A mediation session to resolve hundreds of millions of dollars of investor claims against Securities America Inc. failed to yield a settlement last week, as the firm's 1,800 reps and advisers continue to speculate on whether the firm will survive.
A mediation session to resolve hundreds of millions of dollars of investor claims against Securities America Inc. has failed to yield an expeditious settlement -- the firm’s 1,800 reps and advisers continue to speculate on whether the firm will survive.
On Friday, the firm sent an e-mail to its 1,800 reps and advisers, canceling a scheduled conference call for after the close of the market that was to update them on negotiations of the mediation and the firm’s future.
The firm, along with its parent, Amerprise Financial Inc., is trying to resolve a class action lawsuit and numerous arbitration claims in connection with the sale of $400 million of allegedly fraudulent private placements.
Securities America advisers have spent a tense week as the firm faces the potential threat of shutting down due to legal expenses and damages from lawsuits if some sort of wide ranging settlement is not reached.
On March 18, its chief financial officer Kelly Windorski testified in federal court in Dallas that the firm could go out of business if a federal judge rejected Securities America’s initial, proposed $21 million settlement with investors. Judge W. Royal Furgeson Jr. rejected that proposed settlement and later sent the two sides into mediation.
That process started Thursday in Chicago. The mediation is being overseen by retired federal judge James M. Rosenbaum.
“We hope to hear more next week, maybe Tuesday,” said one broker, who asked not to be named.
“Negotiations are ongoing,” wrote Janine Wertheim, a spokeswoman, in an e-mail.
The multi-million dollar legal dilemma at Securities America has been unfolding since July 2009, when the Securities and Exchange Commission charged two sponsors of high risk private placements with fraud. Those sponsors, Medical Capital Holdings Inc. and Provident Royalties LLC, sold about $2.7 billion of investments through dozens of independent broker-dealers, many of which have gone out of business due to crushing legal bills and liabilities.
Securities America brokers were by far the biggest seller of Medical Capital offerings, selling $700 million of the product. About half is in default.
