Ameriprise Financial Services Inc. will pay $4.5 million to settle charges with the Securities and Exchange Commission that it failed to safeguard retail investor assets from theft by its representatives.
According to the SEC’s order, five Ameriprise representatives committed numerous fraudulent acts, including forging client documents, and stole more than $1 million in retail client funds over a four-year period.
The SEC found that Ameriprise, a registered investment adviser and broker-dealer with a national network of approximately 9,700 representatives, failed to adopt and implement policies and procedures reasonably designed to safeguard investor assets against misappropriation by its representatives.
“A critical obligation of an investment adviser is to safeguard investor assets,” said Fuad Rana, an assistant director in the SEC’s Division of Enforcement, in a statement. “Ameriprise failed to meet that obligation and as a consequence was unable to prevent the theft of its clients’ assets.”
According to the SEC, Ameriprise employed certain automated surveillance tools to prevent and detect whether a representative may have engaged in fraud by misappropriating funds from a client account. One system did not function properly and a second faced limitations, thereby preventing Ameriprise from detecting the misappropriation of more than $1 million in client funds by the five representatives.
The five representatives were based in Minnesota, Ohio and Virginia, and three previously pleaded guilty to criminal charges. Each of the representatives was terminated by Ameriprise for misappropriating client funds. The SEC’s order found that Ameriprise has implemented a new system to safeguard clients’ money and that Ameriprise reimbursed all impacted clients for the losses they incurred due to the misconduct of the five representatives.
In a statement emailed to ThinkAdvisor, Ameriprise said that it is pleased to bring this matter to a resolution.
“The actions of these five individuals were in clear violation of our policies and resulted in their immediate separation from the firm,” Ameriprise said in its statement. “We fully reimbursed clients who were impacted after the activity was discovered. The underlying advisor misconduct happened years ago. We continually review and improve our compliance program, and we’ve since enhanced controls to better detect this type of prohibited activity.”
The SEC’s order charged Ameriprise with failing to have reasonably designed policies and procedures to prevent its representatives from misappropriating client funds and failing to reasonably supervise the five representatives. Without admitting or denying the findings, Ameriprise agreed to be censured and pay a penalty of $4.5 million.
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