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QA3 Financial To Close This Week?

It’s been a tumultuous year for independent broker/dealers, with many closing their doors over private-placement deals gone bad, rising legal costs, and capital violations. Now, it appears QA3 Financial Corp. has become the latest B-D to bite the dust.

With bankruptcy looming, as well as a possible net capital violation, QA3 Financial told 400 reps last week of its impending future plans. According to a Feb. 4 story by Investment News, Steve Wild, QA3’s owner and CEO, delivered the news via an email approximately one hour after the market closed.

“In light of the arbitration award rendered against QA3 on January 14, and the fact that our errors and omissions carrier has not yet provided coverage set forth in our policy, we have made the difficult decision to cease conducting business as a broker-dealer effective as the close of business on February 11,” the email read.

QA3’s exit from the brokerage business follows at least two dozen firms that have either shut down or were forced to close their doors in the past year.

QA3’s financial issues have been in the making for some time. The broker/dealer was a big seller of private placements in Medical Capital Holdings and Provident Royalties LLC – both of which face fraud charges from the Securities and Exchange Commission (SEC).

In September, bankruptcy rumors began to circulate because of a dispute between QA3 and its insurance carrier and the amount of coverage that was needed for the growing number of legal claims from investors over sales of high-risk private placements.

Last month, a Financial Industry Regulatory Authority (FINRA) arbitration panel ruled in favor of an elderly couple who had a filed a claim against QA3 for real estate deals that had soured. The arbitration award was for $1.6 million.

If you have a story to tell involving private placement deals or independent broker/dealers issues, please contact a member of the securities fraud team at Maddox, Hargett & Caruso.

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