Broker-Dealer/RIA Formation

A group of five brokers/managers and their administrative staff from a respected wirehouse became disenchanted with their firm after it was acquired by a major foreign entity. They decided to start their own broker-dealer and SEC registered investment advisor in order to return to the investment methods and philosophies of their old firm.

1st BridgeHouse was hired by this Texas group to obtain FINRA approval for a broker-dealer and to obtain SEC approval for a registered investment advisor. These processes required confidentiality, since the principals of the proposed new firms were still employed by the foreign entity when the initial applications were filed.

1st BridgeHouse handled both of the filings and acted as the firm’s liaison with FINRA. We wrote the appropriate manuals and disclosure documents, provided the proper documentation, and advised the principals on a myriad of issues ranging from the mundane (recommending appropriate logs and order tickets), to the complex (assisting in the negotiation of the clearing firm contract), to the expedient (preparing the principals for the Pre-membership Interview with FINRA and temporarily acting as the firm’s Financial and Operations Principal).

After the entities were approved by their respective regulators, the firms hired 1st BridgeHouse to provide ongoing compliance and regulatory advice. In this regard, we have worked with the firms in a number of areas, including writing a Business Continuity Plan, creating procedures for the new Supervisory Control requirements, providing advice on the formation of an Irish-based mutual fund, reviewing FOCUS Reports, preparing them for both FINRA and SEC audits, and giving assistance in responding to those audits.

The firms began operations in 2004 and today have combined assets under management/control of over $500 million.

Due Diligence Project

Case Study 2 involves a broker-dealer based in a major metropolitan area in the Upper Midwest that provides brokerage services to dozens of banks and other financial institutions, serving over 100 registered representatives across the country. It has an excellent and well deserved reputation for taking new and/or struggling bank programs and making them successful. The firm was acquired (along with another bank) by a significant financial institution based in the same area. We first became aware of the broker-dealer when its pending acquisition was announced. Although the purchaser was well-versed in banking due diligence, it had no experience in conducting proper due diligence of a broker-dealer. The acquirer hired 1st BridgeHouse to conduct a compliance and operational due diligence of the broker-dealer. Speed was of the essence, since the merger was scheduled to close in a matter of weeks.

1st BridgeHouse was able to schedule the project quickly, conduct the due diligence efficiently, and write the report, all within the time frame allotted. The President of the broker-dealer stated that we were more thorough than any regulator and that we gave his firm many helpful suggestions during the process. After the acquisition, the broker-dealer has hired 1st BridgeHouse on other projects relating to compliance, procedures, and issues of growth.