Allied Beacon Partners Inc. (“Allied Beacon”) has informed its financial advisers that the firm is in violation of industry rules requiring that sufficient capital be kept on hand to remain open for business. Reps no longer can buy securities for their clients. Reps can execute unsolicited sales of securities for clients looking to cash out of positions.
Allied Beacon is the legacy broker-dealer for at least two broker-dealers that went out of business over the past few years after being hit with investor lawsuits over fraudulent private placements. One of those investor complaints filed in 2010 was against Community Bankers Securities, LLC. In a decision rendered by a FINRA panel, Allied Beacon was ordered to pay a $1.6 claim stemming from the complaint. Specifically, claimants made numerous allegations, including that the firm failed to conduct due diligence related to selling private placements of what turned out to be Ponzi schemes.
“A rep called me and said the firm was closed due to a net-capital violation as told to him from the back office of the broker-dealer,” said Jon Henschen, an industry recruiter, told Investment News. “Allied Beacon’s story shows a repeating theme of smaller firms taking on more risk with alternative investments to attract reps to join, but having a lack of capital to cover those risks when arbitrations occur,” said Mr. Henschen. Further, Allied Beacon’s role as the distributing broker-dealer for a new non-traded REIT, United Realty Trust Inc. is an issue. Specifically, the REIT will change dealer-managers to another broker-dealer, Cabot Lodge Securities LLC. This change, however, has been occurring prior to the net-cap violation.
Eccleston Law can help Allied Beacon reps nationwide ensure a smooth transition to a new firm.
