As broker-dealers continue to struggle with a lack of capital, Securities America Inc. sees plenty of opportunity to build its network of independent reps and advisers. And its CEO and president, Jim Nagengast, points to a direct competitor as a potential source.
In August, Steve Bull, a former branch manager with 20 reps under him at Next Financial Group Inc., joined Securities America. When asked about recruiting and mergers and acquisitions in an interview this morning, Mr. Nagengast said, “Next — we see a lot of opportunity there.”
Mr. Bull's group, Verus Capital Partners LLC, has about $225 million in assets under management, according to Securities America.
Barry Knight, CEO and president of Next Financial, did not return calls seeking comment.
In September, Securities America picked up another branch of about 45 reps and managers in control of $500 million in client assets formerly affiliated with Equitas America LLC. That firm is no longer operating as a broker-dealer, Securities America said.
Mr. Nagengast said that Securities America will look to make a couple of small acquisitions in 2011. “We're good at transitioning large branches quickly,” he said. “We're always looking. We're seeing more broker-dealers looking to shut down.”
Management and brokers at Securities America are enmeshed in legal battles stemming from the firm's sale of private placements up until 2008.
For more than a month, Securities America and the Massachusetts Securities Division have locked horns in Boston over the regulator's charges that the firm misled 60 investors in the state who bought $7.2 million in Medical Capital Holdings Inc. notes from the firm's reps.
That administrative hearing, which began in September, follows a January lawsuit in which Massachusetts regulators alleged that the firm failed to reveal potential red flags to advisers and clients about Medical Capital, which used the notes' proceeds to purchase medical receivables. The Securities and Exchange Commission in 2009 charged Medical Capital with fraud. The company is now in receivership.
Last week, Mr. Nagengast testified in the hearing pitting the Massachusetts regulator against Securities America. On Monday morning, he declined to comment about his testimony, saying, “We feel very strongly we did industry leading due diligence and are vigorously defending” the firm and its advisers.