Massive Decrease In Capital Tied To Private Placements

A 10-K filing at the end of 2010 showed that Securities America had $2 million in “actual capital” on hand, according to a report in Investment News. This was down 87% from earlier in the year when the firm reported that it had $15 million in capital available. In 2008, the firm reported that it had $17.4 million.

A company spokesperson noted that the massive decrease in capital levels was directly related to the litany of claims stemming from the Regulation D offerings for Medical Capital Holdings, Inc. and Provident Royalties, LLC.

A preliminary $21 million agreement was reached in February 2011 with class action plaintiffs, while a federal judge in Dallas halted all FINRA arbitration cases against the company pending a hearing on March 18th. After reviewing the potential settlement documents, FINRA has determined that the $7 million payment from the excess net capital would not put the company in jeopardy of a net capital deficiency.

As reported in the Ameriprise annual report, Securities America customers lost around $400 million from investing in the two private placements from 2003 to 2009.

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