Private Placement Deals Continue to Take Down Broker-Dealers

Bruce Kelly with Investment News reported that QA3 Financial Corporation, an independent broker-dealer that was heavily involved in selling high risk private placements, was on the verge of bankruptcy. The insurance carrier for QA3, Catlin Specialty Insurance Company, is allegedly not living up to its contract regarding coverage for legal claims, damages and expenses. The lawsuit contained allegations that the insurance company's failure to defend and indemnify QA3 for claims related to selling the private placements is apt to force the company into bankruptcy. QA3 says that it has some 59 separate FINRA arbitrations relating to its sale of private placements including Medical Capital holdings, Provident Royalties LLC and DBSI, Incorporated.

The toll from the sale of private placements on independent broker-dealers was evident in 2010, when soured deals left dozens in dire straits. Investment News reported earlier in January about the demise in March 2010 of GunnAllen Financial, which sold $22.3 billion worth due to net-capital violations. Jesup & Lamont Securities was another victim of the Medical Capital and Provident mess, followed by Okoboji Financial Services in May 2010 and Dallas based Cullum & Burks Securities, one month later. The continued closing of more independents in 2011 is predicted.

If you have suffered losses from having invested in private placements, please contact our securities law firm for a confidential, no obligation consultation at 1-800-259-9010.

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