According to a report in Reuters, unnamed sources have stated that Ameriprise Financial is willing to let its broker-dealer subsidiary, Securities America, go out of business. Securities America is in financial trouble as a result of liabilities arising from its sales of $400 million in private placements of securities issued by Provident Royalties and Medical Capital Holdings.
As we reported just last week, a federal court rejected a proposed $21 million class action settlement of these claims, and allowed investor claims against the firm to proceed to FINRA arbitration.
It is possible that Ameriprise is bluffing. Negotiations to settle the class action are ongoing and threatening to walk away from the table could pressure the plaintiffs and the federal judge to take a low ball settlement. If Amerprise does let Securties America go belly up, the investing public might have reason to question the savvy of a financial planning firm that can’t even maintain the solvency of its own subsidiaries.
Investment News has reported that FINRA “takes a very dim view” of firms closing to avoid customer claims, so it is possible that Securities America and Ameriprise may want to avoid regulatory reprisals.
For now, Securities America clients who believe they were mislead about Med Cap or Provident Securities are free to pursue their claims in arbitration. Needless to say, investors should be wary of private placement deals offered by brokerage firms.
