A. Webster Dougherty & Co. said yesterday that it has ceased operating as a broker-dealer and that a Bostonbased firm is planning to hire some of the firm's municipal bond employees.
The announcement comes after weeks of market speculation that Dougherty, a Philadelphia-based regional municipal bond firm, was planning to close shop because of financial and legal problems.
Last week, the firm stopped all trading and sales activities, while key employees sought employment elsewhere.
Last month. an arbitration panel ordered Dougherty to pay J.B. Hanauer & Co., a New Jersey-based financial services firm. $310,000 in compensatory damages, according to settlement documents obtained from the National Association of Securities Dealers.
An audit, dated Aug. 13, 1993, also shows that the firm is a co-defendant in litigation brought by a customer seeking to recover lost interest on bonds. The status of the litigation could not be determined, and company officials would not comment on the matter.
In a statement released yesterday, Dougherty said that H.C. Wainwright & Co., a regional firm located in Boston, will absorb Dougherty's public finance, financial advisory, fixed-income research, and asset management units.
Kevin Quinn, Dougherty's president, will move to Wainwright and manage its public finance and financial advisory work in a Baltimore office, said Hugh Caperton, a managing director at Wainwright.
Roger Marshall, senior vice president at Dougherty, will manage Wainwright's asset management and research departments, the release said.
In a telephone interview, Quinn said that 10 to 15 Dougherty professionals, including bankers, asset managers, and researchers, are negotiating with Wainwright on moving to the firm, but he would not comment further.
Quinn denied speculation that the firm is insolvent, saying that "we just determined that the taxable, fixed-income effort was no longer viable." He and other Dougherty executives would not elaborate on other details on the firm's decision to close.
Sources with knowledge of the situation say the situation at Dougherty had severely deteriorated in recent months to the point that the firm could not continue staying in business. Sources say as many as 20 firm employees have left Dougherty since May.
Several sources said that the NASD arbitration panel's decision last month ordering Dougherty to pay J.B. Hanauer $310,000 in damages contributed to the firm's shutdown.
Hanauer filed a claim against Dougherty in May of last year following the cancellation of-a trade that "we felt was unjustified," said Greg Plifka, executive vice president at Hanauer.
In April 1993, a Dougherty salesman, Peter J. Galiano, agreed to purchase $16 million of Federal Home Loan mortgage bonds from Hanauer at a price of 100 18/32, NASD arbitration documents say. Hanauer then bought the same bonds from another firm for 99 27/32, the documents say.
Subsequently, Dougherty decided not to honor the transaction on the settlement date, leaving Hanauer holding the securities, the documents say.
Dougherty rebutted the charges, the documents say. The NASD denied Hanauer's claim for punitive damages.
