Securities America Gets Bailed Out By Parent Ameriprise
Ameriprise, the parent company of its beleaguered independent broker-dealer subsidiary, Securities America, Incorporated, took a big hit to save face and avoid additional scrutiny of the securities regulators, according to securities industry experts. That decision was provoked by the private placement deals involving Medical Capital Holdings and Provident Royalties that have haunted Securities America and caused the firm to threaten bankruptcy. Investment News broke the story reporting that Ameriprise has stepped in and raised the offer to 48 cents for every dollar lost for a total of nearly $200 million. This is up from an offer of 15 to 20 cents on the dollar only a couple of weeks ago.
Although there were many independent broker-dealers who sold Medical Capital and Provident Royalties investments to investors, Securities America was by far the largest seller of the private placements that ended up worthless. Securities America is not unlike other independents that are thinly capitalized with thin profit margins and the burden of spending roughly $2 million a month on attorneys’ fees for defending claims could not be continued. Fortunately, Ameriprise posted a profit of $1 billion last year and industry observers concluded that “while Securities America may not be too big to fail, its parent company, Ameriprise, is too big to let it fail.” Not only would that be embarrassing but the failure to protect the firm’s reputation could adversely affect future business, as well as cause increased scrutiny by regulators for compliance failures, unethical behavior, the misconduct of employees and other lapses.
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