Boogie Investment Group Inc. has submitted its withdrawal request to the Financial Industry Regulatory Authority. The small broker-dealer is the 20th financial firm that sold Provident Royalties private placements to either leave the brokerage business or announce its intentions to depart. According to Investment News, that’s nearly 40% of independent broker-dealers. Just this year alone, 11 broker-dealers that sold the private placements closed shop. Provident’s bankruptcy receiver reports on its Web site that 52 broker-dealers sold the shares.
Boogie sold about $410K in private placements. Its revenue at the end of the fiscal year was $422K-a definite reduction from the $1.2M of three years back. One of the reasons Boogie decided to bow out of the industry is because of the litigation expenses stemming from the failed private placements. Not only is Boogie contending with a class action lawsuit, but also, it is faced with a securities case filed by investors that purchased Provident’s Shale Royalties products and other arbitration cases not related to Provident private placements.
The Financial Industry Regulatory Authority has been tough on the financial firms and individuals that sold interests in private placements while allegedly failing to thoroughly investigate these products or even have reasonable grounds to believe that placements were suitable for clients. The failure to do the appropriate due diligence resulted in the firms being unable to know what were the risks involved. FINRA also says that the principals it has sanctioned lacked a reasonable basis for allowing their financial firms’ registered representatives to keep selling the offerings.
Other broker-dealers that are now out of business or plan to close after selling Provident offerings:
• Workman Securities Corp.
• Harrison Douglas Inc.
• Investlinc Securities LLC/Meadowbrook Securities LLC • WFP Securities Corp.
• QA3 Financial Corp.
• Securities Network LLC • Asset Management Strategies LLC • Okoboji Financial Services Inc.
• Matheson Securities LLC • Main Street Securities LLC • United Equity Securities LLC • CapWest Securities Inc.
• Private Asset Group Inc.
• Community Banker Securities LLC • E-Planning Securities Inc.
• Empire Financial Group Inc.
• GunnAllen Financial Inc.
• Barron Moore Inc.
• Jesup & Lamont Securities Corp.
The Securities and Exchange Commission has charged Provident and Medical Capital Holdings with securities fraud. The two private placement issuers made about $2.7 billion through pushing these offering through a number of independent broker-dealers. This eventually resulted in huge losses for investors.
For instance, after broker-dealer Securities America sold about $700 million in Medical Capital notes, the investors in these private placements would go on to lose over $1 billion even though the notes were touted as low risk. Meantime, between 2001 and 2009 MedCap raised about $2.2 billion from more than 20,000 investors through several private placement offerings of promissory notes.
Our securities fraud attorneys have been investigating claims for clients that purchased private placement units.
And another broker-dealer bites the dust, Investment News, October 23, 2011
FINRA Sanctions Two Firms and Seven Individuals for Selling Private Placements Without Conducting a Reasonable Investigation, FINRA, April 7, 2011
Shepherd Smith Edwards & Kantas LLP Investigates Claims for Clients of Various Brokerage Firms in Connection with the Sale of Private Placement Units in Provident Royalties, LLC, Globenewswire, July 28, 2009
More Blog Posts:
FINRA Wants Brokers Selling Regulation D Private Placements to Take Part in Tougher Due Diligence Process, Stockbroker Fraud Blog, June 7, 2011
National Securities Corp., Independent Financial Group LLC, & Centaurus Financial Inc. among broker-dealers sought by Massachusetts securities regulators over private placements, Stockbroker Fraud Blog, April 19, 2010
SEC to Propose Rule Banning “Felons and Bad Actors” From Involvement in Private Offerings, Institutional Investor Securities Blog, May 29, 2011