Private placements are securities in stocks, bonds or other instruments that a corporation issues to investors. The investments are riskier than traditional securities because many of the issuing companies don’t have to register their placements with the Securities and Exchange Commission (SEC).
Former schoolteacher Adrianne Cross found this out the hard way. According to a March 27 article in the Wall Street Journal, Cross, 64, invested her life savings in private placements. She thought the investments were safe. Now she’s lost everything.
According to the Wall Street Journal, Cross’ broker worked for Ameriprise Financial’s Securities America unit in Los Angeles. Cross says the broker persuaded her to invest more than $1 million in private-placement securities issued by Medical Capital Holdings and Provident Royalties LLC in 2007. The broker allegedly told Cross that the investments were a safe alternative to stocks.
The Securities America broker was wrong. Both Medical Capital and Provident Royalties, which face fraud charges by the SEC, collapsed in 2009. For Cross and thousands of other investors, it meant their investments became essentially worthless.
Cross has since filed an arbitration claim with the Financial Industry Regulatory Authority (FINRA) in an attempt to recover her losses.
In January, Massachusetts’ Secretary of State William Galvin brought the first state enforcement case against Securities America over the broker/dealer’s sales practices of Medical Capital securities. According to the complaint, Securities America’s representatives failed to disclose the risks to customers, many of whom were retirees.
If you have a story to tell involving Medical Capital Holdings, Securities America and/or Provident Royalties, please contact a member of our securities fraud team.