Vic Alboini’s boutique investment firm has failed in an attempt to raise capital by selling new shares to investors, leaving it unable to meet its regulatory capital requirements.
Northern Financial Corp. said Tuesday that it “has not been successful” in an effort to sell $500,000 worth of new common shares in a public offering, which was expected to close Jan. 11. The company had hoped to use the proceeds to enable its wholly owned brokerage firm Northern Securities Inc. to bolster its capital and meet its regulatory risk-adjusted capital requirements.
The company said financial staff from the Investment Industry Regulatory Organization of Canada (IIROC), which is Canada’s brokerage industry regulator, have notified enforcement staff at IIROC about the firm’s non-compliance with its capital ratios.
The notice means IIROC will investigate whether to launch disciplinary action against the firm or its principals for being offside on its capital ratios.
In December, IIROC ordered Northern Securities to transfer all its retail and institutional client accounts to other dealers and get out of the business of managing client money. The order left the firm restricted only to doing merger and acquisition deals, providing research and working in corporate finance.
IIROC made the order after Northern lost its business agreement with its carrying broker, Penson Financial Services Canada, and was unable to find a new carrying broker.
Penson, which announced it was closing its Canadian operations, provided clearing, settlement and custodial services to smaller brokerage firms.
Northern Securities said Tuesday that it cannot feasibly carry on a corporate finance business while facing a restriction on selling securities, so has filed an application with IIROC for approval to sell securities in financings that are exempt from a prospectus requirement, including offerings to wealthy or “accredited” investors.
“The ability of carrying on this business is seriously and substantially limited due to the sales prohibition,” the company said in its release Tuesday.
Corporate finance and advisory revenue has historically accounted for 20 to 40 per cent of annual revenue, Northern Securities said.
Mr. Alboini, who is CEO of Northern Financial, has been an active participant in many small merger and takeover deals in Canada, and has become an outspoken critic of technology firm Research In Motion Ltd.
In a November ruling, IIROC suspended him for two years and permanently banned him from being the “ultimate designated person” at a brokerage firm for failing to comply with several industry trading rules.
He has appealed that decision to the Ontario Securities Commission, which has put the sanctions on hold pending the appeal hearing in February.