Saperston Financial Group resumed taking trades from its customers Wednesday, but only after dropping its plans to affiliate with a Massachusetts broker-dealer in favor of an arrangement with another firm in Chicago.
In a move to resolve financial troubles that Saperston said were brought on when it became the victim of a fraud, the firm agreed Wednesday 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.
The deal was an abrupt about-face for Saperston, which had signed a letter of intent Tuesday afternoon to affiliate with Commonwealth Equity Services of Waltham, Mass., only to back out on Wednesday morning.
"After sleeping on it, I felt uncomfortable and found a similar firm with a more sophisticated background that was more attuned to my clients and their type of business," said Willard B. Saperston, the Saperston Financial principal. Saperston said he felt LaSalle offered better execution on fixed-income and bond trades.
"We think there are so many areas of synergy between the two of us that we can't help but be a winner on this," said Jack McDermott, who runs LaSalle.
"We have matching strengths, complementing strengths," he said. "We're both very investment business oriented in terms of being stock and bond guys first and everything else second."
Although Saperston was spreading the word about his firm's affiliation with Commonwealth on Tuesday afternoon, Commonwealth declined to confirm the move.
"It's a little premature at this point to make any announcement," Peter Wheeler, Commonwealth's president said in a brief, mid-afternoon interview Tuesday. "We're anxiously awaiting their consideration for them to join us as a broker-dealer." He then referred further questions to Saperston.
Saperston subsequently confirmed his firm's affiliation with Commonwealth in a later interview and issued a news release around 5:30 p.m. outlining the arrangement. Commonwealth executives could not be reached to comment on Saperston's announcement after it was issued.
"It wasn't until (Tuesday) night that I had second thoughts -- that I had made too hasty of a decision" to affiliate with Commonwealth, Saperston said.
This time, Saperston said the affiliation with LaSalle Street was set, with most of Saperston's brokers transferring their licenses to LaSalle on Wednesday.
Under the arrangement with LaSalle, the Buffalo broker-dealer will change its name to Saperston Financial Group from Saperston Financial Inc. The Saperston Financial offices will continue to clear trades through National Financial Services Corp., a Fidelity Brokerage Services subsidiary.
Saperston's main branch in Buffalo will affiliate with LaSalle. The other branches in its network of 40 offices in more than a dozen states will be free to affiliate with LaSalle as well.
Saperston said he will be "untitled owner" of the Saperston Financial office in Buffalo. "I'm very excited about it," he said.
Saperston was forced to scramble to find another broker-dealer to affiliate with after a customer refused to pay for trades involving a Vancouver penny stock that spiked in price last week, then tumbled. When those trades went bad, Saperston Financial was left without enough net capital to meet regulatory standards to continue operating and did not take customer orders to buy or sell stocks or bonds on Monday or Tuesday.
Broker-dealers must be able to cover all of their debts with liquid assets, plus have enough left over so the surplus, or net capital, exceeds the minimums regulators have set.