Securities America, a broker/dealer division of Ameriprise Financial, is facing charges by Massachusetts Secretary of State William Galvin for allegedly making omissions and misleading statements in connection to sales of some $700 million in promissory notes.
“Our investigation showed that Securities America ignored their own due diligence analysts and sold these notes to unsophisticated investors without telling them the risks involved,” Galvin said in a statement. “People invested their life savings, while this dealer hid from them the truth of what they were getting into.”
The notes in question were issued by special-purpose corporations owned by Tustin-based Medical Capital Holdings, which was charged this past summer by the Securities and Exchange Commission (SEC) in a $77 million offering fraud.
Private placement securities are supposed to be for “accredited” investors, but unsophisticated investors placed their life savings into Medical Capital notes based on recommendations from Securities America that the investments were suitable, according to the Massachusetts complaint. More than 400 registered reps of Securities America sold the notes using private placement memorandums, marketing flyers and pamphlets, the complaint states. The notes were characterized as “secured” in material from Medical Capital and Securities America, the division says.
From 2003 through 2009, Medical Capital issued more than $1.7 billion in notes, and Securities America placed $697 million. For that work, Securities America received more than $26 million in compensation.
Since August 2008, Medical Capital has defaulted on all of its outstanding notes and currently is in permanent receivership. As a result, millions of dollars of investors’ life savings remain frozen and illiquid.
If you have suffered investment losses connected to sales of private placements by Securities America and wish to discuss filing an individual arbitration claim with the Financial Industry Regulatory Authority (FINRA), please contact us. A member of our securities fraud will evaluate your situation to determine if you have a viable claim for recovery.