From the Desk of Jim Eccleston at Eccleston Law Offices:
According to a report from InvestmentNews, given the higher cost in the broker-dealer business over the past few years, some broker-dealers that don’t have strong capital behind them may have no choice but to look for an exit strategy. In 2014, six to eight broker-dealers are expected to be acquired by larger entities.
Advisors who work for a broker-dealer that is being acquired need to assess acquisition. For example, doesthe acquiring firm plan to leave the broker-dealer as a stand-alone or roll it up into another broker-dealer? Advisors need to keep a watchful eye on it, because even if the acquirer announces a plan to leave the firm as a stand-alone, it could change the plan quickly after due diligence. In addition, advisors need to understand possible administrative changes. For example, advisors who are working in a smaller broker-dealer where they enjoy the accessibility of key senior management may find that if the firm is purchased by a larger firm with plans for a roll-up, the new situation may not suit them.
Likewise, advisors need to do their own due diligence to clarify if the new culture, technology, clearing platform, business model, and compliance/supervision structure etc. are a good match for themselves.
If due diligence shows that the firm acquiring the broker-dealer will add value and fulfill the adviser’s needs and wants, then the change could be beneficial. If the new firm doesn’t offer that, another firm may be a better fit.
The attorneys of Eccleston Law Offices represent investors and advisers nationwide in securities and employment matters. Our attorneys draw on a combined experience of nearly 50 years in delivering the highest quality legal services.
