Rodman & Renshaw LLC, once a leading investment bank for small emerging-growth companies, could shut down.
In a regulatory filing last week, the broker-dealer informed the
Financial Industry Regulatory Authority Inc. that it is no longer in compliance with the Securities and Exchange Commission's net-capital rules.
Falling under regulatory-net-capital levels typically is a broker-dealer's death knell, though on rare occasions, firms manage to bounce back and remain open.
In the SEC filing, Rodman & Renshaw's parent company, Direct Markets Holdings Corp., said that the broker-dealer “would cease conducting its securities business, other than liquidating transactions, unless and until it can achieve compliance” with net-capital rules.
LOOKING AT OPTIONS
The broker-dealer is considering terminating its license by filing a broker-dealer withdrawal form with Finra, according to the filing. It also is considering selling certain assets.
Executives with Rodman & Renshaw, including chief executive Edward Rubin, didn't return calls seeking comment.
Broker-dealers of all stripes have been struggling to maintain net-capital reserves since the financial crisis of 2008, with hundreds failing or simply shutting down since then. Firms must have a minimum amount of cash on hand to remain open for business, and many have been unable to do so.
Over the past five years, Finra has reported a 13% decline in the number of broker-dealers, with 4,370 up and running last month, versus 5,005 at the end of 2007.
Rodman & Renshaw has suffered pronounced turmoil over the past few months.
In May, the parent company changed its name to Direct Markets Holdings Corp. from Rodman & Renshaw
Capital Group Inc., signaling a shift in focus to its Direct Markets platform, which links small public companies making secondary offerings with investors.
But the company's stock price failed to recover from a yearlong slide. Shares were trading last Thursday at a little more than 8 cents, compared with $1.28 a year ago.
Last month, Finra fined the broker-dealer $315,000 for “supervisory and other violations related to the interaction between the firm's research and investment banking functions.”
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