Articles Posted in Securities America

Massachusetts Secretary of the Commonwealth William Galvin is charging Securities America with inadequate supervision of a broker who is accused of using a “grossly deceptive” radio ad campaign to target older investors. The state regulator said that the financial firm shouldn’t have approved the spots that Barry Armstrong ran on his AM radio show. His show, which airs on WRKO-AM, is syndicated on different stations.

The broker purportedly ran ads asking listeners to call for information related to Alzheimer’s Disease when what Armstrong really was doing was collecting their contact information so he could offer to sell them financial advice. Galvin’s office said that the broker engaged in ‘bait and switch’ by falsely advertising one service when he was really selling another type of service.

The regulator contends that Securities America failed to identify or prevent Armstrong’s unethical conduct by neglecting to ask even one question about the content of the ads or attendant mailing materials. Now, the state wants a censure, a cease-and-desist order, and a fine imposed against the firm.
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The Pennsylvania Department of Banking and Securities is looking into the sales of nontraded real estate investment trusts by Securities America employees. Ladenburg Thalmann & Co. Inc., which owns the broker-dealer and two other independent brokerage firms, said in its yearly report that the state regulator wants the brokerage firm to provide data about nontraded REITs that Pennsylvania residents have been buying since 2007. The request was made in October.

According to InvestmentNews, it is not known at this time if Pennsylvania regulators are just looking at nontraded-REIT sales at Securities America or the investigation extends to other firms. It was just last year that Securities America, along with other independent brokerage firms, settled with the Massachusetts Securities Division over nontraded REIT sales.

Securities America paid $8.4 million in restitution to clients in that state along with a $150,000 fine. According to that probe, firms had difficulties abiding by their own policies as well as to the Massachusetts rule that an investor’s purchase of REITs cannot go beyond his/her liquid net worth.

The Financial Industry Regulatory Authority is fining Securities America and Triad Advisors $625,000 and $650,000, respectively, for not properly supervising the way consolidated reporting systems were used. Triad must also pay $375,00 in restitution. Even though they are settling, the two firms are not denying or admitting to wrongdoing.

The self-regulatory organization said this inadequate supervision led to statements containing inaccurate valuations that were sent to customers. The two firms are also accused of disobeying securities laws by not keeping appropriate consolidated reports.

A consolidated report is a document that includes information about the bulk of a customer’s financial holdings. The report is a supplement to official account statements.

Massachusetts Secretary of the Commonwealth William Galvin just announced that independent broker dealers Ameriprise Financial Services (AMP), Securities America Inc., Commonwealth Financial Network, Lincoln Financial Advisors, and Royal Alliance Associates have consented to pay another $10.75 million in restitution over non-traded real estate investment trusts that were sold to clients between 2005 and now. The added charge comes four months after the five independent brokerage firms consented to pay $6.1 million in restitution and $975,000 in fines. It was investors’ complaints that spurred the regulator’s investigation into the REITs.

Along with LPL Financial (LPLA) consenting to pay $4.8 million in restitution to clients for its sale of nontraded REITS, that’s a total of $21.6 million in restitution and fines of nearly $1.5 million from the six IBDs. In a statement, Galvin acknowledged the popularity of these risky investments. The regulator noted that the state’s probe discovered problems pertaining to firms adhering to their own policies and that this was a widespread matter. He also said that there appeared to be issues related to brokerage firms abiding by the state rule that investors cannot buy REITs that are over 10% of an individual’s liquid net worth.

Our REIT lawyers represent investors that have sustained huge losses because of the negligence of brokerage firms, investment advisors, and their representatives. Contact our securities fraud law firm today. We work with clients throughout the US, as well as investors based abroad with claims against firms based in the country.

Securities America Stops Selling Nontraded REIT ARC V

Securities America Inc. has severed ties with American Realty Capital Trust V Inc., a top selling nontraded REIT. The independent broker-dealer blamed this on an overconcentration risk and its own exposure to real estate programs that AR Capital, a brokerage firm, distributes.

The nontraded real estate investment trust, known as ARC V, was the number one seller last month with about $10.8 million in daily sales. Already, between April, when the REIT launched, through the end of June, brokers have sold $406 million of them.

In its first quarter earnings report, Ameriprise Financial (NYSE: AMP) says it intends to sell Securities America. The news comes while the financial firm is still in the process of finalizing its securities fraud settlement with investors accusing the brokerage unit of selling allegedly fraudulent private placements of Medical Capital Holdings and Provident Royalties.

Investors sustained about $400 million in losses after taking part in Medical Capital Holdings-sponsored debt sales and shale gas investments with Provident Royalties. Although originally Securities America had about $400 million in outstanding obligations, the proposed settlement is worth $150 million. The independent broker-dealer unit is accused of failing to do proper due diligence on millions of dollars in investments that it sold, which later proved to be worthless.

Investors who filed securities arbitration cases against Securities America will receive $70 million. Those who are seeking to get back their losses through a class action securities lawsuit will get $80 million. The financial firm could be facing over $300 million more in arbitration claims over the fraudulent placements.

There is speculation over why Ameriprise’s decision to sell comes now. Does this mean that the financial firm has other issues of concern, beside the securities allegations, with Securities America? The sale may also mean that Ameriprise has decided to focus on its core business.

Per the earnings report, Securities America entered into the settlement agreements last month. This has resulted in a $118 million pre-tax charge for Ameriprise during 2011’s first quarter, as well as the $40 million pretax charge it incurred during last year’s fourth quarter.

Related Web Resources:
Securities America Agrees To Settlement With Investors-Sources, The Wall Street Journal, April 13, 2011
Ameriprise profit up, selling Securities America, AP/Bloomberg Businessweek, April 25, 2011
Ameriprise profit up, selling Securities America, Bloomberg Business Week, April 25, 2011

More Blog Posts:
Texas Securities Fraud: Three FINRA Cases Against Securities America Over Sale of Private Placements Halted, Stockbroker Fraud Blog, February 22, 2011
Securities America Inc. to Pay $1.2M in Compensatory and Punitive Damages Over Allegedly Fraudulent Medical Capital Notes, Stockbroker Fraud Blog, January 6, 2011
Securities America & Ameriprise Financial Inc. Sued For Selling Allegedly Faulty Private Settlements, Stockbroker Fraud Blog, November 10, 2009 Continue reading

In what Investment News is describing as a legal victory for Securities America, a federal judge in Dallas has placed a restraining order on three upcoming FINRA arbitration claims against the broker-dealer and its brokers. The cases will be combined with two class action. This will likely limit Securities’ America’s liability. Ameriprise Financial Inc. owns this brokerage firm.

In the U.S. District Court for the Northern District of Texas, Judge W. Royal Furgeson, Jr. ordered the broker-dealer to set up a $21 million settlement fund for investors. The Texas securities fraud claims involve the allegedly bogus sale of private placement notes from Provident Royalties LLC and Medical Capital Holdings Inc.

A number of plaintiff’s attorneys have expressed dismay at Furgeson’s decision because they are worried that their clients won’t get as much from a class action case. Furgeson, however, says that combining the cases protects the financial recovery for all investors and not just those with FINRA arbitration claims.

Per court documents, Securities America sold approximately $18 million of Provident shares and $700 million of Medical Capital notes. Some 20,000 investors purchased the Medical Capital notes from independent broker-dealers and approximately $2.2 billion was raised from the private placements. Unfortunately, many of the medical receivables believed to be underlying the notes never existed.

Dozens of claimants, including the securities divisions of Massachusetts and Montana, have filed securities claims against Securities America. The financial firm, however, maintains that it did not engage in any wrongdoing when it sold the MediCap notes.

Related Web Resources:
Securities America scores huge victory in Reg D case, Investment News, February 18, 2011
More Stockbroker Fraud Blog Posts:
Securities America Inc. to Pay $1.2M in Compensatory and Punitive Damages Over Allegedly Fraudulent Medical Capital Notes, Stockbroker Fraud Blog, January 6, 2011
FINRA Fines H & R Block Financial Advisors (Now Ameriprise Advisor Services) over Sales of Reverse Convertible Notes (RCN), Stockbroker Fraud Blog, February 17, 2010
Securities America & Ameriprise Financial Inc. Sued For Selling Allegedly Faulty Private Settlements, Stockbroker Fraud Blog, November 10, 2009 Continue reading

A Financial Industry Regulatory Authority arbitration panel has ordered Securities America Inc. and broker Randall Ray Talbott to pay an investor nearly $1.2 million in damages over the sale of allegedly fraudulent Medical Capital notes. Claimant Josephine Wayman had charged the respondents with a number of actions, including securities fraud, deceit, breach of fiduciary duty, industry rules violation, financial elder abuse, and negligence. Ameriprise Financial Inc. owns Securities America.

The award includes $734,000 in compensatory damages, $250,000 in punitive damages, and $171,000 in expert witness and legal fees. Punitive damages are not common in FINRA arbitration awards.

Dozens of other claimants are pursuing securities claims against Securities America over the sale of private placements prior to the financial collapse in 2008. The securities divisions of Montana and Massachusetts are among those suing the broker-dealer. Meantime, Securities America has said that Medical Capital Holdings Inc., which issued the private placements, is the one that should be held liable for investors’ financial losses.

From 2003 to 2008, dozens of independent broker dealers sold private Medical Capital notes, with Securities America considered the biggest seller at nearly $700 million. The private placements raised $2.2 billion. Unfortunately, many of the medical receivables that were supposed to be underlying the notes were in fact non-existent. Medical Capital has been accused of running a Ponzi-like scam and using newer investors’ funds to pay promised returns to older investors. Securities America has said that it did not act inappropriately when selling the MedCap notes.

Medical Capital is bankrupt and $1.1 billion of investors’ funds are gone. In 2009, the Securities and Exchange Commission charged Medical Capital with securities fraud.

Related Web Resources:
Securities America and Rep to Pay Over $1 Million in FINRA Fraud Case, AdvisorOne, January 5, 2011
Arbitrators hit Securities America, rep with $1.2 million in damages, legal fees over MedCap, Investment News, January 3, 2011
Financial Industry Regulatory Authority

Securities America
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Dallas-based securities firm Cullum & Burks Securities Inc. has had its license suspended by the Financial Industry Regulatory Authority Inc. The broker-dealer, which had 1,300 client accounts, 100 affiliated reps, and $150 million in assets, reportedly failed to files its mandatory, quarterly Focus report.

Last November, FINRA said the Texas broker-dealer had violated its net capital requirement because it didn’t have enough capital to stay in business. It was then that Cullum & Burkes raised more capital.

The securities firm was one of three broker-dealers listed as sellers of Medical Provider Funding Corp. V, which is a series of private placements that were created by Medical Capital. Other sellers on the list included Securities America Inc. and First Montauk Securities Corp., which is now defunct.

A Reg D filing with the SEC in 2007 reported that the offering was for $400 million. Medical Capital raised about $2.2 billion in investor funds. Now, over half of the investors’ money has been lost.

Cullum & Burks Securities Inc. is the subject of a class action lawsuit filed over the Medical Capital notes sale. The complaint contend that the notes should have been registered with the Securities and Exchange Commission. However, the securities firm denies that it engaged in broker-misconduct in relation to the sale and sees itself as a victim of any wrongdoing committed by Medical Capital. In 2009, the SEC charged Medical Capital Holdings Inc. with securities fraud related to private placement sales.

Related Web Resources:
Another broker-dealer down: Dallas B-D capsized by MedCap, Investment News, June 16, 2010
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A securities fraud lawsuit filed in federal court is suing Securities America and parent company Ameriprise Financial Inc. for selling allegedly faulty private placement offerings even after W. Thomas Cross, a Securities America executive, expressed concerns that the sales could result in a “panicked run on the bank.” The lawsuit’s plaintiff, Florida resident Ilene Grossbard, invested $112,000 in Medical Capital’s fifth deal in March and April. The complaint may become a class action lawsuit.

According to the complaint, Securities America advisers was still selling Medical Capital securities in the form of notes worth hundreds of millions of dollars in October of last year. Securities America, however, is discounting the claim that the company’ advisers continued selling the Med Cap notes even after Cross voiced his concerns.

Last July, the SEC charged Medical Capital Holdings with securities fraud over the sale of $77 million in private securities as notes. Now, a court receiver is questioning the worth of the medical receivables’ holding company. The company has raised $2.2 billion from investors.

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