Less than 24 hours after posting “Why Sue Your Broker,” one reader sent me a link to a Reuters article announcing the settlement of a class action against Ameriprise. The facts aren’t as important as the lesson – class actions often result in low recoveries.
In the Ameriprise case, clients of Ameriprise Financial Inc. sued the broker dealer for selling them an investment in Medical Capital which apparently was nothing more than a Ponzi scheme. Ameriprise allegedly told customers that they were investing in safe medical receivables that would both preserve their capital and pay nice profits. They did not tell investors that the CEO of the company, Sidney Field, had a shady past and had lost his insurance license and was charged with racketeering and fraud.
Investors in the two deals that purchased through Ameriprise lost approximately $300 million. The amount of the settlement? Just $27 million or less than 10 cents on the dollar. That figure may be less depending on whether the settlement is pre or post legal fees.
Obviously, not every class action pays so little. Some return more to investors and some less. As a general rule, however, investors should always speak with their own lawyer and not simply rely on a class action. Most securities fraud lawyers will review your case for a very low fee or free of charge.
There is always tension between the class action bar and lawyers that specialize in stockbroker fraud and FINRA arbitration cases. Both groups have their place. Prudent victims, however, should always seek an opinion from a lawyer and not just hope the court or a class action lawyer will get back their money.
In securities cases, our general rule is to always try and locate to take your claim individually. The problem, however, is that most law firms that specialize in this work have high minimum loss thresholds. For example, we won’t even consider a case unless the out-of-pocket losses exceed $100,000.
For retail investors, losses between $10,000 and $50,000 are more the norm. Since lawyers usually take securities fraud cases on a contingency fee basis (success fee), it is hard to find a competent lawyer willing to sink thousands of dollars in costs and hundreds of hours of work if on the best day the payoff is a few thousand bucks.
For people with smaller losses, a class action may be the best bet. (The only other alternative assuming you can’t find a lawyer to handle your case, is to litigate the case pro se (meaning without a lawyer). Given the very complex nature of securities law and industry regulations, pro se complaints are rarely successful.
Were You Ripped Off by a Brokerage Firm?
Mahany Law is a full service, national boutique law firm that assists victims of investment fraud recover their money. We have successfully handled many cases of investment fraud, securities fraud, stockbroker negligence claims, bank fraud and even attorney malpractice. We accept cases throughout the United States. To see if you have a case, contact attorney Brian Mahany online, by email or by phone .