TAG | Certa Financial Group
Comments off · Posted by Securities Lawyer in FINRA
Pacific West Securities, Inc., a sizable independent broker-dealer with about 290 affiliated reps and advisers, is shutting down due to thin margins and high costs of doing business, with the reps moving to a broker-dealer in Cetera Financial Group, writes Bruce Kelly in a Dec. 6, 2011, ariticle for InvesmentNews.com.
Kelly writes that Pacific West Securities Inc. generated $46 million in fees and commission last year and is on track to see $54 million in gross revenue in 2011. The B-D will inform its brokers of the closing, according to Tony Pizelo, CEO. Multi-Financial Securities Corp. has struck a recruitment deal with Pacific West, Mr. Pizelo said.
These two firms are collaborating on how best to move the brokers, Pizelo said. “We anticipate a very enthusiastic response, and expect well over 50% to move,” he said.
High cost of business is pushing firms like Pacific West to the exit, he said. “The margins we are up against are getting thinner and thinner,” he said. “I’m in agreement with Ric Edelman, the model is broken.”
The InvestmentNews.com article states that in October, Mr. Edelman, co-chief executive of the Edelman Financial Group, said the independent broker-dealer channel was “severely flawed” and that independent broker-dealers faced steep economic challenges.
“This is a tough industry right now” for all but the big players, Mr. Pizelo said.
There will be business as usual at the firm for the next couple of months as the brokers move, Mr. Pizelo said, with an anticipated shut down date of March 1.
Multi-Financial Securities, a subsidiary of Cetera Financial Group, said in a news release that it had entered an agreement with Pacific West Financial Group, the broker-dealer’s holding company, to bring over select advisors from Pacific West. The agreement is subject to approval by the Financial Industry Regulatory Authority Inc.
It was noted in the article that dozens of thinly capitalized independent broker-dealers have gone out of business or been sold over the past few years due to the rising tide of litigation costs stemming from investor lawsuits. Most of those complaints stemmed from sales of three products: Medical Capital Holdings Inc. notes, Provident Royalties LLC preferred stock, and real estate deals by DBSI Inc. Mr. Pizelo said Pacific West did not sell any of those products.
Pacific West has been facing increasing legal costs due to customer arbitrations. Over the last two years, the firm has lost Finra arbitration awards totaling $969,000, according to the firm’s profile on Finra BrokerCheck.
Securities Attorney, Lars Soreide, of Soreide Law, PLLC, has represented clients nationwide. If you or a family member have experienced losses with these or other stockbrokers/brokerages, call a Securities Arbitration Lawyer for a free consultation on how to potentially recover your losses. To speak with an attorney, call 888-760-6552, or visit www.securitieslawyer.com.
Soreide Law Group, PLLC., representing investors nationwide before FINRA the Financial Industry Regulatory Authority.
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