Capwest May Be Another Victim of Private Placements

CapWest Securities Incorporated was one of the largest sellers of Provident Royalties LLC and Medical Capital Holdings notes, two private placement offerings that the Securities and Exchange Commission (SEC) declared to be fraudulent in 2009. They sold $22 million in private placements issued by Provident and $30.6 million in private placements issued by Medical Capital. Now CapWest is on the verge of shutting down, according to Investment News.

Earlier this year, the firm reported in its filings with the Securities and Exchange Commission (SEC) that a number of events, including three straight years of losses, a decline in net capital and a surge of lawsuits, "raise substantial doubt about the company's ability to continue as a going concern." The firm reported that it had net capital of $80,420.

Now CapWest has been dealt another blow. A recent FINRA arbitration panel ordered them to pay a customer $438,000 in compensatory damages, plus interest and $130,000 in attorneys' fees. This may be enough to push the firm over the edge. The firm will have 30 days to pay the award or face the possibility of being suspended by FINRA for not paying an arbitration award. Alternatively, CapWest can elect to file a form called a BDW. This form stands for Broker-Dealer Withdrawal and is filed by firms when they are shutting down and going out of business.

The broker is no longer with CapWest and moved to another firm in July 2008, however, he is no longer associated with any FINRA firm since he was suspended for failing to comply with another separate adverse arbitration award.

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