Resource Horizons Group, a regional brokerage firm and investment adviser, may no longer be able to stay in business after a $4 million Financial Industry Regulatory Authority arbitration award was issued against it. The self-regulatory organization blames the firm for almost $3.5 million in investor losses after Robert Gist, one of the firm’s brokers, allegedly took the money. Part of the award is $1 million in punitive damages.
Last year, Gist consented to pay $5.4 million to settle SEC charges claiming that he converted about that much from at least 32 customers for his own use over a ten-year period. He went through Gist, Kennedy & Associates, Inc., which was an unregistered entity with no connection to Resource Horizons, in that financial scam.
Resource Horizons hired Gist in 2001. Even before that there already were a number of customers disputes and other disclosures on his record. Both the SEC and FINRA have now barred Gist from the securities industry.
The claimants that filed a case against Resource Horizon and three firm executives include a family trust and six individuals. Among their allegations was a claim alleging inadequate supervision.
Resource Horizons reportedly may not have enough money to pay the arbitration award. An audited filing with the Securities and Exchange Commission notes that the firm’s net income in 2013 was $286,220 and its excess net capital is only $468,628 over the $100,000 it is obligated to keep to satisfy regulatory requirements.
If Resource Horizons cannot pay the securities arbitration award, it will need to note the amount as a liability. This would get rid of its excess capital and put the firm under the $100,00 net capital requirement.
Once a financial firm drops under net capital requirements, it can no longer conduct business and must notify customers that they must now put their orders straight through to its clearing firm.
Brokerage, Execs Ordered to Pay $3.9M in Bad-Broker Case, WSJ.com, September 24, 2014
B-D's fate uncertain after $4M arbitration award, Investment News, September 25, 2014
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