Buffalo brokerage firm Saperston Financial Group, which hadn't accepted trades from its clients since Monday because of what it described as fraudulent international trades, reopened today after affiliating with a Chicago broker-dealer.
Saperston said it agreed today to affiliate with LaSalle St. Securities Inc., a Chicago broker-dealer that has more than $25 million in sales and more than 300 registered representatives.
Late Tuesday Saperston had arranged to link with Commonwealth Equity Services of Waltham, Mass., but this morning it struck a new deal with LaSalle.
As a result of the affiliation, Willard B. Saperston, the firm's principal, will remain in charge of the Buffalo office. But Saperston's network of 40 branch offices in more than a dozen other states now will be affiliates of LaSalle.
"It is my business in Buffalo, instead of Buffalo and all the other branches," Saperston said. "I'm now just a branch office of the home firm."
The affiliation with LaSalle allows Saperston to rebuild its net capital to the point where it now meets regulatory standards.
The firm stopped accepting trades after discovering some large Canadian trades that it describes as fraudulent. When those trades went bad, Saperston Financial was left without enough net capital to meet regulatory standards to continue operating.
Securities and Exchange Commission rules require broker-dealers to be able to cover all of their debts with liquid assets, plus have enough left over so that the surplus, or net capital, exceeds the minimums that regulators have set. The minimum net capital standards are based on the types of activities the business is involved in, or a certain percentage of the firm's total debt.
With Saperston Financial not taking orders for the last two days, its clients were forced to contact National Financial Services Corp., the Fidelity Brokerage Services subsidiary that clears Saperston's trades, to execute any transactions.
During that time, Saperston emphasized that its clients accounts were not in jeopardy because the Securities Investor Protection Corp. protects customers against a brokerage failure for up to $500,000 in securities and $100,000 in cash. On top of that, Saperston clients also are covered by a separate $99.5 million policy maintained by National Financial Services Corp.
"The crisis for the clients is over -- if there was one -- because there wasn't because of the insurance," said Saperston, who also has a weekly radio program called the "Dollar Doctor" on WWKB-AM.
Saperston said affiliating with LaSalle allows Saperston Financial to continue clearing its trades through National Financial Services, which provides continuity for clients, as well as the continued protection of the Fidelity subsidiary's insurance.
"I wanted them to have additional insurance -- and this is the biggest on the street -- for when things happen like what happened to me," Saperston said.
As a result of the deal, the Buffalo broker-dealer is changing its name to Saperston Financial Group from Saperston Financial Inc.