More than 60 investors, including many seniors, are set to get more than $1 million as part of the final settlement agreed to by Securities America over sales of nearly $700 million of promissory notes issued by Medical Capital.
Earlier, Securities America paid $2.8 million to the investors as part of a case brought in 2010 against it by Massachusetts’ top securities regulator, Secretary of the Commonwealth William Galvin, whose office says the independent broker-dealer made more than $26 million on the sales.
The IBD’s latest payment comes after several class-action suits, arbitration, and receivership involving notes issued by Medical Capital (or MedCap), which used the funds raised to buy medical receivables before defaulting in 2008 and going into receivership itself.
According to Galvin’s office, the notes sold by Securities America were governed by a regulatory exemption allowing such a sale to “sophisticated and accredited investors.”
However, the broker-dealer “pushed [them] at dinner seminars for as many as 100 people at a time who were never asked if they were sophisticated and accredited investors,” the state regulatory group says in a press release.
“These were people trying to protect their savings, but were sold high-risk products which garnered high commissions for the broker-dealer,” Galvin explained in a statement.