EF Hutton
| Company type | Public (historical) |
|---|---|
| Industry | Financial services, stock brokerage |
| Founded | 1904 |
| Founder | Edward Francis Hutton, Franklyn Laws Hutton |
| Fate | Merged into Shearson Lehman/American Express in 1988; brand revived later |
| Headquarters | San Francisco (original), Springfield, Ohio (revival) , United States |
Key people | Edward Francis Hutton (founder), Franklyn Laws Hutton (founder), Gerald M. Loeb (chairman), Robert M. Fomon (CEO) |
| Products | Brokerage services, investment management, mutual funds, life insurance, banking |
EF Hutton was a prominent American stock brokerage company established in 1904 by brothers Edward Francis Hutton and Franklyn Laws Hutton. Under the guidance of distinguished Wall Street trader Gerald M. Loeb, EF Hutton rose to become the second largest brokerage firm across the United States.
Origins through the 1970s
Founded in San Francisco in 1904 by Edward Francis Hutton and Franklyn Laws Hutton, E.F. Hutton & Co. was among the earliest brokerages to open offices in California. Following the destruction of its offices during the 1906 San Francisco earthquake, the company rebuilt and expanded its operations. Trader Gerald M. Loeb joined in 1924 and eventually assumed the role of chairman. EF Hutton established a nationwide retail brokerage network to distribute debt and equity securities, including seasonal branches located in Palm Beach, Florida and Saratoga Springs, New York. In 1969, Morrie Cohen launched the firm’s first single-person office on Maui.
Edward Francis Hutton directed the company until his passing in 1962; later, in 1970, Robert M. Fomon was appointed CEO. The firm recruited pioneering stockbroker Carole Brookins during the early 1970s, at a time when few women operated on Chicago futures exchange floors. Unlike many competitors who either failed or were acquired during that era, EF Hutton maintained its independence under Fomon’s stewardship. By the early 1980s, E.F. Hutton & Co. served as the principal entity within E.F. Hutton Group Inc., a Delaware-incorporated holding company publicly traded on the New York Stock Exchange. Its subsidiaries encompassed E.F. Hutton Trust Company (now integrated into Citigroup), E.F. Hutton Life Insurance Company, and E.F. Hutton Bank. The group managed various mutual funds and investment portfolios while actively engaging in corporate mergers and public securities issuance. In 1976, a strategic alliance was formed between Western Union and E.F. Hutton & Co.
Check kiting scandal of the 1980s
Beginning in 1980, multiple Hutton branches engaged in issuing checks surpassing their available cash balances, then depositing matching sums into other banks—a practice known as "chaining," which is a variant of check kiting. This allowed EF Hutton to access funds from both accounts until clearance of checks, effectively receiving interest-free loans. Thomas Morley, assigned to enhance cash management, revealed that one branch generated an additional $30,000 per month through this method. President George Ball circulated Morley’s report with the annotation, "A point well remembered—and acted on." Over time, EF Hutton transferred funds among approximately 400 banks, predominantly small rural institutions, utilizing an estimated $250 million daily without incurring interest expenses. When confronted with concerns, EF Hutton disputed banking procedures.
The scheme persisted for nearly three years until Genesee County Bank in Leroy, New York identified unusually large deposits originating from a four-person Hutton office funded by checks drawn on two Pennsylvania banks lacking sufficient funds. Genesee ceased honoring these checks while United Penn Bank requested an investigation by the Federal Deposit Insurance Corporation. In 1984, authorities referred the matter to the U.S. Attorney for the Middle District of Pennsylvania for a federal criminal inquiry.
Starting in 1982, the United States Postal Inspection Service also initiated an investigation. EF Hutton retained defense lawyer Tom Curnin who initially prepared to contest charges aggressively. However, a memo from a regional vice president mentioning "bogus deposits" led Curnin to pursue plea negotiations. By spring 1985, he advised EF Hutton’s board to accept guilt pleas or face potential convictions of top executives and collapse of the business. To avoid extended adverse publicity, the firm opted for settlement.
On May 2, EF Hutton admitted guilt to 2,000 counts of mail and wire fraud, incurring a $2 million fine plus $750,000 toward investigative expenses—amounting to approximately $ and $ today—and $8 million in restitution (equivalent to about $). In exchange, no individual executives faced prosecution despite government findings implicating 25 senior officers; moreover, the Securities and Exchange Commission permitted EF Hutton to continue operations—an uncommon decision given the severity of offenses.
An internal assessment conducted by former Attorney General Griffin Bell attributed the fraud to deficient internal controls; notably, Morley lacked direct supervision. Public opinion considered penalties insufficiently severe, prompting clients and key personnel to depart from EF Hutton; several public sector entities also terminated business relationships. Although not directly involved in wrongdoing, CEO Robert M. Fomon was removed by the board in 1987.
1987 Market Collapse and Consolidations in the 1990s
In early 1987, an internal investigation uncovered that brokers at a Providence, Rhode Island branch were involved in money laundering activities linked to the Patriarca crime family. Although Hutton reported these findings to the SEC, prosecutors were on the verge of filing charges.
This revelation came just ahead of the 1987 stock market crash known as Black Monday. By November of that year, Hutton had suffered $76 million in losses due to trading setbacks and margin calls. Its commercial paper rating was downgraded from A-2 to A-3, resulting in a $1.3 million reduction in available financing. The firm was on the brink of collapse. On December 3, 1987, Hutton consented to a merger with Shearson Lehman/American Express, culminating in the creation of Shearson Lehman Hutton, Inc. in 1988.
Subsequent reports revealed that Hutton had been grappling with significant liquidity shortages since at least 1985 and had explored options for a sale in 1986.
Following the merger, a considerable number of former Hutton brokers defected to rival firms. The newly combined entity shifted its strategic focus away from retail investors toward larger corporate transactions. In 1990, the Hutton name was discontinued when the firm was rebranded as Shearson Lehman Brothers. That same year, Joe Plumeri was appointed President and Managing Partner.
In 1992, Shearson divested The Boston Company’s asset management division to Mellon Financial. Notably, in December 1988, The Boston Company disclosed an overstatement of earnings by $30 million.
By 1993, American Express sold Shearson along with Hutton’s brokerage and asset management segments to Primerica for $1 billion. Primerica subsequently merged these operations with Smith Barney, forming Smith Barney Shearson, later simplified to Smith Barney. Through a series of mergers during the 1990s, the original E.F. Hutton entity ultimately became part of Citigroup and subsequently Morgan Stanley Wealth Management—a joint venture between Morgan Stanley and Citigroup.
EFH Group Revival
In the aftermath of the Subprime mortgage crisis, Citigroup divested certain assets, leading a group of former E.F. Hutton executives to acquire the E.F. Hutton brand for an undisclosed amount. In 2012, under the leadership of Frank Campanale, plans were made to relaunch E.F. Hutton & Company; however, Campanale left in 2013 to head Lebenthal Wealth Advisors, and the project was discontinued.
In 2014, Christopher Daniels—an alumnus of EF Hutton’s investment banking division and former president of Ascend—revitalized the brand as EFH Group Inc., modernizing its presentation as EF Hutton. Stanley Hutton Rumbough, grandson of founder Edward Francis Hutton, assumed the role of non-executive Chairman.
EFH Group went public in November 2014 through a reverse merger with OTC-listed Twentyfour/seven Ventures, Inc., adopting the name EF Hutton America, Inc., trading under ticker symbol HUTN. The company relocated its headquarters to One Main Street in Springfield, Ohio in 2016; by October 2017, it rebranded itself as HUTN, Inc.
The firm sought to capitalize on social media platforms and technological innovation to deliver a client-focused financial services model and initiated an extensive software development initiative but faced challenges due to insufficient capital. By late 2018, it had accumulated $14 million in debt and had pledged both its office property and rights to the EF Hutton brand as collateral.
In April 2019, Christopher Daniels—who controlled over 92% of voting shares—resigned after unsuccessful attempts at debt restructuring amid heavy indebtedness and over-leveraged assets. Following this, HUTN suspended normal operations; the board accepted an interim loan from Chairman Stanley Hutton Rumbough as it commenced formal dissolution and wind-down procedures.
2021 Resurgence
In 2021, the EF Hutton brand was resurrected as EF Hutton Group through the rebranding of Kingswood Capital Markets, which operates as an affiliate of Kingswood Holdings Ltd. and Benchmark Investments LLC. CEO Joseph T. Rallo emphasized the firm’s “remarkable heritage as a Wall Street icon” as a primary motivation behind reclaiming the EF Hutton name.
Distinct from previous launch attempts by Campanale and Daniels, this iteration of EF Hutton Group is already well-established. Since its inception in May 2020, Kingswood Capital Markets successfully secured over $2 billion in client capital during the first eight months of 2021, exceeding $3 billion within the most recent twelve-month period.
The leadership team intends to introduce multiple SPACs under the EF Hutton banner. The inaugural SPAC, managed by CEO Ben Piggott alongside co-presidents Rallo and Boral, targets approximately $150 million in fundraising with a focus on the U.S. consumer technology industry. Stanley Hutton Rumbough, Edward Francis Hutton’s grandson, is expected to invest and serve on the boards of the initial four SPACs. These special purpose acquisition companies have not yet submitted filings to the SEC.
Further reading
External links
- Vintage television advertisement from the late 1970s: When E. F. Hutton talks, people listen.