by Brian Mahany
Investment News, a daily news service for finance professionals, reports another broker dealer is “hanging on by a thread,” CapWest Securities. Unfortunately, stories like this have become far too common.
Brokerage firms are required to maintain certain minimum capital levels. If their operating capital falls too low, the firm is subject to being shut down. That spells disaster for customers with outstanding claims against the business or one of it’s brokers.
CapWest is just one of many brokerage firms in financial trouble. Many brokers got in trouble after selling private placements with little or no due diligence or to people not qualified to own them. CapWest is certainly not alone with problems surrounding private placements.
The Investment News article reports that there are 4557 broker dealers licensed to business in the U.S. That is about 400 fewer than just 5 years ago.
In these tough and turbulent economic times, we recommend not wait before asserting claims against bad brokers and other financial professionals.
Wait too long and the company may not have enough money to pay its claims. The safest bet is to immediately consult with a securities lawyer if you feel that you have been the victim of investment fraud or bad advice from a stockbroker.
As previously reported in this blog, CapWest’s problems arose after the firm’s stockbrokers sold $22 million dollars of investments from Provident Royalties LLC. The SEC says the company was a scam. In the aftermath of those sales, the company is fighting several FINRA arbitrations and 5 lawsuits. The company has net capital of just $80 thousand as of the end of 2010.
Most customer claims against stockbrokers are heard by the Financial Industry Regulatory Authority or “FINRA” for short. Although the filing and administrative fees are higher than those of most courts, the speed with which cases get resolved is quick and overall costs and fees are often much lower than a fraud lawsuit.
Will CapWest survive? Time will tell. If you have claims against them or other brokers, don’t wait.
Mahany & Ertl is a boutique law firm concentrating in investment fraud, fraud recovery and stockbroker arbitrations. If you feel like you suffered losses because of a bad broker, investment planner or financial professional, call us. We often take cases on a contingent fee basis meaning we don’t get paid unless we collect money for you.