Trustee OKs W.S. Clearing Transfer
The court-appointed trustee handling the liquidation of failed Glendale brokerage W.S. Clearing Inc. has reached a tentative agreement to transfer most of the accounts to J.B. Oxford & Co., a controversial Beverly Hills-based discount brokerage.
Isaac Pachulski, attorney for the trustee firm of Stutman, Treister & Glatt, said Wednesday that J.B. Oxford will take the bulk of W.S. Clearing’s 15,000 accounts, pending documentation and Bankruptcy Court approval.
W.S. Clearing, which processed trades for 18 small brokerages nationwide, failed March 6 after its capital evaporated because of losses incurred in securities dealings with one of its client brokerages.
But the choice of J.B. Oxford as the new trade processor for most of W.S. Clearing’s accounts has upset some of the client brokerages, because of J.B. Oxford’s relationship with Irving Kott, a convicted stock swindler.
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Kott was convicted of stock fraud in Canada in 1976 and has since had run-ins with securities regulators in Europe.
Stephen Rubenstein, J.B. Oxford’s chief executive, couldn’t be reached for comment Wednesday, but his public-relations firm said Kott’s relationship with J.B. Oxford has been in a consulting role and that Kott is neither an officer, director nor shareholder of the firm.
Rubenstein in the past has insisted that J.B. Oxford is a fast-growing discount brokerage with a clean reputation.
In an ironic twist, J.B. Oxford has distant links to William Sedkey Saydein, the owner of W.S. Clearing, who has been sued by the Securities and Exchange Commission in connection with the firm’s failure.
Sources say Saydein in the early 1990s was connected with Otra Securities Group, a trade processor that in 1992 became RKS Financial Group. RKS was in turn the parent of penny-stock brokerage Reynolds Kendrick Stratton, which RKS shut down in 1994 in the wake of lawsuits connected with its stock-trading activities.
RKS in 1994 then became J.B. Oxford Holdings, parent of J.B. Oxford & Co.
Because of J.B. Oxford’s history, at least two of W.S. Clearing’s client brokerages have privately expressed reservations about the trustee’s decision to award most of W.S. Clearing’s accounts to J.B. Oxford.
But Pachulski said the trustee’s mission under guidelines of the Securities Investor Protection Corp., which insures brokerage accounts up to $500,000 per customer, is to “get the customers’ accounts unfrozen” as quickly as possible.
He noted that J.B. Oxford “has been around this block before” because it was the winning bidder for accounts of Adler Coleman Clearing, a large New York trade processor that failed in 1995.
Pachulski also noted that although J.B. Oxford would take over most of the W.S. Clearing accounts initially, client brokerages or individual customers then would be free to move those accounts if they choose.
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Meanwhile, Pachulski said accounts of two of W.S. Clearing’s 18 client brokerages--Cygnet Securities and Euro-Atlantic Securities--will remain frozen, at least for now.
The Securities and Exchange Commission is believed to be investigating the roles of Cygnet and Euro-Atlantic in W.S. Clearing’s failure.
