What current and prospective clients should know about complaints and regulatory actions against Securities America Inc.
Based in La Vista, Nebraska, Securities America Inc. (CRD#: 10205) is a broker-dealer that is registered to operate in all 50 US states along with the District of Columbia and Puerto Rico. The firm was founded in 1984 and now manages money for more than 300,000 customers.
If you are considering becoming a client of Securities America – or you are currently a client – it’s important that you know about the customer complaints and regulatory actions against the firm.
In this post you’ll find information about notable regulatory disclosures involving Securities America, in addition to a running list of links to news stories involving brokers and advisors at the Firm.
Do you have a complaint about Securities America? We want to hear it.
Browse Securities America Inc. Complaint and Regulatory Action News
- Ronald Roach, Formerly of Securities America, Barred by SEC for Alleged Participation in Ponzi Scheme (12/5/2019)
- Broker Investigation: Hector May (12/22/2018)
- Broker Investigation: Michael D. Jackson (12/14/2018)
- Broker Investigation: Michael E. Heath (11/2/2018)
- Lack of Oversight: Securities America Failed to Spot and Stop Advisor’s Scam (7/3/2018)
- Broker Investigation: Jeffrey A. Laberge (5/24/2018)
- Investigation: Broker James Rosebrough, Formerly of Securities America, LPL Financial (6/15/2015)
- Retirees Seek Damages from NFP Securities, Inc., and Securities America, Inc., for Capital Solutions Sold Through Andrew Stuart Asset Management (7/29/2013)
Regulatory Disclosures Involving Securities America
Overcharging Its Customers
In July of 2016, Securities America consented to findings that it systematically overcharged several of its customers. The firm was censured (Disciplinary Proceeding No. 2015047269801) and ordered to pay $1,541,419 in financial restitution to the affected clients. The basis for this finding was that Securities America failed to properly issue waivers on front-end sales charges to certain eligible customers. All registered broker-dealers have a legal duty to look out for the best interests of their clients. One part of this duty is properly identifying and applying all applicable sales charge waivers and discounts.
This was far from the only time that Securities America was determined to have overcharged its clients. For example, in another case, the firm was fined $275,000 and ordered to pay $477,688 in restitution for not applying discounts on certain customer purchases of Unit Investment Trusts (UITs). Once again, FINRA officials pointed to the company’s failure to establish a proper supervisory system as the root cause of the issue.
Selling Unregistered Securities
In February of 2016, Securities America was censured and fined $250,000 for selling unregistered securities. Specifically, the firm was charged with selling its clients unregistered preferred promissory notes in limited partnerships. Securities America failed to conduct adequate due diligence on this product, and thus put its customers at a considerable, and avoidable, financial risk. The full details regarding this case can be found by referencing FINRA Disciplinary Proceeding No. 2013036692002.
In several different cases, Securities America brokers pushed their clients into unsuitable investment opportunities. This single most prominent example of this is the case of Medical Capital Holdings. From 2003 through 2009, Medical Capital issued more than $1.7 billion in promissory notes. While many different brokerage firms sold these notes, no firm sold more than did Securities America. Indeed, InvestmentNews.com reported that Securities America sold nearly $700 million worth of this product, in the process generating $26 million in fees for itself.
MedCap Was a Ponzi Scheme
In most cases, Securities America brokers had no reasonable basis to recommend that their customers buy Medical Capital holdings at all. The investment opportunity was simply unsuitable for many Securities America clients, often retirees or near-retirees, who were seeking safe and conservative investment options.
To make matters far worse, it turns out that Medical Capital Holdings was a Ponzi scheme. Securities America, which sold 37 percent of Medical Capital’s notes, was responsible for damaging many of its clients. As was reported by The New York Times in 2011, the dispute between Securities America and its customers was eventually settled for $180 million in damages.
Breakpoint Sale Violations
Similar to many other consumer products, investors are often entitled to a ‘discount’ on investment fees when they buy a large enough amount of a certain product. This practice is regulated by FINRA Rule 2342, known as the rule on breakpoint sales.
Consider the following example: A mutual fund may offer a discount on transaction fees if an investor buys at least $20,000 worth of the product. Investment advisors have a duty to understand where these ‘breakpoints’ exist in order to ensure that their clients are always getting the best possible deal. If an investment advisor recommended that a client purchase $19,900 worth of a mutual fund when a discount is available for a $20,000 purchase, they would be damaging their client’s interests.
In March of 2008, Securities America was ordered to pay $322,000 in fines along with full financial restitution to customers because it failed to properly advise them in regards to potential discounts. In this case, a discount was available when the total purchase of a certain mutual fund exceeded $50,000. Yet, the brokerage firm was selling clients amounts slightly less than this amount, and, even more disturbing, it was also encouraging them to buy similar, albeit separate, mutual funds for no real reason. A clear violation of FINRA Rule 2342.
At the Sonn Law Group we have been fiercely advocating for wronged investors for nearly 30 years. To schedule a free, no-obligation review of your case, please contact us today at 844-689-5754. We represent investors nationwide and in Puerto Rico, Mexico and South America.