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.
(At the time of the sales, Securities America was owned by Ameriprise Financial; it is now part of Ladenburg Thalmann.)
“People who invested their life savings in these soon-to-be-worthless notes are precisely the people that the [now delayed] Department of Labor’s fiduciary rule is designed to protect,” Galvin added.
In 2011, Securities America agreed to pay $150 million over sale of notes issued by both Medical Capital and Provident Royal after the SEC brought a case against the IBD in 2009.
Securities America declined to comment on the matter.
— Check out ‘No Going Back’ on Commissions, Fiduciary Changes, Broker-Dealer CEOs Say on ThinkAdvisor.