Northern Financial Corp. (TSXV:NFC) reports that its proposed financing has failed, leaving its brokerage subsidiary short of capital.
Northern Financial said Tuesday that its proposed $500,000 common share financing, “has not been successful to date”, and it notes that the company’s insiders are limited to participating in the proposed deal to a maximum of 25%. At the same time, the business of the firm’s brokerage subsidiary, Northern Securities Inc., (NSI) is severely constrained.
Last year, as part of an agreement with the Investment Industry Regulatory Organization of Canada (IIROC), NSI has handed off its retail and institutional accounts to other firms after its former carrying broker, Penson Financial Services Canada, decided to discontinue its business; and, the firm was unable to obtain a new carrying broker.
NSI is restricted to “corporate finance” business. But, the firm said today, its ability to carry on this business “is seriously and substantially limited due to the sales prohibition”.
As a result, the firm reports, “NSI is not in compliance with the risk adjusted capital requirement of IIROC.” And, it notes that the capital shortfall has been referred to enforcement at IIROC.
In the meantime, the firm has applied to IIROC to permit it to sell securities in exempt market financings, including offerings to accredited investors. It notes that corporate finance and advisory revenue has historically provided between 20% and 40% of total revenue at NSI.