Ameriprise to Sell Brokerage Unit Securities America
After paying a hefty sum to settle legal claims against subsidiary Securities America (SA), Minneapolis-based Ameriprise Financial, Inc., has decided to sell the brokerage unit.
Ameriprise said Monday that “management has decided to identify an appropriate buyer for SA”-a move that it said will “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.”
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-reported to be somewhere between $150 million and $160 million-will go to investors who collectively claim to have lost $400 million on private placements bought through La Vista, Nebraska-based SA.
Ameriprise said Monday that “the sale process will not affect management's commitment to completion of the settlement on its current terms.”
SA is a broker dealer that provides technology and other support for 1,800 self-employed brokers who don't use the Ameriprise name.
It was a long road that led to the legal claims against SA. 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, some of which have been forced to close their doors, and SA was the largest among them.
Prior to the just-reported resolution, on December 31, 2010, SA was ordered to pay $1.2 million in compensatory and punitive damages, along with fees, related to its sale of the private placements.
In addition to announcing that it's putting SA on the auction block, Ameriprise also on Monday released its earnings for the first quarter of 2011. The company reported a profit of $241 million, or 94 cents per share, on revenue of $2.65 billion. During the same period in 2010, the financial services firm reported a profit of $214 million, or 81 cents per share, on revenue of $2.27 billion.
Excluding the settlement charge, the company earned $1.35 per share, up 54 percent from the same period the prior year. Those results are attributed to record levels of “advisor productivity,” strong retail client assets and activity, and last year's purchase of Columbia Management investment advisory firm.
Ameriprise is among Minnesota's 10-largest public companies based on revenue, which totaled approximately $10 billion in 2010.