An arbitration panel for the NASD says that Ameriprise’s Securities America must pay up to $9.3 million to three retired American Airlines pilots who are accusing a broker of spending their retirement savings on mutual funds that had high fees and trading costs. A spin off from American Express Co., Amerprise Financial offers clients financial planning and advice. Securities America is an Ameriprise Financial Inc. subsidiary.
In an NASD ruling, broker Robert P. Gormly, Jr. and Securities America are both being held liable for $2.4 million in lawyer’s fees and $3.9 million in damages. In addition, Securities America must also pay $3 million in punitive damages.
According to the American Airlines pilots, Gormly (who had been affiliated with Securities America in Texas) had initially purchased products from the American mutual funds group, liquidated the funds between 1998 and 2003, and then directed the pilots’ money into more aggressive Rydex funds that he traded on a nearly daily basis.
This ruling was the second significant arbitration award in 2006 to Ameriprise clients who say that the company’s brokers negatively spent their clients’ retirement funds on inappropriate investments. Just last September, Ameriprise agreed to settle a case by 32 former Exxon Mobile Corp. employees for $16.3 million-$13.8 million in restitution and $2.5 million for failing to properly supervise the broker involved. Ameriprise also agreed to hire a consultant who would review the way the company marketed investment recommendations to retired workers. In its ruling, the NASD said that a broker persuaded Exxon employees to retire early by cashing out company-sponsored investment plans and reinvesting the funds with Securities America. Even though there were investment losses, the broker said he could win the retired investors returns between 11.5% and 18%.
There are two more arbitration claims pending against Gormly and Securities America that were filed by airline pilots. Hearings for one of those cases will begin in January.
The NASD is the largest private-sector regulator of financial services. Every securities firm in the United States must register with the NASD. Over 663,535 stockbrokers and registered representatives and more than 5,100 brokerage firms fall under the NASD’s jurisdiction. Among its many responsibilities, the NASD writes rules governing the behavior of securities companies, examines firms and brokers for compliance, and makes rulings and enforces actions anytime the rules it has created are broken. NASD’s arbitration hearings are the main forum on Wall Street for clients to file their complaints against brokerage firms and stockbrokers.
At Shepherd Smith Edwards & Kantas LTD LLP, Our primary goal is to represent investors who have lost their savings and retirement when their brokerage accounts were mishandled. Our firm has represented thousands of clients nationwide who were victims of misrepresentations, commission churning, unsuitable investments, unauthorized transactions, execution failures, excessive mark-ups, disappearing funds, botched transfers, web-broker outages, “selling away” from firms, unregistered brokers, unregistered securities, improper margin liquidations, broker bribes, fraudulent research, “boiler room” sales practices, and other wrongful acts. If you would like to speak with one of our attorneys for a free consultation, contact Shepherd, Smith, and Edwards today.
Ameriprise Unit Must Pay Retired Pilots $9.3 Million, Bloomberg.com, December 27, 2006
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