A Montana regulator has filed a cease and desist order against broker-dealer Securities America related to its sales of private placements.
The office of the state auditor for the Commissioner of Securities and Insurance in Montana alleged in an Aug. 5 order that Securities America and some of its executives, including Chief Executive James Nagengast, "withheld material information regarding the heightened risks" of promissory notes it sold that were issued by Medical Capital Holdings Inc. Omaha, Neb.-based Securities America is a unit of Ameriprise Financial Inc. (AMP).
The broker-dealer was the placement agent for the sale of Medical Capital Holdings' promissory notes to Montana investors from 2006 through 2008, and was responsible for the sale of 37% of the total notes from the issuer nationwide since 2003, amounting to $697 million, the regulator said in its legal action.
The broker has requested an administrative hearing on the matter, and the Montana regulator is preparing to set up a scheduling meeting with it, a spokeswoman for the commissioner's office said in an interview Tuesday. Such matters are usually resolved very quickly in the state, she said.
In January, William Galvin, Secretary of the Commonwealth of Massachusetts, charged Securities America with improper sales of Medical Capital notes. His office alleged the brokers' representatives failed to disclose risks to customers.
Several broker-dealers have had to shut their doors due to their sales of private-placement securities, which are stocks, bonds or other instruments issued by a corporation to investors outside the public markets.
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