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Broker-Dealer QA3 To Close This Week

Broker-dealer QA3 Financial Corp. will cease operations on Feb. 11 due to financial troubles (“B-D down: QA3 to close up shop next week,”InvestmentNews, Feb. 4, 2011). The firm’s 400 brokers were told last Friday via an evening email from CEO Steve Wild, in which Wild wrote that the Jan. 14 $1.6 million arbitration award against the company and the troubles with the firm’s insurance carrier were two deciding factors in the decision.

QA3 was one of the leading sellers of Regulation D private placements, including those offered by Medical Capital Holdings Inc and Provident Royalties LLC. (According to research byInvestmentNews, QA3 sold $32,585,000 of Provident Royalties private placements and made $6,974,450 in commissions.) In September, the firm claimed that it was on the verge of bankruptcy due to a $6.5 million dispute with its insurance carrier over the amount of coverage the firm had for claims related to the high-risk private placements.

According to the article, QA3, which has been around for 12 years and made $50 million in annual gross revenue at its peak, is one of the most significant broker-dealers to close in the past year. In 2010, dozens of firms were either forced to shut down by regulators or decided to close due to financial difficulties related to the sale of the Provident Royalties and Medical Capital private placements.

Wild has not yet commented on the future of QA3, which still faces a number of pending lawsuits and arbitration claims over the Medical Capital and Provident Royalties products.