Another small broker-dealer is closing its doors due to not having enough capital on hand to meet industry rules to remain open for business —
at least the seventh B-D to shut down this year.
Chicago Investment Group, with about 90 brokers and $200 million in client assets, revealed the shortfall last week in its annual Focus filing with the Securities and Exchange Commission, according to a source who had read the report but asked not to be named.
Richard Lynch, CEO of Chicago Investment Group, on Monday did not return phone calls to comment.
Several broker-dealers, including Newbridge Securities Corp., are attempting to move the Chicago Investment Group reps to their firm, sources said.
Like Newbridge, Chicago Investment cleared its securities transactions through Legent Clearing LLC.
Robert Spitler, president of Newbridge Securities, did not return a call to comment.
Inability to meet the net-capital requirements of the Financial Industry Regulatory Authority Inc. has forced some small and independent broker- dealers to shut down this year.
Just last week, Jesup & Lamont Securities Inc. was told by Finra it could not open after its capital fell to a level deemed inadequate to fund continued operations.
In March, GunnAllen Financial Inc., facing tens of millions of dollars in legal liabilities, went out of business after it violated net-capital rules, scattering 400 reps and advisers — believed to be the largest closure to date.
(See the list of closures here.)
The market downturn of 2008 and early 2009, coupled with pressure from securities regulators, is putting a squeeze on firms that don't carry an excess of net capital, observers said.
(Read more about why small broker-dealers are shuttering, from today's print edition of InvestmentNews.)
