Independent broker-dealer QA3 Financial Corp., with 400 brokers, will close its doors this Friday, 2/11, apparently crippled by the aftermath of failed private placements.  Two of the deals - Medical Capital Holdings and Provident Royalties - face SEC fraud charges.  CEO and owner Steve Wild delivered the news to firm personnel after Friday's close.  Mr. Wild started QA3 after he sold Securities America to American Express in 1998.  According to InvestmentNews, Mr. Wild wrote in an email: 

"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."

    Beginning of the End.   In September, the firm claimed it faced bankruptcy because of a dispute with its insurance carrier over the amount of coverage that the it had for legal claims stemming from the sale of high-risk private placements.  The company said it had $7.5 million of coverage for its Reg. D offerings;  the carrier, Catlin Specialty Insurance Co., said the coverage was capped at $1 million.  In January, QA3 lost a $1.6 million arbitration award to an elderly couple who invested in real estate deals that went bust - the "straw that broke the camel's back." 

In recent weeks, Mr. Wild tried unsuccessfully to sell the firm's assets to another independent B/D.  Meanwhile, the firm faces other lawsuits and arbitrations pertaining to different failed private placements.

Should QA3, in fact, close on Friday, it would become one of the most substantial independent broker-dealers to exit the business in the past year.  At its peak, the firm generated peak annual gross revenues of $50 million.   [InvestmentNews, 2/4]