06/11/2010

Finacorp Calls It Quits After Brief MBS Stint

Broker-dealer Finacorp Securities, which made a big push into mortgage-backed securities amid the credit crisis, closed its doors this week.

It's unclear why the Irvine, Calif., firm suddenly shut down after 16 years as a fixed-income broker. Some market players speculated Finacorp was unable to raise enough capital to establish a viable inventory of mortgage bonds - the same problem that plagued now-defunct Utendahl Capital. Finacorp's operations manager, Shiva Naby, confirmed the closing but declined further comment. The firm had a staff of about 65.

Ed Prado founded Finacorp in 1994 to sell fixed-income products to small and mid-sized institutions. The firm was among a number of mid-tier brokerages that set their sights on the mortgage-bond market beginning early last year, motivated both by a plethora of distressed-investment opportunities and a wide availability of securitization talent cut loose by the big banks.

In March 2009, Finacorp hired former RBC Capital mortgage-bond traders Mike Sullivan and Mike Wier, along with ex-RBC sales specialist Mike Lingvall. The three worked in Finacorp's Minneapolis office under mortgage-backed securities chief Jack Hussian. Another former RBC trader, Steve Cutri, also was brought in around the same time.

Finacorp's mortgage-bond team additionally included Stephen Jencks, who previously spent years at Prudential Financial. Also part of that group was former GMAC executive Ronnet Glezer.

Utendahl, a New York brokerage whose specialty was corporate bonds, hired some 20 securitization professionals early last year to fill out what had been a small structured-product-trading desk. Those recruits quickly grew frustrated, however, as a lack of capital to build up an inventory of structured products hampered their market-making opportunities. By the end of the year, many of the new hires had quit, prompting founder John Utendahl to shutter the brokerage. A similar issue has contributed to a rash of defections at New York-based broker-dealer ICP Capital (see The Grapevine on Page 1).

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