Another independent broker-dealer has bitten the dust.
Cullum & Burks Securities Inc., which was heavily involved in the sale of Medical Capital private placements that have gone bust, has had its licensed suspended by the
Financial Industry Regulatory Authority Inc.
The firm had 100 affiliated registered reps, 1,300 client accounts and $150 million in assets, according to an industry source who asked not to be named. The license was officially suspended on May 25.
According to its profile on Finra's BrokerCheck system, the Dallas-based Cullum & Burks failed to file its quarterly Focus report with Finra within three weeks after being told it was in danger of suspension. Firms must file Focus reports, which contain detailed financial information, to the Securities and Exchange Commission.
In November, Finra said the firm was in violation of its net capital requirement, meaning Cullum & Burks did not have sufficient capital on hand to remain open for business, according to its Finra record. The firm then raised additional capital to continue normal operations, Finra said.
Cullum & Burks was one of three broker-dealers listed as the sellers of Medical Provider Funding Corp. V, one of the series of private placements Medical Capital created. According to its Reg D filing with the SEC, the November 2007 offering was for $400 million. The other broker-dealers listed as its sellers were First Montauk Securities Corp., which is also defunct, and Securities America Inc.
Medical Capital's business was to provide financing to healthcare providers by purchasing the providers' accounts receivables and making loans to those providers, attorney said. The accounts receivables allegedly were packaged into notes and sold through private placements, or Regulation D offerings, to investors.
Cullum & Burks is the subject of a class action over the sale of Medical Capital notes, according to the Finra record, alleging that Medical Capital notes should have been registered with the SEC.
Cullum & Burks “believes it is just as much a victim of any possible wrongdoing at [Medical Capital] as any client,” the firm responded on its record to the lawsuit allegations. “The firm strenously [sic] denies any wrongdoing in relation to its sale of Medical Capital notes.”
Last summer, the SEC charged Medical Capital Holdings Inc. with fraud over the sale of private placements. In total, Medical Capital raised roughly $2.2 billion in investor money and sold its notes through dozens of broker-dealers. About half of investors' money has been wiped out.
Tim Cullum, the firm's CEO, was not immediately available for comment.
