Broker-dealer Pacific West Securities is going out of business next year. The independent broker-dealer, which has about 290 affiliated advisers and reps, decided to close its doors because staying in operation is costing too much and margins are too thin.
The broker-dealer made $46 million in commission and fees in 2010 and its gross revenue for this year is expected to be $54 million. Pacific West has struck a deal with Cetera Financial Group over the transfer of many of its representatives and advisers to the latter’s subsidiary, Multi-Financial Securities Corp. The Financial Industry Regulatory Authority, however, must still approve this arrangement.
Unfortunately, dozens of independent brokers that are thinly capitalized have had to close shop or be put up for sale in the last few years. Many took huge hits in the wake of securities fraud lawsuits related to the sale of Provident Royalties LLC preferred stock, Medical Capital Holdings Inc. notes, and DBSI Inc. real estate deals. Although Pacific West didn’t sell any of these financial instruments, it has had to contend with Securities arbitration claims, including losses of nearly $1 million in FINRA arbitration awards over the last 24 months.
Investment News reported not too long ago that at least 2,500 reps have been displaced because of broker-dealers that shut down their operations. It became clear trouble was starting to brew in the industry in 2010, when Jesup & Lamont Securities Corp. and GunnAllen Financial Inc., which both have hundreds of reps, shut their doors after violating SEC rules dealing with capital. By the end of last year, there were 142 less broker-dealers than in 2009.
In February, QA3 Financial Corp. followed their lead. The broker-dealer, which worked with about 400 reps, couldn’t deal with securities lawsuits costs over the sale of allegedly fraudulent private placements.
The following month, Investors Capital Holdings Inc.’s owner Theodore E. “Ted” Charles submitted an SEC filing giving notice that he was going to sell his stake in the broker-dealer. More brokerage firms have since shuttered. FINRA says that if the broker-dealer you are working announces that it is going out of business, you should contact its offices right away to find out about next steps for you.
Our stockbroker fraud law firm represents clients that suffered losses because of broker misconduct and other formers of broker-fraud. Please contact our securities fraud lawyers and ask for your free consultation today.
B-D with 290 reps to shutter, Investment News, December 6, 2011
Broker-Dealer Pacific West to Close Its Doors, Adviser One, December 6, 2011
If a Brokerage Firm Closes Its Doors, FINRA
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