Securities America Seeks to Resolve Arbitration Cases Involving Medical Capital and Provident Royalties

Last week, a federal court rejected Securities America's attempt to force arbitration claimants to abandon their cases and require them to participate in a class action settlement that would allow defrauded investors to recover only one-eighth (1/8) of their $400 million in losses due to investments in Medical Capital Holdings, Inc. and Provident Royalties. Securities America's effort to extinguish investors' arbitration rights came on the heels of a customer's $1.2 million arbitration award, which included punitive damages, against the firm for allegedly fraudulent sales of Med Cap securities.

Yesterday, Investment News reported that Securities America has now proposed a settlement of all of the individual investor arbitration claims by offering the claimants nearly 50% of their losses. This offer represents a significant increase from the last offer Securities America made before the federal court ruled last week.

While Securities America's proposal represents its attempt to manage its exposure by settling for a sum certain, the offer was reportedly extended only to investors with existing arbitration claims, and does not provide for claims that may yet be filed in the future.

Investors who have lost money in Med Cap and Provident investments and who believe they have claims against Securities America and its parent, Ameriprise Financial, should contact an investment fraud lawyer to investigate their claims.

LPL Financial Disciplined For Allowing Broker To Improperly Transfer Customer Funds to His Own Account

Earlier this month, LPL Financial, LLC was fined $100,000 by the Financial Industry Regulatory Authority ("FINRA") for failing to maintain supervisory procedures to catch a representative who was transferring assets from a customer account to the broker's personal account with the firm.

In the face of charges by the regulatory agency, LPL Financial submitted a Letter of Acceptance, Waiver and Consent by which the firm consented to a censure and the fine, while at the same time neither admitting or denying the facts.

According to the FINRA enforcement action, LPL Financial did have a supervisory system that was intended to monitor the transfer of funds or securities from a customer account to third parties. However, the firm's system simply failed to address movement of assets from a customer account to a broker's LPL account. This failure allowed a broker to convert for his own benefit more than $1 million in cash and securities belonging to LPL customers.

This is one of three fines, totaling $220,000, that FINRA assessed against LPL Financial this month for various disciplinary violations in March, 2011.

Any investors who suspect that money or securities have been moved from their accounts without proper authority should immediately investigate the circumstances of the transfers.Investment fraud lawyers can assist with that investigation and seek to recoup embezzled funds.

Charles Schwab Must Pay $18 Million to Investors for Improper Sales Practices Concerning YieldPlus Bond Fund

Earlier this year the regulatory agency that oversees brokerage firms ordered Charles Schwab to reimburse investors in its YieldPlus ultra short-term bond fund a total of $18 million through a fund to be set up by the Securities and Exchange Commission ("SEC").

The Financial Industry Regulatory Authority ("FINRA") determined that Schwab misrepresented the YieldPlus fund as a low risk alternative to money market funds despite the disproportionate impact the upheaval in the mortgage-backed securities market had on the YieldPlus portfolio.

Between September 2006 and February 2008, Schwab sold more than $3.3 billion of YieldPlus shares to its customers, including a significant percentage who were over 65 years of age. At the beginning of this period, Schwab changed the classification of non-agency mortgage-backed securities to allow the fund manager to increase the percentage of these volatile securities to over 50 percent of the fund's assets. According to FINRA, while YieldPlus' NAV declined through 2007, Schwab internal records admitted that YieldPlus was a higher-risk investment than it had been before this change. Despite this understanding, Schwab continued to market the fund to customers "as a cash alternative with minimal risk and price fluctuation."

While neither admitting or denying any wrongdoing, Schwab has now settled FINRA's charges by agreeing to pay $18 million into the SEC's "Fair Fund" to compensate investors with the fees Schwab earned in selling the fund.

Investors who believe they have lost money because of Schwab's improper sale of YieldPlus funds, or any other actions, should contact an investment fraud lawyer to investigate their claims.

Chicago Bulls Star Carlos Boozer Files Investment Fraud Lawsuit

The parade of investment advisors who target professional athletes for fraud has claimed another victim. Carlos Boozer, a starting forward for the Chicago Bulls NBA franchise, has filed a lawsuit alleging that he and his wife were "maliciously" induced to invest $1 million in a Florida company that was marketed as being in the business of constructing affordable housing for disaster victims.

According to Boozer's lawsuit, the owners of the company, InnoVida, represented that investors would receive returns of 1,000% while helping people in need who lost their homes. This combination of benefits proved too attractive for Boozer and others to pass up. Rather than use the investment funds as intended, the lawsuit alleges the owners of the company used the money to fund a lavish lifestyle.

Professional athletes are often targeted for investment fraud because they are young, inexperienced in investment matters, and place a premium on trust. Often, the schemes used to defraud them involve private placement investments that are not liquid and are represented to offer large returns. Whether or not you are a professional athlete, the effects of investment fraud can be devastating. Victims of fraud should consult with experienced investment fraud lawyers to learn their rights and pursue claims to recoup their losses.

UPDATE: Securities America Victims Can Pursue Arbitration Claims for Medical Capital Losses

Investors who accused Securities America and its parent, Ameriprise Financial, of selling fraudulent interests in Medical Capital ("MedCap") and Provident Royalties found themselves odds in a federal court in Dallas, with some investors realigning their interests with the firms they sued.

Attorneys for investors who filed a class action lawsuit against the firms had secured a settlement agreement that would pay nearly $50 million to the thousands of investors victimized by these deals. The catch, however, was that individuals who wanted to pursue their own claims in arbitration against their advisors had to be forced to participate in the class settlement and abandon their individual cases against Securities America and Ameriprise.

This condition was significant to the firms because the individual arbitration claims exposed the broker-dealer to the potential for huge liabilities. In a class action, any settlement would be equitably distributed among all class members who had similar cases but who did not want to pursue claims on their own. Typically, class members have the right to opt-out of any class settlement and file their own lawsuits without regard to any other payments the defendant made. The benefits of class action settlements are greater to a defendant when larger numbers of class members participate in a class settlement.

With the MedCap litigation  the class action settlement was less attractive to many victims because of the possibility of larger awards in favor of investors who decided to forego the class action and instead file their own arbitration claims. In January, 2011, one couple who sued the firm won an arbitration award of $1.2 million. Given the large number of investors who lost an estimated $400 million in MedCap, the likelihood of individual arbitration awards threatened Securities America's very existence.

Accordingly, Securities America and Ameriprise sought to eliminate the greater threat posed by individual cases by insisting that all MedCap and Provident investors be forced to participate in the class settlement. The settlement was submitted to the court, which had to decide on the viability of that structure. As a result, investors who opted out of the class action battled investors who wanted the class action settlement to be approved.

On March 18, 2011, the federal court judge overseeing the class action rejected the settlement, allowing aggrieved investors to continue their individual arbitration cases. The status of the agreement to settle the class action lawsuit remains up in the air.

Investors who have lost money from investments in Medical Capital or Provident Royalties should make sure they consult with experienced investment fraud lawyers to investigate their right to recover their losses.