Monthly Archives: July 2010

At least 12 broker/dealers that sold private placements issued by Provident Royalties LLC are now either out of business or no longer sanctioned by the Financial Industry Regulatory Authority (FINRA). As reported June 30 by Investment News, the 12 firms in question sold $56.7 million of Provident offerings.

In July 2009, the Securities and Exchange Commission filed a lawsuit against Provident Royalties, charging the company and its founders with fraud. From 2006 to 2009, Provident sold $485 million of private placements through a number of broker/dealers throughout the country.

Those same broker/dealers are now facing a slew of arbitration claims and lawsuits from investors who lost millions of dollars on the Provident deals, as well as on other private-placement offerings, including those from Medical Capital Holdings.

Last month, the trustee in the Provident case, Milo H. Segner Jr., filed a complaint against 49 broker/dealers, alleging they “failed miserably in upholding their fiduciary obligations” when selling a series of Provident Royalties private placements. In total, the lawsuit lists 61 firms that sold investment offerings in Provident.

Investment News provided a list of broker/dealers with problems connected to sales of Provident private placements. Among the broker/dealers on the list:

• AFA Financial Group LLC – AFA sold $2.5 million of Provident private placements; in April, the broker/dealer said it was closing its business due to overwhelming legal and insurance costs.

• Barron Moore Inc. – The Financial Industry Regulatory Authority (FINRA) expelled Barron Moore in June 2008 over penny stock sales. The company sold $205,000 in Provident private placements.

• Community Bankers Securities LLC – Community Bankers ceased its affiliation with FINRA in December 2009. It sold $2.8 million in Provident private placements.

• Empire Financial Group Inc. – FINRA expelled Empire in March 2009 for failing to pay unknown fines and/or costs. Empire sold $2.8 million in Provident placements.

• Empire Securities Corp. – FINRA suspended Empire Securities in May 2010 for failing to pay arbitration fees. Empire Securities sold $205,000 in Provident private placements.

• ePlanning Securities Inc. – The company withdrew from FINRA in February 2009. It sold $3.8 million in Provident placements.

• GunnAllen Financial Inc. – GunnAllen was shut down in March 2010 when it failed to meet FINRA’s net-capital requirements. It sold $22.3 million in Provident private placements.

• Jesup & Lamont Securities Corp. – The broker/dealer closed its doors in June 2010 after failing to meet FINRA’s net-capital requirements. It sold $100,000 in Provident private placements.

• Main Street Securities LLC – The firm withdrew its registration from FINRA in November 2009. It sold $205,000 in Provident private placements to investors.

• Okoboji Financial Services – In May 2010, Okoboji filed forms with both FINRA and the SEC to withdraw its registration as a broker/dealer. Okoboji sold $21.9 million in Provident private placements.

• Private Asset Group Inc. – FINRA suspended Private Asset Group in May 2010 for failing to pay arbitration fees of $2 million.

• Provident Asset Management – On March 18, FINRA expelled Dallas-based Provident Asset Management for marketing a series of fraudulent private placements offered by its affiliate, Provident Royalties, in a massive Ponzi scheme. Provident Asset sold $50,000 in Provident private placements.