B. Riley Boca Brokers Exit Ahead of Firm's Effort to Raise Cash
B. Riley “has received interest from external parties in this business,” the company said in a statement, without elaborating. One rival, Stifel Financial Corp., has looked into a potential deal, but only for pieces of the wealth unit rather than the whole operation, according to a person with knowledge of the matter.
A bidder would focus on the most desirable parts of the wealth business or picking off top brokers who have valuable client rosters, the person said, asking not to be identified discussing private information. This could let a buyer avoid taking on any liabilities stemming from current or past disputes with customers and regulators, the person said.
Broker Choice
“An advisor wants to make his or her own choices to seek the right fit in the marketplace,” said Craig Pirtle, senior vice president at Wedbush in charge of business development. “If there is a potential acquisition on the horizon, they want to seek the right firm, the right culture, and the right capabilities to service their clients at the highest levels.”
Pirtle, whose career included nearly six years at B. Riley, said the three advisers hired by Wedbush brought about $300 million in client assets. Calls to Kestra and Prospera seeking comment weren’t returned.
B. Riley raises debt and provides analyst coverage and investment conferences for hundreds of middle-market companies that might otherwise be overlooked by big investment banks. The wealth unit includes a retail brokerage, investment management, insurance and tax services for individuals, as well as families and small businesses, among others.
The segment has grown over the years through acquisitions. In addition to buying Wunderlich in 2017, B. Riley expanded its operation by purchasing FBR & Co., with a stable of analysts and investment bankers. In 2019, B. Riley took a 45% stake in National Holdings Inc., and bought the rest in 2021, boosting its assets under management to about $30 billion.
Past Complaints
Dozens of National’s customers had complained about brokers in the years before the sale to B. Riley, leading to millions of dollars in settlements through arbitration, Finra records and B. Riley filings show.
Finra signed off on B. Riley’s purchase but later ordered National to pay $9 million for a range of missteps.
The industry’s self-regulator said this included underwriting 10 public offerings and trying to artificially influence the market for those securities and omitting information to customers in 2018 about securities involving GPB Capital Holdings LLC. Those episodes occurred before B. Riley took ownership of National.
National consented to Finra’s findings without admitting or denying the charges. Prosecutors have said GPB was a Ponzi-like fraud that put at risk more than $1.8 billion raised by broker-dealers from thousands of investors. GPB’s founder was found guilty of securities fraud in August.
“Mullen began to clean up these issues in 2017 when he took on the role as CEO,” B. Riley said in a statement. “He terminated brokers with compliance or other issues. B. Riley acquired National in 2021 and from that point accelerated efforts to strengthen the firm, which included resolving outstanding litigation.”
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