Another independent broker-dealer — and a substantial seller of allegedly fraudulent private placements — has gone belly up.
Facing more than $14 million in legal claims, WFP Securities of San Diego this week notified the Financial Industry Regulatory Authority Inc. that it was closing. The firm had 48 registered reps and advisers.(Click on the following link to see all
independent B-Ds that have closed since 2010).
According to court documents, the firm sold more than $27 million of private placements issued by Medical Capital Holdings Inc. and $6.8 million issued by Provident Royalties LLC. In 2009, the Securities and Exchange Commission charged both those companies with fraud.
WFP was one of 13 independent broker-dealers that was recently targeted in lawsuit filed by BNY Mellon over sales of MedCap notes,
as reported last week by
InvestmentNews. (To see the list of 13 B-Ds named in the suit,
click here.)
WFP's BrokerCheck profile, however, had no reports of lawsuits or regulatory actions against the firm, but in an SEC filing last year, WFP said Finra was conducting an investigation of the firm related to investors' arbitration claims.
When reached Friday morning, the firm's president, John Schooler, said he did not have time to comment about the firm's closing.
Dozens of broker-dealers that sold notes from Medical Capital and Provident Royalties are struggling to survive or have folded, unable to bear the cost of lawsuits and investor complaints stemming from the failures of the alleged fraudulent investments.
Investors, along with some regulators, have charged that firms' lack of adequate due diligence on the products harmed clients, who have lost hundreds of millions of dollars in the deals. Broker-dealers, in turn, have laid the blame on the issuers.
