The Retirement group

John Jastremski

Two broker-dealers capitalize on QA3's decline

Two broker-dealers have appeared as early champions in the battle within the 400 representatives connected with QA3 Financial Corp., which basically turn off Friday.

Last week, as recruiters mounted a frenzied campaign to join up repetitions from the unsuccessful broker-dealer, FSC Securities Corp., a subsidiary of American International Group Inc., pre-registered about 50 brokers have been responsible for $7 million in commissions and fees. As a team called The Retirement Group LLC, which is situated in North Park all of the advisors likely to FSC went.

Meanwhile, Securities Support System Inc. said it's received promises from 32 QA3 representatives who made $6 million in profits and fees. They comprised two groups: Orizon Investment Counsel LLC of Omaha, Neb., which has seven representatives, and ESI Financial of Caledonia, Mich., which has 25.

The QA3 brokers wanted to relocate groups because it gave leverage to them in bargaining winnings, based on employers.

QA3, which at its peak did $50 million in annual revenue, is the latest of several broker-dealers to possess closed recently. Data obtained by InvestmentNews indicate that about 24 firms turn off a year ago. Like QA3, many were associated with trying to sell Regulation N private placements that regulators consequently stated were fraudulent. That exposed the corporations to legal fees and claims from investors that threatened to wash them out.

In a court filing in September, QA3 acknowledged that it had been 'facing bankruptcy' indirectly consequently of the private-placement legal claims. Its insurance carrier was sued by the firm because its coverage was capped by it for all those claims at $1 million. QA3 maintained that the plan promised coverage for up to $7.5 million.

Last month, the firm was struck with yet another severe setback when it lost a million arbitration award to an elderly couple who invested in real estate offers that went bust.

Because of this of QA3's issues, many of its agents had made contingency plans in the case that the firm shut down.

QA3 specialist John Jastremski, who is moving to FSC, recognized he had considered six broker-dealers in the last few months and was willing to make a move fourteen days before QA3 technically said it was closing.

The greatest reason QA3 repetitions have been drawn to FSC and Securities Service Network is the economic security of the organizations, said brokers and executives involved in the movements.

'Representatives are drawn to [Securities Services Network] because of our security --- 28 years of knowledge --- and our powerful cash position,' Wade Wilkinson, the firm's leader, said in a record.

Mark Schlafly, FSC's CEO, said his firm has no debt and has extra internet capital.'Financially, our firm is sound,' he said.

Mr. Jastremski, who caused an independent employer to make the change, declined to comment in regards to the payout and upfront money FSC offered him and other experts. In comparison with other broker-dealer presents, the FSC package is 'fair,' he explained.

'There is no problem other organizations were more aggressive,' he explained.

Mr. Jastremski said FSC's security was more essential than financial rewards. 'There isn't any question that a firm's net cash was the No. 1 issue for me,' he explained.

FSC's increased reputation for financial security is really a clear transformation from the firm's prospects of very nearly two and a half years back, when it confronted questions about its financial health after the authorities bailed out its parent, AIG. More over, a purchase of the AIG broker-dealer group in August 2009 was quit hours before it was scheduled to be released.

The death of QA3 turned certain Feb. 4, when chief executive and owner Steve Wild published an e-mail saying: 'In light of the arbitration award rendered against QA3 on Jan. 14, and the fact that coverage haven't been yet provided by our errors-and-omissions carrier set forth inside our plan, [we will cease conducting business effective Feb. 11].'

Mr. Wild didn't reunite calls in the last a couple of weeks seeking review.

He's been among the most successful entrepreneurs in the independent-contractor-broker-dealer business. In 1998, he offered Securities America Inc. to American Express Co.

QA3 was among the top vendors of Regulation D personal placements in the last decade, and the Securities and Exchange Commission has charged that two of these deals, involving Medical Capital Holdings Inc. and Provident Royalties LLC, were fake.

Regulators with the Financial Sector Regulatory Authority Inc. have been watching the firm's quantities of net capital directly recently, as deficits of securities arbitration states have to be recorded in a firm's net-capital calculations. According to its 2009 audited financial report, QA3 had $118,000 in excess net capital at the conclusion of the year.