Securities America Loses $400 Million Private Placement "Poverty" Plea

Monday, March 21, 2011 06:48
Securities America Loses $400 Million Private Placement

Tags: compliance | securities fraud

A federal judge has ruled that despite Securities America's claims that it doesn't have the cash to make good on its clients' losses in a bad private equity placement, the claims are valid and can proceed.

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Securities America went to court in an attempt to pay only $48 million on an estimated $400 million in client losses related to a private placement in a company called Medical Capital Holdings.


FINRA has determined that the brokerage firm failed to do adequate due diligence on the company, which in turn packaged and sold medical debt that didn't actually exist.


Securities America says it only has $2 million in cash, but the judge noted that there were interesting movements of money between it and corporate parent Ameriprise in the recent past.


Plaintiffs hope that Ameriprise will be forced to make good on their claims. Since recent decisions in the Medical Capital Holdings case have been adding penalties of about 70% on top of investment losses, those claims could be extraordinarily expensive.


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