Beginning Thursday in Chicago, there was a meeting of representatives of Securities America, its parent company Ameriprise and attorneys for plaintiffs in a class action suit against Securities America over the sale of certain Reg D securities from Provident Royalties and Medical Capital Holdings. The talks were taking place in a mediation process overseen by retired federal judge James Rosenbaum.
On Saturday, Janine Wertheim, the Securities America Inc. VP and chief marketing officer, sent an e-mail to this and other AdvisorOne reporters in which she wrote, “We made substantial progress in our mediation.” Moreover, she wrote that “all interested parties have committed to a process that we hope will result in a full and final resolution of these matters.”
The statement nearly replicated a March 25 posting on Ameriprise’s corporate website, in which it said: “Ameriprise Financial has been working with Securities America, Inc. (SAI), an independent subsidiary of Ameriprise, and plaintiffs to help SAI resolve legal matters related to sales of Medical Capital and Provident Royalties securities. … The parties have made substantial progress and have committed to a process that we are hopeful will result in a full and final resolution of the matters.”
The mediation was prompted by a sitting federal district court judge, Royal Furgeson in Dallas, who on March 18 rejected a class action settlement under which Securities America would have paid $21 million to settle the class action suit. The settlement also would have disallowed any other plaintiffs from filing separate suits against Securities America in specific states, with which state securities regulators and NASAA, the organization of state securities regulators, took issue, claiming it constituted preemption of state securities laws. Both Massachusetts and Montana had filed actions against Securities America and its top management over the sale of the Provident and MedCap securities.
A separate FINRA arbitration case against Securities America rep Randall Ray Talbott and the broker-dealer resulted in an award of more than $1 million—compensatory damages of $734,118 and punitive damages of $250,000—to a single claimant, Josephine Wayman, who accused the parties of breach of fiduciary duty and financial elder abuse, suggesting the scope of the overall exposure to Securities America, which is led by CEO James Nagengast (left).
While the legal process has taken its course, neither Securities America nor parent company Ameriprise Financial has responded to requests by AdvisorOne to comment on that process. However, Ameriprise last week did post a statement on its website in which it said that while "it has no financial obligation to participate in Securities America's settlement discussions, we have reached out to Securities America to determine if we can help the parties find a reasonable resolution for all constituents."
Ameriprise went on to say in the statement that Securities America was one of "many firms that distributed Medical Capital and Provident Shales securities." In fact, many other independent BDs did sell the Reg D securities. The securities in question, Ameriprise said in that statement, which were registered with the Securities and Exchange Commission (SEC) as Reg D offerings, constituted "a widely distributed asset class."
Look for additional coverage on AdvisorOne.com and in our Daily Wire newsletter on the legal issues surrounding Securities America, the implications for the broader independent BD space and on how individual Securities America reps are reacting.