Newbridge Securities Corp., a small to midsize broker-dealer
with a history of compliance problems, recently released a grim assessment of its financial health.
In its annual audited financial statement, which was filed in March but did not appear on the Securities and Exchange Commission's website until this month, Newbridge said it had potential future losses of close to $4.1 million stemming from investor arbitration claims against the firm. It has just $627,000 on hand to resolve such claims.
Newbridge had total revenue in 2018 of $32.8 million and a net profit of $108,000, according to the financial statement, which is known as a Focus report in the securities industry. Firms are required to file such a report each year with the SEC.
The firm's auditor painted a dark picture of Newbridge's future.
"The company has a large accumulated deficit and negative cash flows from operations," according to a letter from Liggett & Webb, which was dated March 6 and addressed to the firm's board. "These factors raise substantial doubt about the company's ability to continue as a going concern."
Newbridge Securities CEO Thomas Casolaro did not return phone calls seeking comment.
One veteran compliance attorney said that when an auditor raises such a "going concern" point about any type of business, it could prove significant.
"The going concern issue suggests that the firm has a limited ability to continue as a viable business," said Terry Lister, a legal and compliance consultant and former Waddell & Reed chief regulatory officer. "It's a major issue for accountants to put that in there."
On its website, the firm, which is based in Boca Raton, Fla., says it operates out of 80 locations around the country.
According to its BrokerCheck report, Newbridge got its start in 2000. Since then, it has amassed 32 "disclosure events," or slightly less than two per year since it opened for business.
A cluster of disclosure events at a firm is often seen as a red flag in the industry. Such marks at a firm are typically lists of arbitration awards and regulatory actions over the years.
According to a recent notice from the
Financial Industry Regulatory Authority Inc., the regulator is keeping close tabs on firms that have histories of hiring individuals with histories of misconduct that pose risk to investors.
Finra has identified 20 small firms — those with no more than 150 advisers, like Newbridge — that have 30 or more disclosure events over the prior five years. While Newbridge's number of disclosures matches Finra's criteria as stated in the notice, its disclosure events stretch over a longer timeframe than the five years that Finra specified.
Two years ago, the Pennsylvania Department of Banking and Securities hit Newbridge
with a $499,000 fine for failing to supervise a broker in connection with sales of structured products to his clients in the state.
