Ameriprise resists bailout of subsidiary clients

Sep 26, 2008 @ 3:46 pm

By Bruce Kelly

Ameriprise Financial Inc. has no immediate plans to bail out clients of advisers of its independent broker-dealer subsidiary, Securities America Inc., which saw $60 million erased last week when a giant money market fund, the Reserve Primary Fund, “broke the buck”.

Ameriprise, however, is protecting its own clients.

On Wednesday, it said it was making clients of Ameriprise reps whole, paying them a total of $33 million.

Ameriprise of Minneapolis has no plans at the moment to make the same offer to the clients of advisers of Omaha, Neb.- based Securities America, said Ben Pratt, an Ameriprise spokesman.

“It’s a tough situation,” he said when asked about Securities America and their clients. “We’re still evaluating [it].”

The fact that Ameriprise will pay its clients and not those of Securities America has become an extremely sensitive issue for many of Securities America's 1,750 representatives and advisers, said sources inside and outside the firm.

The Primary Fund, administered by The Reserve Management Corp. of New York, "broke the buck" Sept. 15, falling in value to 97 cents.

The two firms had 325,000 client accounts with $3.2 billion invested in the fund.

Securities America’s CEO, Steve McWhorter, said he was pleased with Ameriprise’s overall reaction to the crisis.

Mr. McWhorter added that Ameriprise has given Securities America a line of credit in order to help its clients. “I think Ameriprise has stepped up.”

One difficulty in the issue of the Primary Fund, he said, was ascertaining the accurate value of the fund. And finding that out will take time.

“There has to be some clarity on the numbers,” he said.

Ameriprise and Securities America are acting in concert in other areas around the issue.

Ameriprise and Securities America on Sept. 19 sued.

The Reserve and its founder, Bruce Bent, alleging misconduct in the administration of the Primary Fund.

The suit claims that The Reserve on Sept. 15 “secretly notified a number of major institutional investors” in the $64 billion Primary Fund of its exposure to debt issued by New York-based Lehman Brothers Holdings Inc.


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