Indie broker-dealer says Reg D sales could drive it under

Another independent broker-dealer that sold high-risk private placements is hanging on by a thread, with the firm's management stating grave concerns about the broker-dealer's future
OCT 18, 2011
Another independent broker-dealer that sold high-risk private placements is hanging on by a thread, with the firm's management stating grave concerns about the broker-dealer's future. CapWest Securities Inc. reported in its most recent filing with the Securities and Exchange Commission that a number of events — including three straight years of losses, a decline in net capital and a raft of lawsuits — “raise substantial doubt about the company's ability to continue as a going concern.” The firm reported a loss of $109,000 last year on revenue of nearly $3 million. Dale Hall, the chief executive of CapWest Securities, didn't return messages seeking comment. With many smaller broker-dealers going belly up because of sales of Regulation D private placements, securities cops have increased their oversight of sales of the illiquid deals. CapWest's fundamental dilemma is a lack of capital. The filing shows that the firm had net capital of $80,420 as of Dec. 31. “If, as a result of losses from operations of from litigation, the company were to fail to meet regulatory net-capital requirements, it would be required to raise additional capital to continue operations,” the firm's management noted in the filing. “There can be no assurance that the company will be successful in obtaining additional capital on terms favorable to the company, or at all.” According to court documents, CapWest brokers sold about $22 million of private placements issued by Provident Royalties LLC, which the SEC charged with fraud in 2009. CapWest also sold an unknown amount of DBSI Inc., a packager of real estate deals that was popular among independent broker-dealers. DBSI is now in bankruptcy court. “Management believes that certain of the pending actions are fully defensible and will result in no liability to the company or insurer,” the firm said. E-mail Bruce Kelly at [email protected].

Latest News

Judge OKs more than $90 million in settlement money for GWG investors
Judge OKs more than $90 million in settlement money for GWG investors

Mayer Brown, GWG's law firm, agreed to pay $30 million to resolve conflict of interest claims.

Fintech bytes: Orion and eMoney add new planning, investment tools for RIAs
Fintech bytes: Orion and eMoney add new planning, investment tools for RIAs

Orion adds new model portfolios and SMAs under expanded JPMorgan tie-up, while eMoney boosts its planning software capabilities.

Retirement uncertainty cuts across generations: Transamerica
Retirement uncertainty cuts across generations: Transamerica

National survey of workers exposes widespread retirement planning challenges for Gen Z, Millennials, Gen X, and Boomers.

Does a merger or acquisition make sense for your firm? Why now is the perfect time to secure your firm’s future
Does a merger or acquisition make sense for your firm? Why now is the perfect time to secure your firm’s future

While the choice for advisors to "die at their desks" might been wise once upon a time, higher acquisition multiples and innovations in deal structures have created more immediate M&A opportunities.

Raymond James continues recruitment run with UBS, Morgan Stanley teams
Raymond James continues recruitment run with UBS, Morgan Stanley teams

A father-son pair has joined the firm's independent arm in Utah, while a quartet of planning advisors strengthen its employee channel in Louisiana.

SPONSORED RILAs bring stability, growth during volatile markets

Barely a decade old, registered index-linked annuities have quickly surged in popularity, thanks to their unique blend of protection and growth potential—an appealing option for investors looking to chart a steadier course through today's choppy market waters, says Myles Lambert, Brighthouse Financial.

SPONSORED Beyond the dashboard: Making wealth tech human

How intelliflo aims to solve advisors' top tech headaches—without sacrificing the personal touch clients crave