Another Broker-Dealer On The Ropes Raises New Questions About Private Placements
- Created: Tuesday, 22 November 2011 10:12
DeWaay Financial Network sold around $46 million in real estate notes from DBSI, which went under back in 2008.
It estimates that client claims on those failed instruments could cost $24 million -- about seven times as much money as it has on hand.
As a result, management has asked for a temporary injunction on the claims it already has to pay, or else it will shut down.
DBSI was not a member of SIPC and so its products were not only higher-risk than the marketing copy might have indicated, but uninsured from disasters like this.
I don't know how DeWaay sold these instruments or how much due diligence they did.
At this point, all I know is that it looks like if the clients want to recover their losses, they can't get that money out of a dead firm.
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