SAN DIEGO — At the time when credit union broker-dealer XCU Capital Corp. merged with LPL Financial Corp last August, it had the option of closing down its "shell" or selling it. The CUSO said it was approached by $15 billion State Employees' Credit Union and the deal was finalized earlier this year.
That's according to Mark Hoaglin, senior vice president, credit unions at LPL and former president/CEO of XCU Capital. SECU was a former XCU Capital client and opted not to sign on with LPL after the merger last year.
Hoaglin said a licensed shell transaction involves a seller buying a company stripped of assets. To avoid the start-up costs, licensing paperwork and time for regulatory approval associated with starting a new broker dealer, some may buy the shell.
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"In the broker dealer marketplace purchase transactions are typically handled on an asset sale basis or as an outright purchase of the broker dealer," Hoaglin explained. "Depending on the dynamics of the transaction it may make sense for the acquiring broker dealer to simply purchase the assets of the selling broker dealer, which for the most part consists of the client accounts of the seller."
SECU bought XCU Capital's shell for $40,000, said Jim Blaine, president/CEO of SECU. The credit union's 6,000 accounts were moved in house.
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