Ameriprise Sells Troubled Brokerage Unit for $150M
After paying at least $150 million to settle legal claims against Securities America (SA), Minneapolis-based Ameriprise Financial has agreed to sell the brokerage unit for that same sum.
Ameriprise said Tuesday that it signed a definitive agreement under which Miami-based Ladenburg Thalman Financial Services, Inc., is set to acquire SA.
The all-cash transaction could include future payments if La Vista, Nebraska-based SA reaches “certain financial criteria,” Ameriprise said. The deal is pending regulatory approval and is expected to close by the end of the year.
In April, Ameriprise announced plans to find a buyer for SA-a move that it said would “allow SA to focus on growth opportunities in the independent channel and would allow Ameriprise to devote its resources to the Ameriprise-branded advisor business.”
Securities America is an independent broker-dealer that has about 1,700 financial advisors.
Ameriprise recorded a $118 million pre-tax charge in the first quarter of this year and a $40 million pre-tax charge in the fourth quarter of last year to settle claims from investors who lost money when two private placements they bought through SA turned out to be frauds.
The funds paid under the settlement-which total between $150 million and $160 million, according to media reports-went to investors who collectively claim to have lost $400 million on private placements bought through SA.
The legal claims against SA date back several years. In 2009, the U.S. Securities and Exchange Commission accused two companies that issued private placements-Provident Royalties, LLC, and Medical Capital Holdings, Inc.-of defrauding investors after their securities plunged in value.
A private placement is a sale of securities to a small number of select investors as a way of raising capital. Many brokerages distributed the securities, and SA was the largest among them; some of the others were forced to close their doors after the allegations surfaced.
Ameriprise is among Minnesota's 10-largest public companies based on revenue, which totaled approximately $10 billion in 2010.