[Post updated March 2021] When this post was first written in 2011, Ameriprise had just released its annual report, which showed its securities broker dealer subsidiary, Securities America, was hemorrhaging cash. Securities America’s capital had dropped by a whopping 86% in just one year as the company defended itself 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. Brokerage firms are required to perform due diligence on the products they recommend to customers.
Securities America Today
2021 Update: Ten years ago we were concerned about the financial stability of Securities America. Had they not had a strong parent, the firm would have likely failed. We believe most of their losses back then were caused by selling junk to customers. We are shocked that a supposedly sophisticated firm could have been so badly duped.
Fast forward to 2021, the firm remains in business but still makes mistakes. Last month the firm was censured for selling customers’ personal information to third parties. This included social security numbers and financial data. Thankfully it does not appear any of that information was misused.
In November 2020, the SEC charged Securities America Advisors with claims related to unsuitable sales of complex exchange-traded products to retail investors.
In 2018, Securities America was fined for failing to supervise their representatives regarding sales practices of variable annuities.
Customers have continued to successfully bring claims against the firms well. In fairness to the company, the number of new claims has slowed.
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 Law is a national boutique law firm that concentrates in fraud recovery, whistleblower actions and complex civil litigation matters against banks and financial institutions. We have helped people recover money lost to Ponzi schemes, stockbroker fraud and banking misconduct.
[Disclosure: The author of this post previously maintained an account at Ameriprise.]