B-D mulls its options after major arb award

Fintegra, a Minneapolis-based broker-dealer with about 140 advisers, has been forced to halt its securities business temporarily after an arbitration award put it below regulatory net capital requirements.
“An arbitration award issued after close of business on Friday, June 12, 2015, has caused Fintegra to take an immediate charge to its income statement,” the firm’s chief executive officer, Doreen Weber, said in an emailed statement. “This charge results in Fintegra having inadequate net capital to conduct business as a broker-dealer.”
“Fintegra executives and its board are working quickly to come up with a plan that could save the firm and allow it to “recommence conducting its securities business,” Ms. Weber said.
She declined to comment further.
Brokers were informed of the issues Monday in a memo.
The award has not yet been made public. The firm had $714,000 in excess net capital at the end of Dec. 31, 2014, according to the firm’s annual SEC filings.
Many firms are required to keep at least $250,000 in net capital on reserve.
In the SEC filing, Fintegra said that it was subject of five separate lawsuits “which claim securities sold through their registered representatives were either unsuitable or in violation of state securities laws.”
The company was defending the allegations and did not believe it was at fault, according to the filing.
“The amount of ultimate liability with respect to these actions may or may not materially affect the financial position of the company,” according to the filing.
Falling below net capital has been an concern for smaller brokerage firms for several years. Another broker-dealer, Resource Horizons Group, a firm with around 200 brokers, went out of business in November after accruing more than $4 million in judgements from two arbitration awards.