Rodman & Renshaw Exits Brokerage Business

Rodman & Renshaw LLC is getting out of the brokerage business. It turned in its Form BDW – the Uniform Request for Withdrawal of Broker Dealer- to the Financial Industry Regulatory Authority on Friday. Just two days before, on September 12, the brokerage firm, which is a Direct Markets Holdings Subsidiary, told the SRO that it isn’t in compliance anymore with the Securities and Exchange Commission’s Net Capital Rule 15c3-1. Because of this, besides liquidating transactions, the once leading investment bank will no longer be involved in the securities business. Rodman & Renshaw may also sell its assets.

Just last month, FINRA fined Rodman & Renshaw $315,000 for alleged supervisory and information barrier violations involving interactions that took place between its investment banking and research functions. FINRA maintains that because of supervisory deficiencies, at least two incidents occurred involving a research analyst taking part in attempts to solicit investment banking business and an incident involving another research analyst trying to organize a payment from a public company happened. Both individuals have been sanctioned and will serve out suspensions.

According to Investment News, failing to meet regulatory-net-capital levels is often a sign that the end is near for a financial firm-unless it manages to recoup and stay in operation. Since the 2008 economic crisis, a number of brokers-dealers have struggled to keep their reserves up. Unfortunately, hundreds of brokerage firms have been unable to do so, and many of them have had to close down. FINRA says that in the last five year, there has been a 13% drop in the number of broker-dealers. Compare the 4,370 brokerage firms in operation last month to the 5,005 that were in business in 2007.

What to Do if The Brokerage Firm You Work With Closes Shop
FINRA says that in nearly all instances, if a broker-dealer shuts its doors, customer assets are safe and they can usually be moved to another registered brokerage firm. Generally, a firm should have had several levels of protection in place to protect investor assets-including keeping its own funds separate from customers’ cash and securities. Brokerage firms should also keep up minimum net capital requirements to decrease the chances of insolvency, as well as belong to the Securities Investor Protection Corp., which covers up to $500,000 for each of its’ members “legal customers.” SIPC protection can be invoked when firm failure is related to customers’ assets having gone missing because of securities fraud or theft. SIPC, however, doesn’t cover regular market loss, accounts belonging to anyone with a significant beneficial ownership in the financial firm that failed, and investments in fixed annuities, hedge funds commodity futures .or investment contracts that are not SEC-registered.

Unfortunately, as evidenced by the recent collapses involving MF Global (MFGLQ), Peregrine Financial Group (PFG), and not to mention the Ponzi scams of Bernard L. Madoff Investment Securities LLC and Stanford Financial Group, getting a hold of your money and investments isn’t always that easy after a firm suffers massive losses or collapses. This is just one of the many reasons why it is so important to speak with a securities law firm to find out what your options may be.

Our securities lawyers are here to help investors recoup their losses. Contact Shepherd Smith Edwards and Kantas, LTD, LLP today.

End of the Line for Rodman & Renshaw?, Investment News, September 13, 2012

If a Brokerage Firm Closes Its Doors, FINRA

Uniform Request for Withdrawal of Broker Dealer (PDF)

More Blog Posts:
Securities Roundup: FINRA Fines Rodman & Renshaw $315K, Convictions Reached in $1B High Yield Fraud Scam Involving FBI, SEC Sues Wwebnet over $2.1M Fraud, and Ex-Hedge Fund Manager Settles Unsuitable Investment Recommendation Allegations for Over $421K, Stockbroker Fraud Blog, September 11, 2012

SEC’s Efforts to Reconsider a ’07 Proposal Over Broker-Dealer Financial Requirements Elicits Concerns From Some Market Participants, Stockbroker Fraud Blog, June 20, 2012

IRS Pays Whistleblower $104M for Exposing Tax Evasion at UBS AG, Institutional Investor Securities Blog, September 13, 2012