Skip to main content

Menu

Representing Individual, High Net Worth & Institutional Investors

Offices in Indiana and New York City

317.598.2040
212.837.7908

Home > Investor News > Capital Financial Buys Back Shares Sold to Pawn Shop

Capital Financial Buys Back Shares Sold to Pawn Shop

Broker/dealer Capital Financial Holdings has come up with a novel idea to stay financially afloat: go to a network of pawn shops for financing.

Capital Financial Holdings has signed a stock purchase agreement and promissory note with PawnMart Inc., a chain of 29 pawn shops in Georgia and Charlotte, North Carolina. As reported Jan. 25 by Investment News, the deal involves buying back some 3 million shares of outstanding Capital Financial Holdings preferred stock from PawnMart. In return, PawnMart was given a $1.3 million promissory note.

The note itself comes with a 7% interest rate, with Capital Financial Holdings agreeing to pay 24 monthly installments of $66,801.

Capital Financial Holdings is the parent company of independent broker/dealer Capital Financial Services, which was one of the top sellers of two private placements charged with fraud by the Securities and Exchange Commission (SEC) in 2009. Representatives for Capital Financial Services sold $100 million of Medical Capital Holdings private placements and about $60 million worth of preferred shares of Provident Royalties LLC.

The private placements were later targeted by regulators and, in August 2011, Capital Financial Services agreed to a $200,000 settlement with the Financial Industry Regulatory Authority (FINRA) over the doomed deals.

According to the letter of acceptance, waiver and consent to FINRA, Capital Financial Services “failed to have reasonable grounds to believe that private placements offered by Medical Capital Holdings Inc. and Provident Royalties LLC, pursuant to Regulation D, were suitable for any customer.”

The letter went on to state that Capital Financial Services “failed to conduct adequate due diligence” on the two series of private placement offerings and “to put in place a supervisory system to achieve compliance when selling the private placements.”

Following FINRA’s findings, the SEC ordered Capital Financial Services to hire an independent consultant within 60 days of Dec. 16 and to cooperate fully with the consultant’s findings.


Top of Page