There's no letup in sight for broker-dealer closings. Today, yet another small brokerage that focused on selling illiquid alternative investments has been shuttered.
MCL Financial Group Inc. of Santa Ana, Calif, which had 44 registered reps, filed its broker-dealer withdrawal form Tuesday with the Financial Industry Regulatory Authority Inc., making it at least the sixth such firm to close this year.
The B-D, which cleared through
Legent Clearing LLC, had $2.9 million in revenue in 2010, down form $3.2 million a year earlier, according to filings with the Securities and Exchange Commission. Meanwhile, the firm posted losses of $10,330 last year and $447,250 in 2009.
Lawrence Singleton, MCL's CEO, did not return phone calls this week to comment about the firm's demise.
Small and midsize broker-dealers have been struggling for a variety of reasons of late. Many that sold illiquid private placements and real estate deals have seen a huge rise in legal costs due to litigation filed by investors. In addition, retail investors' lack of trading activity, coupled with historically low interest rates, have hammered a number of broker-dealers. (See a list of the nearly
20 broker-dealers that have exited the business since March 2010.)
According to its annual Focus report filed this year with the SEC, MCL generated 26% of its revenue in 2010 from the sale of REITs and 15% from the sale of limited-liability companies, which often take the form of private placements.
According to its profile on Finra's BrokerCheck system, MCL had no recent actions against it from regulators or substantial losses from Finra arbitrations.
Last year, however, the receiver for bankrupt real estate syndicator DBSI Inc. sued MCL
(and more than 90 other broker-dealers) seeking to claw back commissions generated from the sale of wildly popular tenant-in-common exchanges. According to court papers, MCL generated $210,000 in commissions from selling TICs issued by DBSI.
In the Focus report from March, the B-D said it did not expect the resolution of claims against the company to have an adverse affect on the financial position or results of the firm.
At the end of last year, MCL had $90,671 in net capital.
