An independent broker-dealer linked by the Securities and Exchange Commission to oil and gas private-placement investments that blew up last summer is getting out of the securities business.
Okoboji Financial Services Inc. filed forms last Friday with the SEC and the
Financial Industry Regulatory Authority Inc. to withdraw as a broker-dealer.
Okoboji Financial, which is based in the Iowa town of the same name, is mentioned in the SEC's July lawsuit against Provident Royalties LLC, and its related funds and business entities.
The SEC charged Provident with selling fraudulent private-placement offerings from September 2006 through January 2009. Provident raised $495 million from at least 7,700 investors nationwide, according to the SEC.
According to the SEC lawsuit, Okoboji Financial received a 5% payout for selling Provident notes. Last year, Finra censured Okoboji and fined it $30,000 for selling private placements to prospective investors with whom neither the firm nor its representatives had a pre-existing relationship. That is a violation of rules regarding the sale of private placements, which are supposed to be sold only to sophisticated and wealthy investors.
In March, Okoboji Financial lost a $978,000 arbitration over unsuitable structured settlements, according to Finra records.
Until recently, Okoboji had about 20 reps and advisers, sources said. The firm's website is no longer up, and calls to the firm could not be completed.
According to a lawsuit filed in April in federal court in South Dakota, a rep from Okoboji sold an 87-year-old widow, Thelma Barber, $150,000 in private placements, including two Provident funds and one fund of Medical Capital Corp. The SEC also charged Medical Capital with fraud last summer.
An increasing number of independent contractor broker-dealers who sold questionable private placements have been forced out of the securities business.
AFA Financial Group LLC said in April that it was closing because it couldn't keep up with its errors-and-omissions insurance premiums and was facing an increasing number of investor complaints. Prior to 2010, only one arbitration claim had been filed against the 100-rep firm; this year, investors have sued the firm seven times.
Facing $40 million in liabilities from the sale of Provident, as well as other investor lawsuits, GunnAllen Financial Inc. failed to maintain appropriate net capital and was shut down in March.
Peak Securities Corp. closed last November, and last month lost a $400,000 arbitration claim from an investor who bought Medical Capital private placements.
