Securities America Inc. is dealing with the fallout from a rogue broker it fired last year, who was later charged with running a Ponzi. The firm now faces a lawsuit alleging that a family suffered $18 million in losses after working with the adviser since 2001.
In December, the broker, Hector A. May, pled guilty in federal court to running a Ponzi scheme. He faces up to 25 years in prison. According to his BrokerCheck profile, Mr. May was fired by Securities America one year ago after he was accused of stealing client assets.
The Jamieson family filed the complaint against Securities America, one of the largest independent broker-dealers in the industry, and Mr. May in U.S. District Court for the Southern District of New York on Feb. 26.
Securities America disclosed the complaint and its claim of $18 million in compensatory damages in the annual audited financial statement it filed at the start of this month with the Securities and Exchange Commission.
Securities America did not respond to a request for comment.
According to the complaint, Mr. May ran the Ponzi scheme with his daughter, Vania May Bell. Over 17 years, Mr. May, with the assistance of his daughter, "stole millions from the Jamieson family and repeatedly provided investment advice designed to make it easier for him to steal more," the complaint says. "The only reason May and Bell were able to perpetrate a fraud that was breathtaking in scope — the Jamieson family was not the only victim — and duration was the abject failure of Securities America to perform its duties."
The firm failed to supervise the broker properly and ignored "stark red flags" that would have exposed the scheme in 2003, at a time when Mr. May had stolen only $750,000 from the family, according to the complaint.