Securities America agreed to pay $2.8 million in restitution to
a group of Massachusetts investors who lost money after purchasing
allegedly fraudulent private placements from the firm.
The settlement is part of a broader agreement reached last month
by Securities America that would require the brokerage and its
parent company, Ameriprise Financial Inc. (AMP), to pay around $150
million to hundreds of investors. Ameriprise Financial late last
month said it would look to find a buyer for its broker.
The broker-dealer will make full restitution to 63 customer
accounts of Massachusetts investors who purchased Medical Capital
Holdings Inc. notes, the state said Monday. A class action
settlement in a Texas case is expected to result in the repayment
of 40% of investors' losses to Massachusetts investors, the state
said.
If the class action settlement isn't approved, however,
Massachusetts said Securities America will pay an additional $2.2
million to the investors, with further provisions that if all those
payments don't return investors 100% of their principal, the firm
will make up the difference.
Securities America faced potentially more than $300 million in
arbitration claims related to sales of private placements from
Provident Royalties LLC and Medical Capital. Regulators had accused
those two companies of fraud in 2009, and clients allege the
brokerage didn't conduct adequate due diligence of the
offerings.
-By John Kell, Dow Jones Newswires; 212-416-2480; john.kell@dowjones.com