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Group Of Broker/Dealers Face Lawsuit Over Provident Royalties Private Placements

Forty-nine broker/dealers have been named in a lawsuit involving sales of Provident Royalties private placements. The lawsuit, which was filed June 21 by the trustee now overseeing Provident – Milo H. Segner Jr. – charges the broker/dealers of failing to uphold their fiduciary obligations when selling a series of Provident Royalties LLC private placements.

The lawsuit hopes to recover $285 million in claims and commissions from the firms named in the lawsuit. As reported June 29 by Investment News, the leading sellers of the private placements in Provident Royalties were Capital Financial Services, with $33.7 million in sales; Next Financial Group, with $33.5 million; and QA3 Financial Corp., with $32.6 million.

Investment News provides a complete list of the broker/dealers named in the lawsuit, as well as the commissions they collected.

“The commissions, fees and payments received from Provident Royalties encouraged and played a substantial role in the negligent and/or grossly negligent conduct of the broker-dealers,” according to the lawsuit.

In July 2009, the Securities and Exchange Commission (SEC) filed a fraud lawsuit against Provident Royalties and several high-ranking executives for running an alleged $485 million Ponzi scheme tied to fake oil-and-gas investments. From June 2006 to January 2009, many independent broker/dealers sold private placements in Provident to some 7,700 investors.

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