Reports: Ameriprise Reaches $150M-$180M Settlement
Ameriprise Financial, Inc., and brokerage subsidiary Securities America, Inc., have reportedly agreed to pay between $150 million and $180 million to investors who lost money when securities bought through the unit turned out to be frauds.
La Vista, Nebraska-based Securities America told lawyers on Tuesday that a preliminary agreement had been reached to settle a class-action lawsuit and numerous arbitration claims, both Reuters and The New York Times reported.
However, the amount that Ameriprise has agreed to pay differs depending on the source. Reuters indicated that $80 million will be paid to settle the class-action suit and $70 million will be paid to investors pursuing claims in industry arbitration-which translates to a recovery rate of roughly 40 cents on the dollar. But The New York Times reported that the agreement will give investors almost $180 million, or about 45 cents on the dollar.
In a Wednesday statement e-mailed to Twin Cities Business, Minneapolis-based Ameriprise would say only: “We continue to make good progress toward a settlement of these matters.” Ameriprise and Securities America began mediation before a retired federal judge on March 24 in Chicago to try to reach an agreement.
The funds that will be paid under the settlement would reportedly go to investors who collectively claim to have lost $400 million on private placements bought through Securities America. Reuters reported that Ameriprise will fund the bulk of the payment because Securities America has very little capital.
Last month, rumors circulated that Ameriprise was prepared to let Securities America fail rather than paying its legal claims. But about a week later, in late March, reports surfaced that Securities America had reached a preliminary agreement to pay more than $50 million to settle the claims made by investors.
Securities America 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 Securities America to its current situation. 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 Securities America was the largest among them.
According to Reuters, the next step in the settlement process is getting a judge to approve the agreement. Lawyers involved with the case expect investors to receive settlement-related payments this fall.
Prior to the just-reported resolution, on December 31, 2010, Securities America was ordered to pay $1.2 million in compensatory and punitive damages, along with fees, related to its sale of the private placements.
Ameriprise is among Minnesota's 10-largest public companies based on revenue, which totaled approximately $10 billion in 2010.