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Important Notice
UPDATE FROM RECEIVER
July 23, 2008
The Receiver continues to work with clearing firms that have existing or new clearing relationships with North American Clearing correspondent broker-dealers in order to transfer customer accounts to those clearing firms. Since our last update we have transferred an additional twelve correspondents and we are in discussion with additional correspondents about moving their accounts. With respect to the JW Richards customer accounts, the Receiver has been provided several proposals for the transfer of these accounts, but the completion of the transfer has been frustrated by either the correspondents' inability to get approval from its clearing firm or approval from the regulators. As a result, these accounts have not yet been transferred.
On May 27, 2008, the date the Receiver was named, NACI had approximately 15,000 customer accounts with total equity of approximately $280,000,000. Since that date the Receiver has transferred out approximately 11,000 customer accounts of thirty-one (31) correspondents with total equity of approximately $227,000,000.
For the correspondents, the Receiver plans to send 50% of the balance in its PAIB accounts, by the end of this week.
Please do not contact the Receiver regarding the transfer of customer accounts. All inquiries should be directed to the customer's broker-dealer.
Peter J. Anderson
Court Appointed Receiver over NACI
UPDATE FROM RECEIVER
June 27, 2008
The Receiver continues to work with clearing firms that have existing or new clearing relationships with North American Clearing correspondent broker-dealers in order to transfer customer accounts to those clearing firms. As a result of this work, we have successfully transferred two correspondent broker-dealers on Wednesday. We are scheduled to begin transferring additional correspondent broker-dealers on Tuesday, July 1, 2008. The Receiver has also requested proposals to transfer the customer accounts of North American Clearings' retail division, JW Richards, to another broker-dealer Although progress continues to be made, there can be no assurance that the process will be successful for every correspondent and customer transfer.
To the extent that correspondent broker-dealers have not selected a clearing firm, we would encourage them to do so as soon as possible.
Please do not contact the Receiver regarding the transfer of customer accounts. All inquiries should be directed to the customer's broker-dealer.
Peter J. Anderson
Court Appointed Receiver over NACI
UPDATE FROM RECEIVER
June 19, 2008
Presently, the Receiver and staff of North American Clearing ("NACI") have transferred customer accounts of 17 correspondent broker-dealers to three different clearing firms. These transfers have resulted in the movement of 5,509 customer accounts with a securities market value of $190.5 million. The Receiver anticipates transferring additional customer accounts to another clearing firm next week. Although progress continues to be made, there can be no assurance that the process will continue to be successful for every correspondent or customer.
Customer accounts of JW Richards, the retail division of NACI, have not yet been transferred.
If correspondent broker-dealers have not contacted the Receiver regarding their plans to transfer customer accounts to another clearing firm, they should do so immediately.
Customers should not contact the Receiver regarding the transfer of their accounts. All inquiries should be directed to the customer's broker-dealer.
Peter J. Anderson
Court Appointed Receiver over NACI
UPDATE FROM RECEIVER
June 13, 2008
The Receiver continues to work with clearing firms that have existing or new clearing relationships with North American Clearing correspondent broker-dealers in order to transfer customer accounts to those clearing firms. As a result of this work, we have successfully transferred three correspondent broker-dealers today. We are scheduled to begin transferring six more correspondent broker-dealers on Monday, June 16, 2008. The Receiver is hopeful that more correspondent broker-dealers and accounts will be transferred next week. Although progress continues to be made, there can be no assurance that the process will be successful for every correspondent and customer transfer.
To the extent that correspondent broker-dealers have not selected a clearing firm, we would encourage them to do so as soon as possible.
Please do not contact the Receiver regarding the transfer of customer accounts. All inquiries should be directed to the customer's broker-dealer.
Peter J. Anderson
Court Appointed Receiver over NACI
UPDATE FROM RECEIVER
June 11, 2008
The Receiver continues to work with clearing firms that have existing or new clearing relationships with North American Clearing correspondent broker-dealers in order to transfer customer accounts to those clearing firms. The Receiver is hopeful that some customer accounts will be able to be transferred on Friday, June 13th and Monday, June 16th. Although progress continues to be made, there can be no assurance that the process will be successful.
The Receiver continues to encourage correspondent broker-dealers to arrange new clearing relationships as soon as possible. Correspondents that have not arranged new clearing relationships may wish to contact the following clearing firms who are currently working with the Receiver: First Southwest Company, Legent Clearing, and Sterne Agee.
Please do not contact the Receiver regarding the transfer of customer accounts. All inquiries should be directed to the customer's broker-dealer.
Peter J. Anderson
Court Appointed Receiver over NACI
UPDATE FROM RECEIVER
June 6, 2008
In preparation for the transfer of client accounts to other clearing firms, clients should cease writing checks and/or utilizing debit cards tied to their accounts at NACI effective the end of day Monday, June 9, 2008.
UPDATE FROM RECEIVER
JUNE 5, 2008
CONVERSION FILES SENT TO NEW CLEARING FIRMS
Efforts to move correspondent broker-dealers along with their customer accounts have progressed. As of close of business this evening, a total of twelve (12) correspondents' conversion files have been sent to the following clearing firms: Legent (6); First Southwest Company (2); Sterne Agee Leech (3); and Penson (1). The conversion files will be utilized by the clearing firms to set up new accounts for customers of the correspondent broker-dealers who have signed clearing agreements. The actual transfer of customer securities and funds will follow after the clearing firms notify the Receiver and NACI that they are ready to receive the account positions. Securities currently on pledge for margin debt will be released by the lending institution concurrent with satisfaction of the margin debt. It is the hope that the actual movement of customer accounts will begin next week. Although progress is being made, there can be no assurance that the process will be successful.
To the extent that correspondent broker-dealers have not selected a clearing firm, we would encourage them to do so as soon as possible. The four firms mentioned above remain willing to consider additional firms. Raymond James & Associates has reconsidered its willingness to participate and will not accept new correspondents currently with NACI.
Please do not contact the Receiver to check on the status of the transfer of accounts; rather, direct your inquiries to your broker-dealer.
STOPPAGE OF CHECK PAYMENT
In order to facilitate the timely transfer of customer funds and securities, all outstanding checks issued to clients that have not been honored to date have had "stop payment" orders issued. Client accounts are being credited the amount of any check previously issued.
Peter J. Anderson
Court Appointed Receiver over NACI
UPDATE FROM RECEIVER
June 4, 2008
Efforts to move the entire block of accounts to one clearing firm have not been successful. After two days of due diligence, the proposed replacement clearing firm declined to move forward due to a number of operational concerns.
Nevertheless, with the cooperation from FINRA, the SEC and DTC, we are going to attempt to move correspondent relationships in blocks to a number of clearing firms willing to accept the relationships and the accounts. The process began this morning. At present, First Southwest Company and Legent Clearing are working with the Receiver to arrange for the transfer of accounts at certain correspondent firms. The Receiver has been contacted by several other clearing firms who my also be interested in moving accounts for correspondents. If correspondents have not selected a firm, both First Southwest and Legent have indicated each will be willing to discuss a relationship. Raymond James & Associates has similarly indicated an interest.
Further, cooperation from North American's lenders (where securities are pledged to secure margin loans) will be essential to facilitate an orderly and expeditious transfer. Although we are hopeful that this process will enable us to expeditiously move relationships from North American to other clearing brokers, the process is time consuming, labor intensive and there can be no assurance that it will be successful.
We continue to pursue these alternatives to forestall a SIPC liquidation, which if necessary, will result in further delay to customers seeking access to funds and securities. Your patience is appreciated.
Peter J. Anderson
Court-Appointed Receiver Over NACI
Update From Receiver
June 3, 2008
Hundreds of calls and emails have been received from correspondent broker-dealers of North American Clearing, Inc. ("NACI"), and their individual clients. The questions surround the following:
1. The safety of customer funds and securities given the allegations raised in the federal court action filed on May 27, 2008, by the Securities and Exchange Commission against NACI and its principals in its efforts to obtain a Temporary Restraining Order ("TRO") and the appointment of the Receiver;
2. The customers' ability to trade their accounts;
3. The customers' ability to close their accounts and/or withdraw their funds;
4. The customers' ability to cash/deposit checks previously received from NACI;
5. The status of correspondent broker-dealer security deposits; and
6. The status of commissions earned by brokers which have not yet been paid.
EFFORTS BY RECEIVER SINCE APPOINTMENT
Since May 27, 2008, the Receiver has been working on the following: 1) to secure the assets of NACI for the benefit of customers; 2) to ascertain NACI's financial capital and reserve status to determine if NACI is in compliance with SEC and FINRA Rules which would permit NACI to reopen for business; 3) to address unreconciled discrepancies in customer accounts; and, if necessary, 4) to arrange for a transition of the customer accounts to another clearing firm.
Since his appointment by the Court, the Receiver has had multiple calls with the SEC, FINRA, SIPC, DTC and NACI's banks relative to NACI's status in order to protect customer funds and securities.
CAPITAL POSITION OF THE FIRM AND NO TRADING ALLOWED
A preliminary analysis of NACI's net capital position reveals the Firm is under-capitalized and cannot conduct business. Similarly, there is not adequate customer reserve being maintained. Again, as a result, NACI cannot do business as a securities clearing firm. On May 23, 2008, before the Receiver was appointed, DTC, due to its concerns, stopped accepting transaction orders, including those to sell securities in customers' accounts. However, option "closing" transactions have been permitted to minimize customers' exposure, with proceeds remaining in the account as those positions all cleared away from DTC.
CHECKS WRITTEN AND NOT HONORED
Because there were insufficient funds in the NACI operating account to cover all checks issued, and so as to treat all clients equitably, checks presented for payment have not/are not being honored until funds are available. Checks drawn on a client's account but not sent to the client have been voided and the debit entries in the client's account have been/are being reversed. When funds are available to cover outstanding checks, a notice will be posted to this site.
CHECK WRITING PRIVILEGES
Individuals who currently have check writing privileges on their account may continue to write checks, provided that they have sufficient money market shares to cover the check. NACI is unable to process any new requests for check writing privileges at this time. Any changes to this policy will be posted to this site.
EFFORTS TO FIND REPLACEMENT CLEARING FIRM
The Receiver spoke with firms last week to ascertain interest in taking over the clearing function, and under what circumstances. A few indicated only partial interest, if any at all, meaning the firm might be willing to take over some of the accounts, but did not want responsibility for all. One national clearing firm ("Replacement Firm"), which has indicated a willingness to assist in transitioning all of the accounts, subject to the completion of satisfactory due diligence, is on-site at NACI's offices doing its review. A decision by the Replacement Firm is expected in the next few days.
If the Replacement Firm agrees to go forward, the accounts of NACI correspondent broker-dealers and their customers will move to it. Correspondent broker-dealers then could choose to remain with the Replacement Firm or move their clients' accounts via ACAT to another clearing firm. However, the clients would have access to their funds/securities at the Replacement Firm until that transfer would occur. As to a return of correspondent broker-dealer security deposits or commissions owed to brokers, those must wait until the client accounts are fully moved to the Replacement Firm or an alternative arrangement can found.
The efforts of the Receiver are to obviate a SIPC liquidation, if possible. A SIPC liquidation necessarily involves additional time and delay for resolution, but would ultimately ensure return of client funds. We are hopeful of achieving the same result on a quicker time frame.
As additional information becomes available, we will post it on the website. Thank you for your patience. Your frustrations in light of the circumstances are understandable.
Peter J. Anderson
Court-Appointed Receiver over NACI
Update From Receiver
June 2, 2008
Hundreds of calls and emails have been received from correspondent broker-dealers of North American Clearing, Inc. ("NACI"), and their individual clients.
The questions surround the following:
1. The safety of customer funds and securities given the allegations raised in federal court action filed on May 27, 2008, by the Securities and Exchange Commission against NACI and its principals in its efforts to obtain a Temporary Restraining Order ("TRO") and the appointment of the Receiver;
2. The customers' ability to trade their accounts;
3. The customers' ability to close their accounts and/or withdraw their funds;
4. The customers' ability to cash/deposit checks previously received from NACI;
5. The status of correspondent broker-dealer security deposits; and
6. The status of commissions earned by brokers which have not yet been paid.
EFFORTS BY RECEIVER SINCE APPOINTMENT
Since May 27, 2008, the Receiver has been working systematically: 1) to secure the assets of NACI for the benefit of customers; 2) to ascertain NACI's financial capital and reserve status to determine if NACI is in compliance with SEC and FINRA Rules which would permit NACI to reopen for business; 3) to address unreconciled discrepancies in customer accounts; and, if necessary, 4) to arrange for a transition of the customer accounts from the Depository Trust Company ("DTC") to another clearing firm.
Since his appointment by the Court, the Receiver has had multiple calls with the SEC, FINRA, SIPC, DTC and NACI's banks relative to NACI's status in order to protect customer funds and securities.
CAPITAL POSITION OF THE FIRM AND NO TRADING ALLOWED
A preliminary analysis of NACI's net capital position reveals the Firm is under-capitalized and cannot conduct business. Similarly, there is not adequate customer reserve being maintained. Again, as a result, NACI cannot do business as a securities clearing firm. On May 23, 2008, before the Receiver was appointed, DTC, due to its concerns, stopped accepting transaction orders, including those to sell securities in customers' accounts. However, option "closing" transactions have been permitted to minimize customers' exposure, with proceeds remaining in the account as those positions all cleared away from DTC.
CHECKS WRITTEN AND NOT HONORED
Because there were insufficient funds in the NACI operating account to cover all checks issues, and so as to treat all clients equitably, checks presented for payment have not/are not being honored until funds are available. Checks drawn on a client's account but not sent to the client have been voided and the debit entries in the client's account have been/are being reversed.
CHECKS WRITTEN ON MUTUAL FUND ACCOUNTS AWAY FROM NACI
Clients who have accounts at mutual fund companies away from NACI may continue to utilize check the writing privileges which they maintain at the fund companies, so long as they do not overdraw their accounts. This practice may only be utilized by clients on accounts not maintained by NACI.
EFFORTS TO FIND REPLACEMENT CLEARING FIRM
The Receiver spoke with firms last week to ascertain interest in taking over the clearing function from DTC, and under what circumstances. A few indicated only partial interest, if any at all, meaning the firm might be willing to take over some of the accounts, but did not want responsibility for all. One national clearing firm ("Replacement Firm"), which has indicated a willingness to assist in transitioning all of the accounts, subject to the completion of satisfactory due diligence, is on-site at NACI's offices doing its review. A decision by the Replacement Firm is expected in the next few days.
If the Replacement Firm agrees to go forward, the accounts of NACI correspondent broker-dealers and their customers will move to it from DTC. Correspondent broker-dealers then could choose to remain with the Replacement Firm or move their clients' accounts via ACAT to another clearing firm. However, the clients would have access to their funds/securities at the Replacement Firm until that transfer would occur. As to a return of correspondent broker-dealer security deposits or commissions owed to brokers, those must wait until the client accounts are fully moved to the Replacement Firm or an alternative arrangement can be agreed to with DTC.
The efforts of the Receiver are to obviate a SIPC liquidation, if possible. A SIPC liquidation necessarily involves additional time and delay for resolution, but would ultimately ensure return of client funds. We are hopeful of achieving the same result on a quicker time frame.
As additional information becomes available, we will post it on the website. Thank you for your patience. Your frustrations in light of the circumstances are understandable.
Peter J. Anderson
Court-Appointed Receiver for NACI
May 29, 2008
To Our Valued Correspondents:
EFFECTIVE IMMEDIATELY:
If you or your clients have received checks for payment from NACI, please do not deposit them for payment into your bank at this time as they will not be honored. Checks already deposited that have not cleared will also not be honored. We will advise within the next few days when the checks may be deposited for payment. We apologize for this inconvenience.
Peter J. Anderson
Receiver for North American Clearing, Inc.
May 28, 2008
Please be advised that North American Clearing Inc. (NACI) will begin to accept certain Buy to Close and Sell to Close Option Orders only, subject to pre-approval.
Option orders may only be entered through our trading desk and trading away will not be allowed at this time. We will not allow any option orders that increase margin
risk/requirements. No other types of orders will be accepted under any circumstances. Also, please note that funds from the proceeds of any option order or otherwise will
not be released from any account at this time.
Additionally, NACI is unable to accommodate Automated Customer Account Transfers (ACATs) at this time.
As information becomes available, it will be posted to www.northamericanclearing.com and forwarded by blast email. If you have any questions, please contact the
North American Clearing Inc. Hotline at 404.407.5115 (NACI.hotline@sutherland.com) or Peter J. Anderson, Esq. (peter.anderson@sutherland.com).
May 27, 2008
On May 27th, 2008 the United States District Court for the Middle District of Florida appointed Peter J. Anderson Esq. Receiver over North American Clearing, Inc ("NACI"). As Receiver, Mr. Anderson has the authority and power to administer and manage the business affairs, funds, assets,
choses in action and any other property of NACI, marshal and safeguard all of the assets of NACI and take whatever actions are necessary for the protection of the investors.
The Middle District also entered a temporary restraining order enjoining NACI from further violations of the Federal Securities Laws.
In a Related matter, the Securities and Exchange Commission filed a lawsuit against NACI and some of its officers.
The Receiver is currently taking steps to assess the situation and attempt to determine whether customers' funds and securities are adequately protected and whether NACI is a going concern. As more information becomes available, the Reciever will update this website.
The Receiver reminds investors that their accounts are insured by SIPC up to $500,000 including $100,000 claim for cash.
In addition, NACI has excess SIPC insurance up to $30,000,000 in the Aggregate with a per customer limit of $7,500,000.