In its first quarter earnings report, Ameriprise Financial (NYSE: AMP) says it intends to sell Securities America. The news comes while the financial firm is still in the process of finalizing its securities fraud settlement with investors accusing the brokerage unit of selling allegedly fraudulent private placements of Medical Capital Holdings and Provident Royalties.
Investors sustained about $400 million in losses after taking part in Medical Capital Holdings-sponsored debt sales and shale gas investments with Provident Royalties. Although originally Securities America had about $400 million in outstanding obligations, the proposed settlement is worth $150 million. The independent broker-dealer unit is accused of failing to do proper due diligence on millions of dollars in investments that it sold, which later proved to be worthless.
Investors who filed securities arbitration cases against Securities America will receive $70 million. Those who are seeking to get back their losses through a class action securities lawsuit will get $80 million. The financial firm could be facing over $300 million more in arbitration claims over the fraudulent placements.
There is speculation over why Ameriprise’s decision to sell comes now. Does this mean that the financial firm has other issues of concern, beside the securities allegations, with Securities America? The sale may also mean that Ameriprise has decided to focus on its core business.
Per the earnings report, Securities America entered into the settlement agreements last month. This has resulted in a $118 million pre-tax charge for Ameriprise during 2011’s first quarter, as well as the $40 million pretax charge it incurred during last year’s fourth quarter.
Related Web Resources:
Securities America Agrees To Settlement With Investors-Sources, The Wall Street Journal, April 13, 2011
Ameriprise profit up, selling Securities America, AP/Bloomberg Businessweek, April 25, 2011
Ameriprise profit up, selling Securities America, Bloomberg Business Week, April 25, 2011
More Blog Posts:
Texas Securities Fraud: Three FINRA Cases Against Securities America Over Sale of Private Placements Halted, Stockbroker Fraud Blog, February 22, 2011
Securities America Inc. to Pay $1.2M in Compensatory and Punitive Damages Over Allegedly Fraudulent Medical Capital Notes, Stockbroker Fraud Blog, January 6, 2011
Securities America & Ameriprise Financial Inc. Sued For Selling Allegedly Faulty Private Settlements, Stockbroker Fraud Blog, November 10, 2009 Continue Reading ›