Another Independent Broker Dealer May Go Out Of Business

According to a report by Investment News, another independent broker dealer is announcing that it might bite the dust. Management has indicated that it is hanging on by a thread and there are serious concerns about its ability to continue as a going concern.

CAP West Securities, which is owned by Capstone Financial Group, reported in a recent filing with the Securities and Exchange Commission (SEC) that three straight years of losses, a decline in capital and a rash of lawsuits related to its sale of private placements that went bust has placed into question its ability to continue to operate. The firm is not alone in its struggles, as many independent broker dealers have bitten the dust due to their oversight of sales of illiquid private placements such as Medical Capital Holdings and Provident Royalties, among others. A prime example is the independent broker dealer unit of Ameriprise, Securities America, which has been fighting Reg D lawsuits for nearly two years only to have reached a settlement in April 2011.

Cap West’s major problem is the lack of capital, according to the article and its filing with the Sec. The firm had net capital of $80,420 at the end of last year and there can be no assurance that its parent company will continue to assist with funding to support it. Cap West reportedly sold some $22 million of private placements offered by Provident Royalties, which the SEC charged with fraud in 2009. It also sold an unknown amount of DBSI Inc. real estate deals that were popular among independents. DBSI is now in bankruptcy.

Cap West is working on settling the pending arbitration claims and court cases. If you have suffered losses from private placement deals with Cap West, please contact our securities law firm for a free consultation at 1-800-259-9010.

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