Penson Worldwide facing up to $25 million loss Friday October 31, 11:04 am ET Penson Worldwide could lose up to $25 million due to exposure to company that shut down DALLAS (AP) -- Shares of Penson Worldwide Inc. plunged more than 39 percent Friday after the company said it has $25 million in exposure to Evergreen Capital Partners Inc., which has ceased operations. Canada's Evergreen made a number of transactions involving listed Canadian equity securities, for which Evergreen and/or its customers have been unable to make margin calls. If Penson -- a provider of execution, clearing, custody, settlement and technology infrastructure products for financial services firms -- is unable to recover any of the $25 million, it will likely record a loss of $15.5 million, or 59 cents per share. Shares of Penson Worldwide fell $4.66 to $7.20 in morning trading, earlier hitting an all-time low of $6.58. Penson said it is working to reduce or eliminate the unsecured receivables exposure to minimize its losses. It added no other positions are affected by this exposure, and that it has ample liquidity. The company had $281 million in equity as of Sept. 30. "We are doing everything possible to learn all the facts surrounding this issue, in order to maximize the possibility of recovery, and to prevent any such issue from ever again happening," said Philip A. Pendergraft, chief executive, in a statement. Investors buy "on margin" by taking out a partial loan from a broker to make a larger investment than the investor's capital could actually cover. A margin call is triggered when the amount of actual capital an investor has falls below a certain percent of the total investment. With so many investors losing so much money in the market recently, many haven't been able to pay back those partial loans. BMO Capital Markets analyst Michael Vinciquerra, who rates Penson shares at "Outperform," said the event is "quite disappointing from our perspective, as the company has been posting excellent operating results the last couple quarters and was gradually building back investor confidence that had been lost back in mid-2007." This event has the potential to reverse that process he said. and could this be related to.... U.S., Costa Rican police raid SanJosé office in $100M fraud investigationU.S. agents and Costa Rican police yesterday raided Red Sea/Sentry Global offices in downtown San José, seizing documents in an investigation of a $100 million U.S. fraud scheme, according to wire reports.The raided offices house branches for the firms Red Sea Management, Sentry Global Trust, Sentry Global Securities and Global Financial Logistics, AFP news agency reported.The raid is in connection with an FBI sting in New York that led to the arrest of Jonathan R. Curshen, who is the Caribbean island St. Kitts and Nevis' honorary consul to Costa Rica, on fraud allegations in September. With rumor out today that a VFinance Branch manager out of Red Bank NJ was just hauled in under SEC Subpoena to discuss while others refused to testify under such subpoena.
Penson Financial Services Canada Inc., has an unsecured receivable from Evergreen Capital Partners Inc., a correspondent firm of Penson Canada
Penson clears for over 200 firms from tos to lightspeed to zeeco and on and on. If they go under matters little with sipc ins plus another clearing firm would rush in fast to take there millions of accounts
They clear for thinkorswim, where I have an account...supposedly it's safe but I am rather nervous, particularly in this environment
I don't think it will be a huge issue. If you want a recent historical look back on MJK Clearing and their bankruptcy due to bad collateral held in Genesisintermedia shares.
I think you will find that there was a litany of fraud taking place but i am not sure how that will impact some of the other accounts. Adler Colman clearing went BK over fraud through Hanover Sterling and MJK Clearing did as well but I do not believe that there was any major disturbance to the legitimate accounts.