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Another Broker/Dealer Shutters

Omni Brokerage Inc. is the latest broker/dealer to go out of business. The Utah-based B-D, which is facing $2.8 million in claims for selling DBSI tenant-in-common (TICs) exchanges, says its shuttering is tied to lack of business, not legal issues.

However, Omni is at the center of several arbitration claims filed by investors with the Financial Industry Regulatory Authority (FINRA) over failed DBSI deals. As reported in a June 2 story by Investment News, a lawsuit filed by DBSI trustee James Zazzali says Omni generated $271,000 in commissions from pitching the DBSI TICs.

Omni joins dozens of other broker/dealers that sold failed private placements issued by Medical Capital Holdings Inc. and Provident Royalties LLC and, as a result, have gone out of business. As of March 2010, a total of 16 broker/dealers have closed their doors.

DBSI was a leading packager of tenant-in-common exchanges. TICs are a form of real estate ownership in which two or more parties have a fractional interest in a property.

DBSI began to default on its payments to investors in 2008. The firm later filed for Chapter 11 bankruptcy protection.

In December 2010, the trustee for the DBSI bankruptcy sued more than 90 broker/dealers that sold the failed product, including Omni.

According to the Investment News story, the DBSI trustee claims that TICs from DBSI were actually part of a $600 million Ponzi scheme. A similar allegation has been waged against Medical Capital Holdings and Provident Royalties.

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