John Sykes is selling his independent broker-dealer business after years of losses.
Ameriprise Financial Inc. said Tuesday it agreed to buy the assets of the broker-dealer Mr. Sykes owns, JHS Capital Advisors, for an undisclosed sum. The firm is home to 150 employee and independent registered reps who control $4.1 billion in client assets.
The deal is expected to close next quarter.
The sale of JHS Capital Advisors potentially marks the end of Mr. Sykes' foray into the broker-dealer industry. Before entering the business, he had amassed hundreds of millions of dollars in the call center industry. He purchased the holding company that controlled GunnAllen Financial Inc. in the perilous market of 2008, brimming with confidence, brio and optimism. At the time, he said he wanted to build a banking and financial services powerhouse that could rival another bigger and more well-known Florida-based broker-dealer, Raymond James Financial Inc.
(See also: John Sykes' JHS Capital Advisors challenged by annual losses, handful of Finra arbitration claims)
GUNNALLEN BANKRUPTCY
That didn't work out. In December 2009, he resigned as chairman of GunnAllen Holdings Inc. a few months after it acquired a small broker-dealer that would be rechristened JHS Capital Advisors. GunnAllen Holdings filed for bankruptcy protection in 2010.
JHS Capital reported a series of losses in recent years. Its 2014 audited financial statement filed with the Securities and Exchange Commission did not disclose revenue or income, but in 2013 the firm had total revenue of $38.1 million and a loss of $1.4 million. In the three years prior, JHS Capital posted annual losses of between $5 million and $6 million.
JHS Capital also was dealing with legacy legal and regulatory issues. It lost a $1.7 million arbitration award to an investor in 2012 due to claims that a broker was trading excessively in a client account to generate commissions. Most recently, it was fined $75,000 by the Financial Industry Regulatory Authority Inc. in 2013 for violating industry rules in 2010 when it transferred client accounts from one clearing firm to another.
'GOOD OPPORTUNITY'
Ameriprise approached JHS Capital Advisors, which wasn't looking to be acquired, said Eileen Canady, vice president, strategic development and marketing at JHS. “It's a good opportunity to affiliate with a company with the stability and national recognition of Ameriprise,” she said. She did not comment on the company's reported losses or Mr. Sykes' future plans in the financial services industry.
The reps and advisers at JHS Capital have the option to join either the employee or franchise model at Ameriprise, said company spokeswoman Kathleen McClung, who noted the deal marked the first acquisition of a broker-dealer by Ameriprise since 2008 when it acquired H&R Block Financial Advisors and its 900 advisers for $315 million in cash.
“This is a great opportunity for the JHS Capital to come to Ameriprise and thrive and grow,” she said.
(See also: Ameriprise plan: Rouse H&R Block brokerage unit)
