CapStone Investments Inc., the San Diego-based stock-research boutique, is closing after merger talks with Ascendiant Capital Markets LLC collapsed, according to Scott Dahle, CapStone’s general counsel.
The firm halted operations after the Financial Industry Regulatory Authority said it didn’t have enough capital, Dahle said Monday in a telephone interview. CapStone, which employed about 35 people, was founded in 1995 by Anthony Capozza and his son Steven Capozza, Dahle said.
“We’ve ceased conducting securities business,” Dahle said. “We were very close to finalizing the deal, we just needed Finra approval.”
Ascendiant may still hire some of CapStone’s employees, Dahle said. The Capozzas didn’t respond to phone calls and emails seeking comment Monday and on Jan. 11. Nancy Condon, a Finra spokeswoman, declined to comment. CapStone Investments has no connection with Capstone Holdings Group LLC, the New York-based money manager run by Paul Britton.
Other brokerages that buy and sell stocks and provide advice to institutional investors have been closing as trading on U.S. markets slows and computerized execution drives down commissions. ThinkEquity LLC, Rodman & Renshaw LLC and WJB Capital Group Inc. were among those to shut last year.
Ascendiant, a securities firm based in Irvine, Calif., is no longer in talks to buy CapStone, said Ascendiant Executive Vice President William Owen. Owen declined to say whether his company was considering hiring CapStone employees.
“We certainly were thinking that a merger would make sense,” Owen said in a telephone interview on Jan. 11. “But at this point in time that’s not going to happen.”
The capital shortfall hinged on Finra’s interpretation of a “non-refundable retainer” on CapStone’s balance sheet, which had been audited, Dahle said. CapStone had $597,300 of assets as of the end of 2011, according to a filing with the Securities and Exchange Commission.
“Finra came up with an interpretation that we had not seen in the entire time that CapStone has been around,” he said.