Securities America is a large broker dealer headquartered in La Vista Nebraska. Licensed in all 50 states and in business for over 3 decades, the firm is well established in the industry. Lately, however, it has attracted some negative attention for its business practices. Some say the company has allowed or ignored fraud by some of its stockbrokers.
This month, the Financial Industry Regulatory Authority – FINRA – announced the firm was censured and fined $100,000 for not reviewing emails sent by some of its representatives. Regulators say that Securities America’s email monitoring system failed to identify misleading communications that misrepresented private placement offerings offered by the firm. Although it did not admit to the allegations, Securities America agreed to pay the fine and correct any oversight deficiencies.
If that sounds like a trivial violation, it isn’t. Unlike investment advisers, stockbrokers are paid on commission. There is a natural tendency by some brokers to exaggerate claims and minimize risks in order to make a sale. Stockbrokers operate under strict rules that require them to know their customer (KYC rules), fully understand their financial circumstances and risk tolerance and only then, make recommendations suitable for their clients (suitability rules). Because private placement investments often pay much higher commissions, there is more temptation to mislead or cut corners with these investments.
The investments believed to give rise to the investigation and sanction were in IMH Secured Loan Fund and Medical Capital Funding Corporation (Med Cap). Securities America also came under scrutiny by state regulators for sales of Med Cap investments.
Just last month, the Massachusetts Securities Division sanctioned Securities America for selling non-traded REITS (Real Estate Investment Trusts) in excess of state limits. Once again, the company did not admit to wrongdoing but agreed to a cease and desist order, payment of a $150,000 fine and to pay restitution to affected investors. That investigation centered on 13 different REIT offerings. Like private placements, REITS usually pay higher commissions but often are not suitable for many investors.
All told, FINRA says Securities America has 62 reportable events. For a large company, that is not necessarily bad but the recent complaints suggests a breakdown in the company’s ability to manage and supervise its many branches, particularly when it comes to riskier private placement investments and REITs.
If you lost $100,000 or more because of a stockbroker, investment adviser or other financial professional, give us a call. The stockbroker fraud lawyers at Mahany & Ertl have helped many investors get back their hard earned money. We also take cases involving other frauds including legal and accounting malpractice. Most cases can be handled on a contingent fee basis meaning no legal fees unless we recover money for you.
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Post by Brian Mahany, Esq