End of the line for Rodman & Renshaw?

Broker-dealer short on cash, falls short of net-capital rules

Sep 13, 2012 @ 1:09 pm

By Bruce Kelly

Rodman & Renshaw LLC, once a leading investment bank for small, emerging-growth companies, has run short of capital and could shut down.

In a regulatory filing yesterday, the broker-dealer informed the Financial Industry Regulatory Authority Inc. that it is no longer in compliance with the Securities and Exchange Commission's net-capital rules.

Falling under regulatory-net-capital levels is typically a broker-dealer's death knell, although on rare occasions, firms manage to bounce back and remain open.

In the SEC filing, Rodman & Renshaw's parent company, Direct Markets Holdings Corp., said the broker-dealer “would cease conducting its securities business, other than liquidating transactions, unless and until it can achieve compliance” with net-capital rules.

The broker-dealer is considering terminating its license by filing a Form BDW, or broker-dealer withdrawal form, with Finra, according to the filing. It also is considering selling certain assets.

Executives with New York-based Rodman & Renshaw, including chief executive Edward Rubin, did not return calls seeking comment.

Broker-dealers of all stripes have been struggling to maintain net-capital reserves since the financial crisis of 2008, with hundreds failing or simply shutting down since then. Firms must have a minimum amount of cash on hand to remain open for business, and many simply have failed to do so.

Over the past five years, Finra has reported a 12% decline in the number of broker-dealers, with 4,370 up and running in August versus 5,005 at the end of 2007.

Rodman & Renshaw has suffered pronounced turmoil over the past few months.

In May, the parent company changed its name to Direct Markets Holdings Corp. from Rodman & Renshaw Capital Group Inc., signaling a shift in focus to its Direct Markets platform, which links small public companies making secondary offerings with investors.

Despite the shift, the company's stock price failed to recover from a year-long slide. On Thursday morning, shares were trading at a little more than 8 cents, compared with $1.28 a year ago.

Last month, Finra fined the broker-dealer $315,000 for “supervisory and other violations related to the interaction between the firm's research and investment banking functions.”


What do you think?

View comments

Recommended for you

Sponsored financial news

Featured video


The #MeToo movement and the financial advice industry

Attendees at the Women to Watch luncheon commend the #MeToo movement for raising awareness about the issue of sexual harassment and bringing women together.

Latest news & opinion

What the next market downturn means for small RIAs

Firms that have enjoyed AUM growth because of the runup in stocks may find it hard to adjust to declining revenues if the market suffers a major correction.

DOL fiduciary rule likely to live on despite appeals court loss

Future developments will hinge on whether the Labor Department continues the fight to remake the regulation its own way.

DOL fiduciary rule: Industry reacts to Fifth Circuit ruling

Groups on both sides of the fiduciary debate had plenty to say.

Fifth Circuit Court of Appeals vacates DOL fiduciary rule

In split decision, judges say agency exceeded authority.

UBS, after dumping the broker protocol, continues to see brokers come and go

The wirehouse has seen 14 individuals or teams leave and five join for a net loss of $2.4 billion in AUM


Hi! Glad you're here and we hope you like all the great work we do here at InvestmentNews. But what we do is expensive and is funded in part by our sponsors. So won't you show our sponsors a little love by whitelisting investmentnews.com? It'll help us continue to serve you.

Yes, show me how to whitelist investmentnews.com

Ad blocker detected. Please whitelist us or give premium a try.


Subscribe and Save 60%

Premium Access
Print + Digital

Learn more
Subscribe to Print