Receiver Takes Control of W.S. Clearing
A court-appointed temporary receiver for W.S. Clearing, a Glendale-based brokerage that closed its doors Thursday after running out of capital, said the firm appears to carry insurance to protect customer accounts but that he could not yet say if all investors will be made whole.
Charles D. Axelrod, the receiver, said W.S. Clearing’s accounts are covered within the limits of Securities Investor Protection Corp. insurance, and that the firm “purportedly has a Lloyd’s [of London] policy” as well.
W.S. Clearing isn’t a retail brokerage but rather acted as a trade processor for 18 mostly small retail brokerages nationwide. As such, the firm handled 15,000 investor accounts and had control of $194 million of customer assets, according to the Securities and Exchange Commission.
An SEC audit last week uncovered that W.S. Clearing’s net capital had evaporated, apparently the result of losses incurred in dealings with one or more of its brokerage clients. Also, the reserve account the firm was supposed to maintain for customers’ protection was $2.1 million below the required $5.4 million, the SEC said.
W.S. Clearing shut down on Thursday. On Friday the SEC sued the firm and its sole owner, William Sedkey Saydein, alleging that the firm tried to conceal its reserve-account deficit by misappropriating $2.7 million of cash from customers of one of the 18 client brokerages, Sunlogic Securities.
The SEC said that while Saydein insisted that Sunlogic had instructed that the $2.7 million be transferred from an Alliance Capital money market fund, Sunlogic’s chief, Robert F. Sun, said no such authorization had been given.
Saydein couldn’t be reached for comment.
Axelrod said a court hearing will be held March 17 to determine W.S. Clearing’s fate. In the meantime, he has sole access to the Glendale office and is hiring accountants to review the firm’s books, he said.
Customers’ accounts remain frozen, which last week caused turmoil in trading of some low-priced stocks that some of the 18 brokerages had pitched to customers. Among the brokerages that did business with W.S. Clearing were: Cygnet Securities; Golden Lender Financial; J&S; Securities; L.B. Saks; Pacific Continental Securities; San Clemente Securities; and Titan Asset Management.
