WFG Investments, an independent broker dealer based in Dallas, is facing a $650,000 fine from the Financial Industry Regulatory Authority (FINRA). Just last year the firm paid a $200,000 fine in connection with a stock fraud scheme. Since that time, the firm also paid two smaller penalties this year. In none of these cases did the company admit any wrongdoing.
According to a recent filing with the SEC, WFG told regulators it was setting aside $650,000 for fines. “The company expects to incur a global fine from FINRA in the near future and has accrued that expense in the amount of $650,000 as of June 30, 2014. The amount is an estimate provided by legal counsel working closely with FINRA,” according to the filing. The company disclosed no details about the alleged violations.
We are concerned about the firm’s recent history. Eleven times in the past decade WFG has been censured and fined for significant compliance lapses. Hawaii tried to revoke the company’s business and the state’s Department of Consumer Protection sued the firm. Those matters were resolved with a fine, however.
The firm’s most recent filed financial statement shows the firm has net capital of $1.6 million but lost $210,000 in its last fiscal year. Net capital of just over one and half million dollars may seem like a large sum of money but in 2008, a customer filed a formal complaint against WFG seeking $2,588,210. Luckily for the firm, that case was resolved for $700,000.
InvestmentNews reports the firm’s owner saying the company has turned the corner and has doubled its compliance staff. WFG employs 270 stockbrokers and investment advisers. As we have seen many times in recent years, however, just one rogue broker can easily bring down a small independent brokerage firm.
What’s the lesson here? If you do lose money because a stockbroker has not treated you fairly or mishandled your assets, don’t delay in seeking redress. Especially with the so-called indie (independent) brokerage firms, the early bird is often the only one getting the worm.
We don’t suggest that WFG is a bad place to do business. Remember, however, that just one bad broker can topple a small firm. If you are a victim of stockbroker fraud, act quickly.
BREAKING NEWS… Less than 24 hours after making this post, another small indie firm is reportedly in dire straits after a single rogue broker resulted in a $4 million arbitration award. The firm reportedly only has approximately $568,000 in net capital meaning it can no longer operate unless the firm finds away to satisfy the award. We continue to worry about smaller brokerage firms and their risk of being wiped out by a single bad actor. For more details, click here.
With some exceptions, our minimum loss criteria is $200,000.