by Brian Mahany
Ameriprise released its annual report, which shows its securities broker dealer subsidiary, Securities America, continues to lose money. Securities America’s capital has dropped by a whopping 86% in the past year as the company continues to defend against investor lawsuits. The company’s actual capital on hand at the close of 2010 was a mere $2 million, down from $15 million just a year earlier.
Securities America has been facing a large number of lawsuits and securities arbitration claims from investors who lost money in two of the company’s prior offerings. Those claims have been tentatively settled.
That’s not the end of the company’s problems, however. More claims and class action suits are pending, this time involving allegedly fraudulent private placements offered by the company. Ameriprise says it will set aside $40 million to deal with those claims.
Securities America has a minimum capital requirement of $250,000. If their capital on hand goes below that, regulators can shut down the company. As a practical matter, however, even $250,000 isn’t enough money to pay all potential claims.
Is Securities America a safe place to do business? At this point, yes. As long as parent Ameriprise continues to set aside reserves, there should be enough money to pay claims.
Note that not every broker dealer has a financially strong parent company standing behind it. If you are dealing with a smaller broker dealer, be very wary of low capital on hand.
More problematic is how and why Securities America was apparently duped by phony offerings. If you lost money because of a stock or investment recommended by a Securities America stockbroker (Ameriprise), contact a securities lawyer for a second opinion.
Not every loss, of course, is the fault of the broker. Bad investment advice, however, always warrants a second opinion.
Mahany & Ertl is a boutique law firm that concentrates in fraud recovery, white-collar criminal defense, tax matters and select civil litigation matters. We have helped people recover money taken in Ponzi schemes, by bad brokers, invested in faulty welfare benefit plans (419 plans) and even lost through the incompetence of lawyers.
For more information, contact Brian Mahany directly at (414) 704-6731 or through the website, https://www.mahanyertl.com
[Disclosure: The author of this post maintains an account at Ameriprise and has done so for several years.]