SEC Files Fraud Charges Against Medical Capital Holdings & Provident Royalties, LLC

The Securities Exchange Commission (SEC) levied fraud charges against these two private placement issuers which raised some $2.7 billion, by peddling their offerings through a network of independent broker dealers. Private placements are stocks, bonds or other instruments corporations issue to investors outside of the market. Since these instruments are not registered with the SEC, they typically are considerably more risky than traditional investments.

One independent broker dealer is Securities America, which is being investigated by Massachusetts securities regulators for their hand in the Medical Capital private placements. They were one of the largest distributors resulting in sales of $700 million of the private placement securities, called Medical Capital Notes. Medical Capital investors ended up losing more than $1 billion in the notes, marketed and recommended as having no risk. An attorney for the Massachusetts Securities Division said “Massachusetts investors were sold unsuitable, fraudulent notes by fraudulent means.”

In the summer of 2010, at the same time Medical Capital was investigated, the SEC brought charges against Provident Royalties and its related entities for selling fraudulent private placements from 2006 to 2009. According to SEC documents, Provident raised $495 million in their offering. Medical Capital and Provident were forced to close down by the federal authorities. However, the broker dealers are responsible for their own due diligence in determining suitability and making recommendations to customers.

If you have suffered losses from private placements, please contact our securities law firm for a confidential, no obligation consultation at 1-800-259-9010.

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