages that they could not afford in order to fraudulently sell unsuitable securities.The SEC alleges the brokers sold unsuitable securities to customers, primarily variable universal life policies (VUL). Most investors who bought these securities lacked the cash or income to do so, but were urged by their brokers to raise the money to pay for the purchases and the monthly payments required for these products by refinancing their fixed-rate mortgages into subprime adjustable-rate negative amortization mortgages.

Each defendant was a mortgage broker and a registered representative and collected compensation from the mortgage refinancings and the sales of securities. The brokers allegedly misrepresented the expected returns from the securities, the liquidity of VULs, the nature of the VULs, and the terms of the new mortgages while failing to disclose material facts about the products. The defendants also allegedly falsified client account forms and order tickets relating to the securities sales.