Embattled broker-dealer Jesup & Lamont Securities Corp. was dealing with other serious regulatory matters in the weeks before Finra last week ordered the firm and its 300 reps to cease conducting business, other than liquidating transactions.
The Boston Globe reported this morning that the Securities and Exchange Commission was investigating the firm in connection with its sale of $11 million in company stock to clients in private transactions. According to the report, Jesup & Lamont allegedly failed to deliver the stock in the firm that investors bought.
And the firm's failure to pay $60,000 to a disgruntled former employee who sued the firm and its top executives in 2007 drew stern warnings from Finra, which said it would suspend the firm June 18 if it didn't pay the award.
In a letter to chief executive Alan Weichselbaum, dated May 19, Finra official Avichal Badash said that “you are hereby given notice of Finra's intent to suspend the firm's membership based upon the firm's failure to comply” with the $60,000 arbitration award. That award was issued on April 6 to Thomas Devere, a former Jesup & Lamont institutional broker in Boca Raton, Fla.
Mr. Devere filed a Finra arbitration claim against the firm in 2007 for $1 million, alleging breach of contract, a hostile working environment and unlawful retaliation, among other charges. Todd. Zuckerbrod, the firm's general counsel, said the firm was appealing that award.
Finally, the Financial Industry Regulatory Authority Inc. on Friday said that the retail-securities unit of publicly traded Jesup & Lamont Inc. was out of compliance for failing to meet the net-capital requirements mandated by the Securities and Exchange Commission.
Retail securities firms that fail to meet their net-capital requirements typically shut down.
Mr. Zuckerbrod said Jesup & Lamont was taking “active steps” to be back in business, but declined to give a specific timeline for a reopening.
“We have worked to address the issues Finra has raised,” he said, adding that the matter could be settled in relatively short order.
Mr. Zuckerbrod said the SEC had just completed an exam of the broker-dealer and its registered investment advisory business. During that exam, the SEC looked at bookkeeping and records on the private placements, but was performing an exam, not an investigation. “The SEC did not give any basis to believe it was concerned with allegations” it failed to deliver stock to investors, Mr. Zuckerbrod said.
John Nester, a spokesman for the SEC, said he had no comment on whether the commission is investigating Jesup & Lamont.