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TAG | independent broker-dealers

Apr/11

7

FINRA Preparing to Sanction Wells for Failing to Meet Advertising Standards and Keeping Information Safe

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In an April 6, 2011, article for InvestmentNews.com, Bruce Kelly writes that the Financial Industry Regulatory Authority, or FINRA, is prepared to sanction the broker-dealer arm of one of the largest sponsors of non-traded real estate investment trusts for allegedly failing to meet standards for advertising and keeping client information safe.

The Securities and Exchange Commission (SEC) in a filing last Friday, Wells Timberland REIT Inc. said that Finra in March notified its broker-dealer manager, Wells Investment Securities Inc., about its preliminary decision to recommend a disciplinary action against the broker-dealer.

Leo Wells, its founder and chairman, is well known in the independent broker-dealer industry. Wells Real Estate Funds Inc. is one of the largest sponsors of investments in the non-traded REIT industry, with $11 billion in assets and 250,000 investors.

Finra notified Wells Investment Securities in August and said that it had made a preliminary decision to discipline the firm, according to the filing.

According to the InvestmentNews.com article, in its SEC filing, Wells Investment Securities said it “intends to vigorously defend these charges.”

The Wells Timberland REIT had $360 million in assets at the end of last year.

Industry lawyers said there was no way to determine the amount of a likely fine without knowing more details about the matter.

In Kelly’s article, he states that Wells’ REITs are extremely popular with independent broker-dealers, and it has as many as 200 selling agreements with such firms. The Wells Core Office Income REIT Inc. is another product sold by independent broker-dealers.

Nancy Condon, a Finra spokeswoman, had no comment about the matter, and a spokesman for Wells, Terrell McCollum, said he could not comment beyond the contents of the SEC filing.

Kelly goes on to say that Wells has been down this path before. In October 2003, Finra’s precursor, NASD, sanctioned Wells Investment Securities for improperly rewarding broker-dealer reps who sold the company’s REITs. Those rewards included lavish entertainment and travel perquisites. At the time, the regulator also censured Mr. Wells and suspended him from acting in a principal capacity for one year.

If you feel you have been a victim of these alleged fraudulent schemes of  Leo Wells and the Wells’ REITs, call a Securities Arbitration Lawyer for a free consultation on how to recover your losses.  To speak with an attorney, call 888-760-6552, or visit www.stockmarketlawsuit.com. Soreide Law Group, PLLC., representing investors nationwide before FINRA  the Financial Industry Regulatory Authority.

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Mar/11

21

CFO of Securities America Says they are on the Brink without Legal Settlement

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In a March 18th., 2011, article in InvestmentNews by Bruce Kelly, he writes that Securities America Financial Inc. could go out of business if a $21 million lawsuit against the brokerage firm isn’t settled at an agreed-on amount.

The article states that according to Kelly Windorski, the independent broker-dealer’s chief financial officer, the firm could go bust if a federal judge does not approve the class action settlement. Mr. Windorski made the statement while testifying in federal court in Dallas this morning.

The CFO, Mr. Windorski, told U.S. District Court Judge W. Royal Furgeson Jr. that if the judge does not approve the settlement, it could mean the end of the firm, according to three attorneys who represented individual investors suing Securities America.

Janine Wertheim, a Securities America spokeswoman, did not return calls seeking comment from InvestmentNews.

The article goes on to say that from 2003 to 2008, Securities America sold $400 million of private placements that are in default. The firm sold nearly $18 million of Provident Royalties, for example, according to court filings. Dozens of investors have subsequently sued the firm seeking damages.

“‘End of the firm’ was the sum and substance of” Mr. Windorski’s testimony, said John Chapman, a plaintiff’s attorney who represents 70 Securities America investors with claims for losses totaling about $25 million.

Mr. Windorski said that, if a settlement was not approved, the firm would go out of business soon, due to defense costs and arbitration awards.

Today’s hearing in U.S. District Court in Dallas was part of a process of determining whether Securities America clients who lost money on soured Reg D offerings could continue their individual lawsuits against the firm or be required to drop those claims and become part of a class action. That class action also involves Ameriprise Financial, Securities America’s parent. Ameriprise said recently it had reached a $28 million preliminary settlement with the class plaintiffs.

Kelly goes on to say that the firm had 1,923 reps, as of Sept. 30, 2010, and generated over $400 million in annual revenue in 2009. The firm ranks as the 17th largest independent broker-dealer, according to the InvestmentNews B-D Data Center.

If you feel you have been a victim of the alleged broker-dealer private placement  schemes of  Securities America Financial, Inc., Ameriprise Financial Inc ., or any other broker-dealer, call a Securities Arbitration Lawyer for a free consultation on how to recover your losses.  To speak with an attorney, call 888-760-6552, or visit www.stockmarketlawsuit.com. Soreide Law Group, PLLC., representing investors nationwide before FINRA  the Financial Industry Regulatory Authority.

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Feb/11

9

400 reps at failed QA3 Financial Corporation, Searching for New Brokerages

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It was reported by Bruce Kelly for InvestmentNews that four hundred registered reps are scrambling for a new home after learning that their broker-dealer, QA3 Financial Corp., will close at the end of this week

“It’s like a smash and grab for these guys,” said Shawn Smith, principal of Financial Advisor Placement Services, a recruiting firm. “It’s a shame it happened. There’s a lot of good advisers at QA3.”

Smith said some reps had seen the firm’s closing coming and had made contingency plans for finding a new broker-dealer. He added that some reps had formed large “marketing” groups, meaning a group of dozens of reps working under a common banner. Such groups have better leverage in negotiating terms with a broker-dealer and can command a higher payout, he said.

Another recruiter pointed to the fact that the reps should quickly find new firms because they all work with Pershing LLC, the industry’s biggest clearing firm. The use of Pershing “gives the advisers a lot of options and will help them transition without much downtime or service interruption,” said Brad Fay, president of IBD Placement and Recruiting Services.

 Steve Wild, QA3′s owner and CEO, wrote in an e-mail that landed in brokers’ inboxes more than an hour after the market close Friday, “In light of the arbitration award rendered against QA3 on Jan. 14, and the fact that our errors and omissions carrier has not yet provided coverage set forth in our policy, we have made the difficult decision to cease conducting business as a broker-dealer effective as the close of business on Feb. 11.”

QA3, which at its peak did $50 million per year in gross revenue, will be one of the highest-profile independent broker-dealers to exit the business in the past year.

According to InvestmentNews, about two dozen firms last year decided to shut down or were forced to shut down, facing rising legal costs and a tough regulatory environment. According to a number of industry sources, QA3 had been in discussions with other independent broker-dealers about a potential sale of the firm’s assets, but ultimately, a deal failed to materialize.

Mr. Wild, one of the most successful entrepreneurs in the independent-contractor-broker-dealer industry, sold Securities America Inc. to American Express Co. in a time when insurance companies were paying premiums for independent broker-dealers in 1998.

QA3 has been one of the leading sellers of Regulation D private placements in the last decade. Two of those deals, Medical Capital Holdings Inc. and Provident Royalties LLC, face fraud charges from the Securities and Exchange Commission. The firm tried to raise money in 2009, offering Regulation D private-placement notes. According to filings with the SEC, the firm was looking to sell $3 million in debt to complete acquisitions. The commission also indicated that the brokerage had raised no money for the deal as of July 2009.

In September, QA3 claimed it faced bankruptcy because of a dispute with its insurance carrier over the amount of coverage the B-D has for legal claims stemming from its sale of private placements.

QA3 claimed that it has coverage for $7.5 million in legal claims, damages and expenses. Its carrier, Catlin Specialty Insurance Co., said that the coverage is capped at $1 million.

In January, QA3 lost a $1.6 million arbitration award to an elderly couple who invested in real estate deals that went bust. It appears that that decision was the arbitration award to which Mr. Wild was referring in his e-mail to brokers late Friday.

It is noted that the regulators with the Financial Industry Regulatory Authority Inc. have been watching the firm’s levels of net capital quite closely as of late, as losses of securities arbitration claims have to be recorded in a firm’s net capital calculations. According to its 2009 audited financial report, QA3 had $118,000 of excess net capital at the end of that year.

QA3 faces other lawsuits and arbitrations due to different failed private placements.

If you have been a victim of the alleged fraudulent schemes of  QA3 Financial Corporation, call a Securities Arbitration Lawyer for a free consultation on how to recover your losses.  To speak with an attorney, call 888-760-6552, or visit www.stockmarketlawsuit.com. Soreide Law Group, PLLC., representing investors nationwide before FINRA  the Financial Industry Regulatory Authority.

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