Securities America has made “substantial progress” in its mediation with plaintiffs’ attorneys involved in class action suits against the independent broker/dealer, said spokeswoman Janine Wertheim, in an email. The firm met with plaintiffs Thursday to negotiate a resolution to investor claims against the company related to its sale of allegedly fraudulent private placements from Medical Capital Holdings and Provident Royalties.
Although Wertheim would not comment further on the outcome of the mediation, she did say: “All interested parties have committed to a process that we hope will result in a full and final resolution of these matters.”
Plaintiffs’ attorneys have not returned phone calls seeking comment.
The mediation, held in Chicago, was lead by retired U.S. District Judge James M. Rosenbaum. The proceedings were initiated by Judge W. Royal Furgeson Jr. of U.S. District Court for the Northern District of Texas, who rejected a $21 million settlement agreement March 18. The settlement would have bundled several arbitration claims and class action suits together. Those individual arbitrations can now move forward.
Ameriprise Financial (NYSE: AMP), the parent company of SAI, posted a similar statement on its website Friday, which also said they’ve made “substantial progress.”
“Ameriprise Financial has been working with Securities America, Inc. (SAI), an independent subsidiary of Ameriprise, and plaintiffs to help SAI resolve legal matters related to sales of Medical Capital and Provident Royalties securities,” the statement said.
It has been highly debated whether Ameriprise will help SAI with its financial obligations. In its annual report, Ameriprise said it set aside $40 million in legal reserves to cover litigation related to the private placements. The report also said the firm was on the hook for about $400 million in outstanding obligations.
While the its legal obligations are still up in the air, the fiasco draws attention to the dangers of working for a sinking broker/dealer. SAI’s advisors are mixed in their reactions to the situation, with some staying loyal to the firm and a few making back-up plans. Securities America was certainly not the only b/d involved with these bad investments, and others are likely to continue to struggle with the fallout.