Beleaguered stockbroker back in action

Carl Martellaro, the Chico stockbroker who owes hundreds of thousands of dollars in industry-ordered fines and settlements, is back in business.

Last week, Martellaro again became licensed to solicit stocks. The National Association of Securities Dealers (NASD) had revoked his registration in December 2000 because of his failure to pay $12,500 in fines stemming from violations of industry rules.

The News & Review profiled Martellaro in March, reporting how his Chico-based First Associated Securities Group, and later First Securities USA, went from overseeing 500 stockbrokers across the country to being targeted with lawsuits as its brokers sold investments that ended up losing clients millions. While Martellaro was president and lead broker, he and the firms were ordered to more than half a million dollars—including $250,000 in punitive damages—to investors who won arbitration awards or settlements against them.

Interviewed in February, Martellaro said he was “retired by choice,” was “not associated” with First Securities USA, had virtually no income or assets (having transferred them to a family partnership) and no income, and yet could get back into the business anytime he wanted to pay off the fines.

Martellaro, who was out of the country and could not be reached for comment, has done just that.

According to online records kept by the NASD, Martellaro on May 25 became approved to act as a securities principal and representative under the employment of the Irvine-based firm Brookstreet Securities Corporation. A spokesman for the NASD’s regulation department, Tom Holloman, confirmed that the revocation of Martellaro’s registration was rescinded on May 11 due to payment of the most-recent fine. It was unclear who cut the check.

An investment adviser approached casually at First Securities USA’s booth at the Silver Dollar Fair related that Brookstreet had purchased First Securities’ stock. The NASD lists First Securities and Brookstreet as sharing the same Irvine address, but with different suite numbers. Brookstreet officials did not return a call for comment.

Previously, Martellaro confirmed that First Securities USA was sold to his half-brother, Ted Bryson, who reportedly continues to manage the Mangrove Avenue office but did not return calls for comment by press time.

Meanwhile, in a side development, Martellaro has been barred from doing business in Ohio by way of a cease-and-desist order from the state’s Department of Commerce Division of Securities. A division order dated March 2001 states that Martellaro supervised brokers in Ohio who sold interest in a foreign mutual fund and who were accused of securities fraud when it was learned the Cyprus Funds shares were never registered with the Securities and Exchange Commission. That, the state wrote, meant Martellaro knowingly “failed to do due diligence” in addition to the illegality of offering unregistered securities for sale.

Martellaro previously said he’s gradually trying to pay off the settlements against him, even though he’s just a victim of a litigious society that reacted when two major investments unpredictably proved to be money-losers. As recently as 1997 he was earning nearly $300,000 a year and was worth at least $1.39 million.

Also, a case in which an elderly man, who invested through the First Associated Securities Group office in Chico and ended up losing nearly $50,000 due to what his lawsuit claims was bad investment advice, is set to go to trial on June 11.