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Home > Investor News > Securities America: Med Cap Saga a Blow to Parent Ameriprise

Securities America: Med Cap Saga a Blow to Parent Ameriprise

Private-placement deals in Medical Capital Holdings and Provident Royalties have created a financial and legal firestorm for broker/dealer Securities America. Now, it appears Ameriprise Financial, the parent company of Securities America, is willing to shell out $200 million to bail out its troubled subsidiary.

As reported April 3 by Investment News, Ameriprise and Securities America have raised their offer to investors who lost some $400 million on the two private-placement deals that Securities America sold. The new offer would reimburse investors up to 48 cents for every dollar lost for a total of $192 million. Just two weeks ago, the companies were offering 15 to 20 cents on the dollar.

The increase might have something to do with concerns by Ameriprise regarding the impact of Securities America’s legal woes on its own credibility, not to mention the attention the issue is likely to draw from securities regulators.

The troubles facing Securities America have been ongoing for at least two years. They began in July 2009 when the Securities and Exchange Commission (SEC) charged Medical Capital and Provident Royalties with fraud. Securities regulators in Massachusetts and Montana also have sued Securities America. Montana is scheduled to begin its hearing against the company this month, and a ruling from Massachusetts is expected in May.

A number of independent broker/dealers sold Medical Capital and Provident Royalties investments to investors, but Securities America was the biggest seller by far.

Of the $400 million in financial losses from the two private-placement deals, a third have resulted in investors’ filing arbitration claims with the Financial Industry Regulatory Authority (FINRA) against Securities America.


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