Ameriprise to pay $17.3M for receiving undisclosed compensation for REIT sales

Ameriprise Financial Services Inc. of Minneapolis has agreed to pay $17.3 million to settle charges that it received nearly $31 million in undisclosed compensation for selling its brokerage customers real estate investment trusts between 2000 and 2004, the Securities and Exchange Commission announced today.
JUL 10, 2009
By  Bloomberg
Ameriprise Financial Services Inc. of Minneapolis has agreed to pay $17.3 million to settle charges that it received nearly $31 million in undisclosed compensation for selling its brokerage customers real estate investment trusts between 2000 and 2004, the Securities and Exchange Commission announced today. “Ameriprise demanded and received so-called revenue sharing payments related to its sales of real estate investment trusts and failed to disclose the payments as required,” the SEC said in a release. The REITs involved were issued by CNL Financial Group Inc. of Orlando, Fla. and W.P. Carey & Co. LLC of New York. Ameriprise sold more than $3.5 billion worth of shares of the REITs to its brokerage customers without disclosing the payments, the SEC said in the administrative proceeding, filed today. Under the revenue-sharing arrangements, Ameriprise received undisclosed payments of $21.1 million from the CNL REITs and $9.7 million from the Carey REITs, the SEC said. The payments were made in addition to standard sales commissions, dealer fees, expense reimbursements and other fees that Ameriprise disclosed that it had received for distributing the REITs, the SEC said. A portion of the revenue-sharing payments made to Ameriprise, when added to other payments it received, caused some of the Carey REITs to exceed the 10% cap on broker-dealer compensation required under the rules of the Financial Industry Regulatory Authority Inc. of Washington and New York. In addition to failing to disclose to investors that additional payments were being made for selling REIT shares, the SEC order found that Ameriprise issued invoices for the REITs that were mislabeled as “account maintenance” fees as a means of collecting the undisclosed revenue-sharing payments. Ameriprise was responsible for selling more than 75% of the shares of the two companies' REITs and was the only major broker-dealer to offer the securities, the SEC said in the administrative proceeding. Ameriprise also sold more than $100 million of one of the Carey REITs before it was registered, which was in violation of the registration provisions of federal securities laws, the SEC said. “Few things are more important to investors than getting unbiased advice from their financial advisers,” Robert Khuzami, the SEC's director of enforcement, said in the release. “Ameriprise customers were not informed about the incentives its brokers had to sell these investments.” The SEC censured Ameriprise and ordered it to cease and desist from violating securities laws, and it ordered the company to pay $17.3 million in disgorgement and financial penalties. Ameriprise consented to the order without admitting or denying the findings. “This is a very old case that hinged on issues of revenue-sharing disclosure that ended in early 2004,” Ameriprise spokesman Paul Johnson said. “We long ago expanded our disclosures to ensure that our clients received the information from us directly as well as through the prospectus of the product issuer, he said. The SEC investigation continues.

Latest News

Social Security trustees see one less year in insolvency countdown, project shortfall to start 2034
Social Security trustees see one less year in insolvency countdown, project shortfall to start 2034

New report shows dimmed outlook for benefits to retirees and disabled Americans, creating further pressure for federal tax hikes or more borrowing.

NY Republican Stefanik presses SEC to probe Harvard bond sale
NY Republican Stefanik presses SEC to probe Harvard bond sale

Open letter to SEC Chair Paul Atkins questions whether the Ivy League university withheld material information prior to its $750 million taxable bond offering.

Ex-LPL leader re-emerges at The Wealth Consulting Group
Ex-LPL leader re-emerges at The Wealth Consulting Group

The Las Vegas-based hybrid RIA overseeing $8.8 billion in assets has named Andy Kalbaugh president to help scale its advisor platform.

Envestnet extends investment offerings with new alts model portfolios
Envestnet extends investment offerings with new alts model portfolios

The wealth tech giant – in collaboration with Fidelity, BlackRock, State Street, and Franklin Templeton – is offering its advisor and wealth firm users more ways to diversify.

Just as wealth industry M&A was picking up, economic uncertainty could kill it again
Just as wealth industry M&A was picking up, economic uncertainty could kill it again

Deal volume increased post-election but now caution has taken over.

SPONSORED RILAs bring stability, growth during volatile markets

Barely a decade old, registered index-linked annuities have quickly surged in popularity, thanks to their unique blend of protection and growth potential—an appealing option for investors looking to chart a steadier course through today's choppy market waters, says Myles Lambert, Brighthouse Financial.

SPONSORED Beyond the dashboard: Making wealth tech human

How intelliflo aims to solve advisors' top tech headaches—without sacrificing the personal touch clients crave