Sigma Financial Corp., a large independent broker with close to 600 reps and advisers, is facing four arbitration claims seeking alleged damages of about $4.5 million, according to the firm’s most recent audited financial statement, called a Focus Report, that it filed with the Securities and Exchange Commission.
It’s not clear what the allegations are in the customer claims, or the nature of the claims. However, million-dollar legal claims by clients can prove onerous for independent broker-dealers like Sigma Financial that usually run on extremely tight margins.
Sigma Financial’s CEO, Jerry Rydell, did not return calls on Thursday to comment.
According to the InvestmentNews’ database of broker-dealers, Sigma Financial reported $124.3 million in total revenue in 2019, the most recent year available. The $4.5 million in potential damages is roughly 3% of that year’s total sales.
Of course, damages cited in arbitration claims are only potential figures, and investors suing a firm for $1 million could receive an arbitration award of far less, or have the claim denied entirely and get nothing.
Sigma Financial has socked away almost $652,000 in preparation for the claims, according to the Focus Report, which the firm filed in March but only became available on the SEC website this month. Sigma “has recorded a loss contingency of $651,834 in accounts payable and other liabilities for potential losses, costs associated with the defense of these customer claims, and a pending settlement,” according to the filing.
Two years ago, Sigma Planning Corp., the RIA arm of the Ann Arbor, Michigan-based broker-dealer, reached a settlement with the Securities and Exchange Commission in which the firm agreed to pay $2.5 million in fines and restitution to clients after it faced charges that it chose mutual funds for clients that provided the firm with financial benefits without disclosing its conflicts to clients.
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