Another IBD Bites the Dust After Selling DBSI
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Independent broker/dealer Alternative Wealth Strategies in Cherry Hill, N.J., has gone belly up, according to Financial Industry Regulatory Authority documents. The firm’s BrokerCheck report says the firm’s membership was suspended at the end of May after it failed to pay arbitration fees, but it’s unclear what these arbitrations were related to. The firm sold real estate deals by DBSI, which went bankrupt.
Former CEO James Gaul and President Jeffrey Rachlin had not returned calls by press time.
Dale Krueger with Ashford Financial in Michigan, a former advisor for the firm, said the firm closed due to “a financial situation.” Krueger said the firm had sold DBSI, but he didn’t know how much was sold (Published reports say it generated $1.1 million in commissions.) Krueger did not sell any.
Someone familiar with the firm, who declined to be named, said he believes part of the problem that contributed to the closing was that FINRA asked the firm to put more money into its capital account to cover contingent liabilities related to claw-back claims by some of the private placement sponsors that have gone into receivership. In November 2010, the bankruptcy trustee for DBSI filed a lawsuit against 100 broker/dealers, including Alternative Wealth Strategies, according to published reports. The suit alleged that the DBSI deals were a Ponzi scheme. The source was not privy to any specific arbitrations against the firm.
A December 2009 financial statement said there was a claim against the company seeking $314,000 plus expenses.
“The company believes the claim is without merit and intends to vigorously defend its position,” the filing said. “The ultimate outcome of this litigation cannot presently be determined. However, in management’s opinion, the likelihood of a material adverse outcome is remote.”
At the end of 2009, the firm had a net capital of $24,981 and had about 40 reps, Krueger said.
Many IBDs have been going under due to large liabilities they face related to alternative investments that have gone bust, and Alternative Wealth Strategies is the latest to surface. Others, such as Securities America, are being sold off, providing an opportunity for larger firms looking to acquire.
