Representatives and advisers at Brewer Financial, a Chicago-based independent broker-dealer, are said to be looking to jump ship after the Securities and Exchange Commission charged the firm and its top two executives with fraud in selling $5.6 million in promissory notes to 74 investors.
Representatives and advisers at Brewer Financial, a Chicago-based independent broker-dealer, are said to be looking to jump ship after the Securities and Exchange Commission charged the firm and its top two executives with fraud in selling $5.6 million in promissory notes to 74 investors.
The SEC civil complaint alleged that from June 2009 to September, Brewer Financial Services LLC, its owner, Steven Brewer, its president Adam Erickson, and Brewer Investment Group LLC, the broker-dealer's controlling company, participated in fraudulent, unregistered offering of promissory notes issued by FPA Limited, an Isle of Man company.
“Through the fraudulent offerings, [Brewer Investment Group] and Mr. Brewer funneled cash to [Brewer Investment Group] and one of its subsidiaries when the entities were under significant financial distress,” according to the SEC's lawsuit. “The offering materials that [the defendants] created and used for the offerings of the FPA promissory notes failed to disclose that over 90% of the proceeds would be disbursed” at Mr. Brewer's direction to the controlling company and, in turn, to its various subsidiaries.
The offering materials also failed “to disclose the precarious financial condition” of Brewer Investment Group and its subsidiaries, the SEC alleged in the charges, which were filed on Thursday.
Mr. Brewer's collection of financial services companies were struggling, according to the SEC. They had consolidated losses of $3 million during 2008, and defaulted on a $2.5 million loan in January 2009, according to the lawsuit.
Mr. Brewer did not return calls seeking comment Monday.
Many of the firm's 87 reps and advisers are looking to change firms, one recruiter said.
“None of Brewer producers were named in the SEC allegations, and they seem to be good producers from quality wirehouse, regional and independent firms, with clean [compliance records] and several with the CFP designation,” said Brad Fay, president of IBD-Placement and Recruiting Services. “It should be easy helping them land on their feet.”
According to the lawsuit, Brewer Financial Services, the broker-dealer, has 25 branches and almost 2,700 client accounts. An affiliated investment adviser, Brewer Investment Advisors LLC, has $378 million in assets with 3,475 non-custodial accounts. Most of the firm's 87 reps are dually registered as brokers and advisers, the lawsuit states.
Mr. Erickson “made sales presentations to representatives and advisers associated” with the broker-dealer and advisory firm, encouraging them to sell the notes, the complaint alleges.
