B/D News

Ameriprise Financial Services has agreed to pay the SEC $17.3 million to settle an enforcement action that the Commission brought against the Minneapolis-based broker/dealer. The SEC alleges that Ameriprise received millions of dollars in undisclosed compensation as a condition of offering and selling certain real estate investment trusts to its brokerage customers. The SEC’s order says that “Ameriprise demanded and received so-called ‘revenue sharing’ payments related to its sales of REITs and failed to disclose the payments as required. Ameriprise also sold more than $100 million of unregistered shares of one particular REIT in violation of the registration provisions of the federal securities laws.” Robert Khuzami, Director of the SEC’s Division of Enforcement, said in a prepared statement announcing the enforcement action that “Few things are more important to investors than getting unbiased advice from their financial advisers. Ameriprise customers were not informed about the incentives its brokers had to sell these investments.” According to the SEC, the Commission’s order finds that “neither Ameriprise nor the REITs disclosed to investors that additional payments were being made in connection with the sale of REIT shares, or the conflicts of interest these additional payments created. The SEC’s order also finds that Ameriprise issued a variety of mislabeled invoices to the REITs as a means of collecting the undisclosed revenue sharing payments that appeared to be legitimate reimbursements for services provided by Ameriprise.” Ameriprise consented to the issuance of the SEC’s order without admitting or denying the findings.

The industry is still scratching its head as to why Bank of America has yet to join the broker protocol. After acquiring Merrill Lynch last year, Bank of America officials indicated in published reports their intentions to join the broker protocol, which allows departing brokers/advisors to leave a firm and not get sued under non-compete or non-solicit agreements, and allows them to take their clients’ basic contact information, and often their clients, with them. Bill Halldin, a spokesman for Merrill Lynch, points out that Merrill is a member of the protocol, and “we anticipate the [Banc of America Investment Services] BAI platform will join in the future, but no date has been set.” Patrick Burns, with the law offices of Patrick Burns in Beverly Hills, says that without BofA having protocol membership, “people are clearly at risk of getting sued and won’t be allowed to take their clients with them.” There are currently about 300 firms on the protocol list, Burns says, “but surprisingly BofA is not one of them.” Burns notes in his most recent Breakaway Broker newsletter that three firms have recently joined the protocol: Morgan Stanley Smith Barney; Wells Fargo Advisors (formerly Wachovia Securities); and Wells Fargo Advisors Financial Network (formerly Wachovia Securities Financial Network).