For the third year in a row, Purshe Kaplan Sterling Investments Inc., a boutique broker-dealer that works with brokers leaving Wall Street to set up their own registered investment advisers, is paying a steep award to clients who sued the firm.
Purshe Kaplan struck a $1.6 million settlement with 50 clients on March 1 who had sued the firm in arbitration run by the Financial Industry Regulatory Authority Inc., according to the company’s annual audited financial statement, known as a Focus report, which it filed last Thursday with the Securities and Exchange Commission.
Purshe Kaplan has a recent history of large legal settlements with clients. Such settlements and awards are also noteworthy as many independent broker-dealers operate on tight margins; in 2017, the most recent year it reported net income, the firm posted $183 in profit, according to that year’s Focus report.
Since 2017, the firm has been on the hook for $16 million in legal settlements and restitution to clients, with the lion’s share stemming from one broker’s sale of alternative investments to a Native American tribe in Michigan.
No reason for the $1.6 million settlement with investors was given, but Purshe Kaplan was one of the 60 or so firms that sold private placements of GPB Capital, whose senior officials were recently charged with fraud by the FBI. Broker-dealers that sold the high-risk GPB private placements are sure to face investors claims.
J. Peter Purcell, Purshe Kaplan’s CEO, in a phone interview on Monday said the settlement was not related to GPB claims and the firm had minimal exposure to the matter. “It’s confidential so I can’t go into details,” he said. “But many firms are alarmed by recent frivolous lawsuits and we’ve hired litigators internally to represent the firm going forward.”
The firm’s owner, Wentworth Management Services, is paying $1.2 million with its insurer paying the remaining $400,000, according to the Focus report.
2021 is the third straight year that Purshe Kaplan, which is based in Albany, New York, is reporting a million-dollar-plus settlement.
In 2020, the firm paid $1.5 million to the pension plan of the St. Jude Heritage Medical Group in California. The St. Jude claim was focused on an outside business activity of James M. Casey, the broker, that was not disclosed to Purshe Kaplan Sterling, the company said at the time.
Purshe Kaplan in 2019 said it paid $9.5 million related to the sale of alternative investments to a Native American tribe in Michigan.
And in 2017, Purshe Kaplan reached a settlement with Finra in which it agreed to pay $3.4 million in restitution to the tribe as well as another $750,000 for failing to supervise a broker who made the alternative investment sales between 2011 and 2015.
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