Category Archives: Ameriprise Financial Services

The Financial Industry Regulatory Authority (FINRA) has fined Ameriprise Financial Services and its affiliated clearinghouse firm, American Enterprise Investment Services (AEIS), $750,000 for failing to properly supervise wire-transfer requests and the transmittal of customer funds to third-party accounts.

In February 2011, FINRA barred former Ameriprise registered representative Jennifer Guelinas for converting approximately $790,000 from two customers over a four-year period by forging their signatures on wire transfer requests and disbursing the funds to bank accounts she controlled. Following the investigation, Ameriprise paid full restitution to the two customers who were affected.

FINRA found, however, that both Ameriprise and AEIS failed to establish, maintain and enforce supervisory systems designed to review and monitor the transmittal of funds from customer accounts to third-party accounts. According to FINRA, neither Ameriprise or AEIS had policies or procedures in place to detect or prevent multiple transmittals of funds going to third-party accounts. Instead, they relied on a manual review of wire requests without the benefit of exception reports that could have helped to discern suspicious patterns.

Ameriprise and AEIS also failed to adequately track or further investigate wire transfer requests that had been rejected, FINRA said.

FINRA went on to state that Ameriprise failed to detect Guelinas’ scheme despite the multiple “red flags” that were present. For instance, Guelinas submitted three requests to wire funds from a customer’s account to a bank account that appeared to be under Guelinas’ control. Ameriprise processed the forged wire transfer requests and disbursed the funds without any inquiries.

In addition, there were at least three other occasions when Ameriprise initially rejected Guelinas’ forged wire transfer requests, including one for an apparent signature discrepancy. Guelinas, however, simply resubmitted the requests in question on either the same day or the next day. Guelinas also forged and submitted a wire transfer request after Ameriprise had begun to investigate her misconduct.

In all of the instances, Ameriprise disbursed the customer funds as Guelinas directed. Even after Ameriprise had terminated Guelinas, she submitted another forged wire transfer request. Ameriprise again disbursed the customer’s funds to a bank account Guelinas controlled; however, the firm realized its mistake in time to prevent Guelinas from accessing those funds.

“Ameriprise and its affiliated clearing firm missed numerous supervisory red flags, including the fact that two of the wire transfers went to accounts in Guelinas’ name. Firms must have robust supervisory systems to monitor and protect the movement of customer funds,” said Brad Bennett, FINRA Executive Vice President and Chief of Enforcement.

Ameriprise signed FINRA’s Letter of Acceptance, Waiver and Consent without admitting or denying the accounts.

Plagued by legal woes involving private-placements sales in Medical Capital Holdings and Provident Royalties, Securities America may soon have a new owner. As reported April 25 by Investment News, parent company Ameriprise Financial is looking to sell the troubled independent broker/dealer.

“In reporting its first quarter financial results this afternoon, Ameriprise management said it was looking to shed Securities America – the 17th largest independent broker-dealer in the industry according to Investment News data, which it acquired in 1998. Ameriprise indicated the potential sale of the firm would not have an impact on its $150 million settlement with investors suing the firm over private placements that have gone bust,” the article said.

In recent months, sales of private placements have been under the microscope by the Financial Industry Regulatory Authority (FINRA). Evidence of the new scrutiny became apparent in early April, when FINRA imposed fines and disciplinary actions against a number of firms that sold investments in Medical Capital Holdings and Provident Royalties.

FINRA’s disciplinary actions focused on the failure of broker/dealers to investigate the private placements being sold by their firms. Both Medical Capital and Provident Royalties were charged with fraud by the Securities and Exchange Commission (SEC) in July 2009.

Private placements are high-commission products, oftentimes producing hefty fees and commission for broker/dealers of up to 8%.

A deal may in the works between Securities America and investors who lost hundreds of millions of dollars from soured private-placement deals in Medical Capital Holdings and Provident Royalties. The story was first reported by Investment News on March 28.

Financial problems related to investor lawsuits in the private placements have been a growing source of concern for the broker/dealer. Now, it appears a settlement offer could be on the table.

Details of the offer have not been revealed.

Securities America sold about $400 million in private placements in Medical Capital Holdings. In July 2009, the Securities and Exchange Commission (SEC) charged the company with fraud, accusing it of essentially running a Ponzi scheme. That same month, the SEC also charged Provident Royalties with fraud.

Earlier this month, a federal judge denied a proposed $21 million settlement between Securities America and the plaintiffs in the case. If the settlement had occurred, investors would likely have received only pennies on the dollar.

And while Securities America may not have enough capital to pay plaintiffs 100 cents on the dollar, its parent company, Ameriprise, does.

As reported in the Investment News article, Securities America has reportedly informed its 1,800 brokers of the proposed settlement.

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.

Securities America and financial adviser Bradley Hofhines have been sued in a potential class action tied to Provident Royalties and oil-and-gas private placements that the Securities and Exchange Commission (SEC) alleged in July were fraudulent. Securities America has been named in at least two other related potential class actions; however, this may be the first time an adviser and his individual practice are cited.

As reported Dec. 1 by Investment News, a lawsuit filed Nov. 25 in an Idaho federal court alleges that Bradley K. Hofhines and his firm, Summit Retirement Advisors LLC, failed to disclose to clients that returns from investments in Provident Royalties LLC securities did not come from revenue generated by actual investments in oil-and-gas properties.

“Rather, investor funds were commingled, and funds raised from later offerings were used to pay so called dividends or “returns of capital” to earlier Provident investors,” the article says.

Hofhines is affiliated with Securities America, an independent broker/dealer subsidiary of Ameriprise Financial. Securities America and Ameriprise are named in the latest lawsuit.

The complaint alleges that the defendants violated federal securities laws and the Idaho Uniform Securities Act, as well as provided investors with materially untrue and misleading offering materials regarding Provident Securities.

In July, the SEC charged Dallas-based Provident of allegedly committing fraud in connection to the sale of $485 million of preferred stock and limited partnership offerings in oil and gas deals. Since then, many investors have begun legal action to get their money back by filing individual arbitration claims with the Financial Industry Regulatory Authority (FINRA).

If you have suffered investment losses and wish to discuss filing an individual arbitration claim with FINRA or have questions about these investments, please contact us.

A recently filed lawsuit claims advisers with Securities America chose to ignore obvious red flags in an effort to sell hundreds of millions of dollars’ worth of securities notes in Medical Capital Holdings, a California medical receivables company that now faces securities fraud charges from the Securities and Exchange Commission (SEC).

According to the lawsuit filed last week on behalf of Ilene Grossbard, an investor in Florida who invested $112,000 in a Medical Capital deal, Securities America sold offerings of Medical Capital as late as October 2008. Several months earlier, however, W. Thomas Cross, an executive with Securities America, wrote to a Medical Capital official expressing fear of “a panicked run on the bank” about Medical Capital. Those fears did not stop Securities America from selling the Medical Capital notes.

“Securities America apparently was not all that alarmed because less than a month later, in August 2008, [the firm] signed on to distribute, promote, offer and sell still more Med Cap securities, this time on behalf of the sixth and final offering by Med Cap, Medical Provider Funding Corp. VI,” the lawsuit says.

As reported Oct. 5 by Investment News, in addition to selling the sixth deal through October, Securities America continued selling Medical Capital’s previous offering, Medical Provider Financial Corp. V. The firm also allegedly neglected to warn investors of the potential dangers in the Medical Capital notes.

IIn July, the SEC charged Medical Capital Holdings with fraud in connection to the sale of $77 million worth of private securities. Since then, a court-appointed receiver, Thomas Seaman, has conducted an inventory of MedCap’s assets and reveals that of $80 million in verified accounts receivable, $74 million is more than 180 days old. An additional $543 million – 87% of all the accounts receivable on MedCap’s books – are “non-existent.”

Grossbard’s lawsuit is seeking class action status.

The lawsuit also names Securities America’s parent company, Ameriprise Financial, as a defendant.

Tell us about your situation with Securities America by leaving a message in the Comment Box below or via  the Contact Us form. We want to consult with you about possible legal options.

The widow of a 77-year-old man has filed an arbitration claim with the Financial Industry Regulatory Authority (FINRA) against Ameriprise Financial Services on allegations an Ameriprise broker failed to appropriately advise her elderly husband about a variable annuity purchase and further botched the beneficiary designation on the investment.

According to the claim, Deborah Amilowski, a broker with Ameriprise’s Hauppauge, New York office, recommended an unsuitable RiverSource variable annuity as an initial investment to the woman’s husband. As reported Aug. 27 by Investment News, when the client purchased the annuity in 2005, he was over the maximum age allowed for the guaranteed death benefit. As a result, any heirs would only be eligible to receive the market value of the annuity at time of his death, according to the claim.

The investor placed $850,000 into the annuity over a one-year period, according the Investment News article.

The original beneficiary on the annuity was an irrevocable trust, according to the claim, but the investor had instructed the Ameriprise broker to change the beneficiary designation to a revocable trust. Ameriprise reportedly informed the client (whose name has not been released) that his change request had been fulfilled. However, at the time of his death in March 2008, his family discovered that the change never made it to processing.

During the time that Ameriprise investigated the beneficiary designation issue, the account’s value went from more than $1 million to a little more than $750,000. The annuity was liquidated in October, 2008.

The widow is seeking damages for the unsuitable annuity recommendation, as well as for Ameriprise’s alleged negligence in failing to either pay out the benefit in a timely manner or to protect the annuity’s value.

In the face of regulatory inquiries and pronouncements by the Financial Industry Regulatory Authority (FINRA) on the inherent risks they pose to retail investors, more brokerages are curtailing their activity in leveraged and inverse exchange traded funds (ETFs).

FINRA initially raised questions about inverse and leveraged ETFs when it issued a notice to brokers/dealers on June 11, cautioning them that the instruments may not be suitable investments for retail investors who plan to hold onto the instruments for more than one trading session.

Shortly after FINRA’s edict, Saint-Louis based Edward D. Jones announced its intent to halt sales of leveraged ETFs. UBS and Ameriprise soon followed. Other brokerages, including Charles Schwab, Raymond James Financial and LPL Financial are reviewing their policies concerning ETFs, with some firms posting information on their respective Web sites that inverse and leveraged ETFs “are not right for everyone.”

Leveraged ETFs allow investors to amplify bets on a wide range of markets, while inverse ETFs make profits when prices fall.

Many investors, however, are unaware about the complexities and underlying risks of inverse and leveraged ETFs. Leveraged ETFs, for example, are designed to deliver their stated leverage on a daily basis. If an investor holds the ETF longer than one trading session, it potentially could lead to financial disaster. Leveraged ETFs also employ, as their name implies, leverage. This, in turn, increases the level of financial risk for investors.

On August 5, a lawsuit involving ETFs was filed in New York, accusing ProShare Advisors LLC and others of violating a securities act by failing to disclose the risks of its ProShares UltraShort Real Estate fund (SRS). Among the risks that the complaint contends the inverse leveraged exchange traded fund failed to cite: “Spectacular tracking error.”

Specifically, the lawsuit alleges that the fund’s index fell 39.2% from January 2008 to December 2008, but the fund fell 48.2%, which was not in accordance with ProShares’ stated objective that UltraShort ETFs go up when markets go down.

The complaint is seeking class-action status, according to an Aug. 6 article in the Wall Street Journal.

The dramatic losses of the SRS fund reiterate the inherent risks posed by inverse and leveraged ETFs, especially in times of a volatile market. In the 12 months through July 23, the Dow Jones U.S. Real Estate Index shed 38%, but the ProShares UltraShort Real Estate fund lost 82%, according to the Wall Street Journal article. This year through July 23, the index is down 3.5%, but the fund has slipped 67%.

Ameriprise Financial Services will pay $17.3 million to settle charges by the Securities and Exchange Commission (SEC) that it received undisclosed payments to sell real estate investment trusts (REITs) to customers.  According to the settlement with the SEC, which was announced July 10, sales of certain REITs provided the Minneapolis-based broker-dealer with $31 million in compensation.

“Few things are more important to investors than getting unbiased advice from their financial advisers,” SEC Enforcement Director Robert Khuzami said in a statement. “Ameriprise customers were not informed about the incentives its brokers had to sell these investments.”

REITs are entities that invest in different kinds of real estate or real estate-related assets, including office buildings, retail stores, and hotels. According to the SEC, neither Ameriprise nor the REITs disclosed to investors that additional payments were being made in connection with the sale of the REIT shares or about the conflicts of interest the additional payments created. 

In addition, the SEC found that Ameriprise issued a variety of mislabeled invoices to the REITs as a means of collecting the undisclosed revenue-sharing payments, making them appear as legitimate reimbursements for services provided by Ameriprise.