Ted Charles keeps it all in the family – sells firm to advisers

Investors Capital Holdings Ltd. has a new set of owners: its employees, advisers, and their clients. The publicly traded independent broker-dealer announced yesterday that its founder, largest shareholder and chairman, Theodore E. “Ted” Charles, was retiring. Mr. Charles and his family owned 55% of the company, which they sold at $4.25 per share. The net proceeds of the sale to Mr. Charles were $14.6 million after deducting underwriting discounts and commissions. The company received no proceeds from the sale. Management and the firm's 500 affiliated reps now control about 40% of the firm. Investors Capital Corp., the independent broker-dealer, reported $83.4 million in gross revenue last year. Mr. Charles founded the firm in 1992. However, he has said that it was truly launched in 1994, when he hired Timothy Murphy, who is now the brokerage's chief executive. (View a company profile of Investors Capital Corp. in the B-D Data Center.) Investors Capital went public in 2001, making it unique among broker-dealers owned by reps and employees, Mr. Murphy said. Out of roughly 100 of the largest independent broker-dealers, Investors Capital Corp.'s number of reps ranks it as the 49th largest, according to InvestmentNews data. On average, its reps generated $145,000 in fees and commissions in 2010, an increase of 12.5% over the prior 12 months. “It's a unique organization right now,” he said. “It's adviser-owned, but they have liquidity. That stands out.” Other broker-dealers such as Next Financial Group Inc. are owned by advisers, but are privately held, which limits liquidity. Several independent broker-dealers have recently gone on the block, including Securities America Inc. Mr. Charles did not get the price he originally wanted. In March, he said he wanted about $5.28 per share, or close to $20 million. “Several people called, but we decided it would be best to keep the company for advisers,” Mr. Charles said. “They're now stakeholders in a public company. It will endure and produce jobs for people. I'm glad this came to fruition.” Buyers included several shareholders who added to their positions, and two institutions, including a broker-dealer. He declined to name the broker-dealer, but added that the offering was oversubscribed. Mr. Charles will remain as a consultant with the company. “I'm not going to hit and run,” he said. “We want to make sure the transition is smooth.”