New York Securities Lawyer Blog
At the end of May 2013, Allied Beacon Partners Inc. (“Allied Beacon”), a mid-sized independent broker-dealer, announced to its 200 registered representatives that the firm violated industry and regulatory rules that require investment firms to maintain sufficient capital in excess of customer funds in order to remain in business. The Securities and Exchange Commission’s net capital rule regulates broker-dealers’ ability to meet financial obligations to customers and creditors. Since Allied Beacon violated the net capital requirement rules, it continues to operate its business for the sole purpose of allowing customers to close out positions. Brokers at Allied Beacon are no longer permitted to purchase new securities for clients. Allied Beacon was a legacy broker-dealer to 2 failing broker-dealers, Workman Securities Corp. and Community Bankers Securities LLC (“Community Bankers”). One investor complaint, which was filed against Community Bankers in 2010, resulted in a Financial Industry Regulatory Authority Inc. (“FINRA”) arbitration award for $1.6 million, which Allied Beacon was ordered to pay to the victimized customers. The investor complaint alleged that Community Bankers failed to conduct due diligence regarding the selling of private placements, including, but not limited to, Medical Capital LLC, Shale Royalties, and Provident Royalties LLC. Moreover, the investor complaint alleged that Community Bankers used new investor funds to repay principal and returns to existing investors; thereby, furthering a Ponzi scheme. After Allied Beacon paid the FINRA award, it did not have sufficient capital in reserve, and therefore was in violation of the net capital regulatory rule.
Lax & Neville LLP has nationally represented small broker-dealers, financial services professionals and securities industry companies in regulatory matters and securities-related and commercial litigation. Additionally, Lax & Neville has extensive experience in successfully prosecuting claims on behalf of customers who have suffered losses as a result of sales practice abuses. Please contact our team of attorneys for a consultation at (212) 696-1999.