Late last Friday, Securities America received news that a federal judge would not be approving the broker/dealer’s request for a $21 million class action settlement. The case involves soured private-placement deals in Medical Capital Holdings and Provident Royalties.
As reported March 19 by Investment News, the decision has been closely watched by hundreds of investors who are suing the firm for financial losses they incurred in Med Cap and Provident. If the settlement had been approved, investors would have been forced to drop their arbitration claims and join the class action lawsuit.
And in doing so, investors would have likely received only pennies on the dollars for their losses.
In July 2009, the Securities and Exchange Commission (SEC) charged both Medical Capital and Provident Royalties with fraud. Two state securities regulators – Montana and Massachusetts – also are suing Securities America.
During the class-action hearing, Judge W. Royal Furgeson Jr. centered in on the relationship between Securities America and its parent company, Ameriprise Financial Inc. Among other things, Furgeson noted that Ameriprise benefited from “positive revenue growth” at Securities America while it insulated itself from the potential liability of Securities America brokers who sold the private placements to investors.