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WFP Securities, the San Diego County brokerage whose extremely dubious investments were featured in my April 20 column, has told the Financial Industry Regulatory Authority that it is shutting its doors, according to Investment News. WFP has $14 million in legal claims against it. It put $27 million of client money into MedCap, which was disciplined by the Securities and Exchange Commission and appears to have been a Ponzi-like scheme. WFP had 40 brokers. A week ago, I was told WFP had sent a memo to staffers about the closing. But I couldn't get confirmation. I called WFP and after I identified myself, the employee hung up. Lawyers who had dealt with the company couldn't get confirmation, either. There are numerous arbitration claims against WFP.

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Comments

ZObserver June 9, 2011 @ 8:37 a.m.

Another website reported that WFP was running lean on capital. I suspect that it just became too costly to pay the legal bills from the Finra arbitrations and now the attack from BNYM--MedCap's trustee. WFP had a clean record with FINRA in recent times. I wonder went wrong here. How did they get involved with so many bad deals?

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Don Bauder June 9, 2011 @ 11:58 a.m.

It's my understanding that these deals that WFP was peddling to its customers offered large sales commissions. That's one factor, in all probability. Best, Don Bauder

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ZObserver June 9, 2011 @ 12:48 p.m.

Is your argument that these deals such as MedCap, Provident, and Desert Capital offered "bigger" commissions? I don't think that is true.

Plenty of deals offer big compensation, and some brokers choose not to sell them anyway. Money is just one piece of the puzzle.

The RegD offering companies usually have powerful and persuasive marketeers who distribute perks and parties and awards for who can sell the most. It's beyond just the commission paid. You might take note of the bank trustee lawsuits noting MedCap parties that were held for certain brokers at the Ritz in LasVegas....in the interest of "due diligence."

In any event, somebody at WFP gave the deals the go ahead, for reasons not yet explained.

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Don Bauder June 9, 2011 @ 9:47 p.m.

Some involved in arbitrations against WFP state that high broker commissions were a motivating factor. Parties may have been a factor, too. Best, Don Bauder

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