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Robert Trigaux

Report: Regulators descend on Tampa's GunnAllen Financial in wake of John Sykes' exit



JohnsykesUT Wake up and good morning. Where is John Sykes and what are his intentions with Tampa brokerage firm GunnAllen? Inquiring minds want to know and, apparently so do industry regulators.

Sykes -- founder of Tampa's Sykes Enterprises, area philanthropist and most recently the chairman of GunnAllen Holdings Inc. -- resigned along with others from the board of directors on Dec. 2 from GunnAllen Financial Inc., the broker-dealer firm he and and an investor team took control of last year. Sykes had stepped in earlier this year as CEO. He did not return an earlier call to his home from the St. Petersburg Times. And there's been no official response from GunnAllen.

Bottom line? It all makes for a dubious strategy for a firm in an industry that must rely on investor confidence for its very existence. GunnAllen's already had its share of notoriety as one one of the fastest-growing independent-contractor firms in the nation. The growth came with a high price, as the firm recruited a sizable number of brokers with a history of compliance problems. There also is some history of litigation over alleged fraud in some securities sold by GunnAllen.

Gunnallenlogo Now comes the industry regulator known as FINRA -- Financial Industry Regulatory Authority Inc. -- whose officials last week reportedly were trying to determine if GunnAllen has enough capital to stay in business. Reports Investment News:

"Inquiries into a firm's net capital are among the most serious in the securities business. If the Financial Industry Regulatory Authority Inc. discovers that a broker-dealer is without sufficient net capital, it will shut down that firm almost immediately."

According to Investment News, on Dec. 8 FINRA officials arrived at the Tampa headquarters of GunnAllen to determine the firm's capital position. They remained there through at least last Thursday, the publication reported, citing unnamed sources "inside and outside" the company. The story adds that while GunnAllen does not disclose its assets under management, based on the number of advisers, industry experts say regulators would want the firm to have a minimum of between $100,000 and $250,000 in net capital on reserve to stay open for business. However, net-capital calculations take into consideration much more information — including the firm's overhead and potential liabilities — than just overall size. Here is the complete story.

What we do have at this point is a non-response response to an Investment News inquiry from David Levine, an executive vice president with GunnAllen Financial:

"When there's material news about a firm, it's very standard for FINRA to check. It's consistent with their role to protect investors. We're working on options and will have updates in the near future."

Just a humble opinion, but GunnAllen might want to expedite those options and updates, and share their status with investors and the area business community. The Wall Street investing image is enough tatters already.

-- Robert Trigaux, Times Business Columnist

[Last modified: Tuesday, June 1, 2010 11:26am]


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