Post by cxgllc on May 9, 2019 22:26:52 GMT 10
THREE FACTORS TO CONSIDER WHEN PURCHASING A BROKER-DEALER
1. Every FINRA Member Has a Complicated History: Purchasers should always realize that the acquired firm has had a life and a regulatory history.
They should make sure that they are absolutely indemnified from any future liabilities, lawsuits and regulatory actions that could be a result of the prior ownerships management.
I would recommend a purchaser drive the indemnification directly down to the entities and individuals that are listed as direct and indirect owners of the firm prior to acquisition, as well as any court-appointed trustee that may be involved.
2. Know What You Are Buying: Understanding clearing agreements and other key contracts is all important. Purchasers should make sure that any clearing or other key contracts that will have impact on the purchaser’s business activities will remain intact after the transition. If they do not remain intact, the firm’s ability to transact business can be negatively impacted.
3. Understand What Commitments to FINRA You Are Assuming: Regarding any trade-offs in the purchase of a FINRA membership, purchasers should ensure that the FINRA membership assessment is addressed during the negotiation of the transaction. FINRA calculates its membership assessment based on a look-back to the prior year’s qualifying revenues.
Financial Services Compliance | Hire series 24 principal
1. Every FINRA Member Has a Complicated History: Purchasers should always realize that the acquired firm has had a life and a regulatory history.
They should make sure that they are absolutely indemnified from any future liabilities, lawsuits and regulatory actions that could be a result of the prior ownerships management.
I would recommend a purchaser drive the indemnification directly down to the entities and individuals that are listed as direct and indirect owners of the firm prior to acquisition, as well as any court-appointed trustee that may be involved.
2. Know What You Are Buying: Understanding clearing agreements and other key contracts is all important. Purchasers should make sure that any clearing or other key contracts that will have impact on the purchaser’s business activities will remain intact after the transition. If they do not remain intact, the firm’s ability to transact business can be negatively impacted.
3. Understand What Commitments to FINRA You Are Assuming: Regarding any trade-offs in the purchase of a FINRA membership, purchasers should ensure that the FINRA membership assessment is addressed during the negotiation of the transaction. FINRA calculates its membership assessment based on a look-back to the prior year’s qualifying revenues.
Financial Services Compliance | Hire series 24 principal