Revenge of blown-up Reg D investors?

July 2, 2010 | By Jim Kim

Recall that the SEC (SEC news) charged Provident Royalties and its founders and some related businesses with fraud (fraud news) last summer. Unfortunately, prior to that, Provident was able to place $485 million of private placements through dozens of small broker-dealers. That ignited a storm of litigation.

According to Investment News, the liquidating trustee, in a complaint against 49 broker-dealers, alleged that they "failed miserably in upholding their fiduciary obligations" when selling the series of Provident Royalties private placements. In total, the lawsuit lists 61 firms that sold the securities, which wiped out hundreds of millions of dollars.

But 12 firms that sold the securities are now out of business. Two of the most notable entries on the list are GunnAllen Financial and Okoboji Financial Services, two fairly well-known firms in their regions.

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