Legacy Financial Services Inc., an independent broker-dealer, has closed shop. Last July, the Petaluma, California company sold most of its affiliated registered representatives and their accounts to Multi-Financial Securities Corp.
Some 125 advisers with close to $10 million in gross dealer concession were transferred by Multi-Financial. A number of Legacy executives and Brecek & Young Advisors Inc., which is also a broker-dealer, also acquired advisers. Individual producers were given compensation packages to switch to Multi-Financial.
Legacy Financial is still facing allegations made by the Maryland Securities Division in an “order to show cause” earlier this year that the independent broker-dealer did not properly supervise Joseph Karsner, a formerly affiliated registered representative and insurance agent.
Karsner had recommended mutual funds that were not suitable to senior investors. He instead invested their money in stocks that were risky and focused on technology shares and small-cap and mid-cap stocks. Many of them lost a huge chunk if not all of their retirement portfolios.
Between 1999 and 2003, Karsner earned over $3.3 million in commissions. He was paid a $125,000 signing bonus by Legacy. The broker-dealer severed its affiliation with Karsner last year.
Legacy executives say that the shutting down of operations has nothing to do with the Karsner case. Rather, Legacy was unable to keep up with competitors. Legacy says it is not culpable in the Karsner case and that they properly supervised him.
Multi-Financial purchased Legacy’s assets for 11.5% of advisers’ fees and commissions from May 2007 to April 2008. Proceeds from the sale are expected to go toward outstanding Legacy Financial costs. Anything left will be for general corporate purposes.
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