Yet another embattled broker-dealer is closing.
CapWest Securities Inc. yesterday filed its broker-dealer withdrawal papers with the Financial Industry Regulatory Authority Inc. According to the B-D's profile on Finra's BrokerCheck system, CapWest's status with Finra and the Securities and Exchange Commission is no longer “active.” Rather, it is listed as “termination requested.”
CapWest's CEO, Dale Hall, confirmed in an e-mail that the firm had filed its broker-dealer withdrawal papers Wednesday.
The Lakewood, Colo., firm is yet another failed broker-dealer that sold private placements and private real estate deals that went bust during the credit crisis. Three series of products, Medical Capital Holdings Inc. notes, preferred stock of Provident Royalties LLC and real estate deals packaged by DBSI Inc. have proved hugely problematic for independent broker-dealers that sold them, with firms unable to bear the burden of legal costs stemming from investor lawsuits.
DBSI filed for bankruptcy in 2008, and the SEC in 2009 charged Medical Capital and Provident with fraud. (Click on the following link to view
a list of firms that sold Provident stock.)
CapWest brokers sold $22 million in private placements issued by Provident Royalties and $30.6 million of Medical Capital notes, according to court documents. (Click here to see the full list of B-Ds that sold MedCap notes.)
Some broker-dealers who sold the private deals have managed to negotiate settlements with regulators and class action plaintiffs to move past the product failures and survive.
Others, including QA3 Financial Corp., GunnAllen Financial Inc., and Jesup & Lamont Securities Corp., did not. CapWest now joins that list.
CapWest, which had about 50 brokers, this year ran into severe hurdles.
In March, the firm reported in its annual filing with the SEC 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.” Then, in July, it lost a $587,000 Finra arbitration claim to four clients who claimed negligence and misrepresentation in the sale of oil and gas ventures offered by Striker Petroleum LLC and Provident.
CapWest is owned by Capstone Financial Group.
