Securities America has agreed to meet with a mediator in an attempt to resolve a flood of investor cases that could expose it to more than $300 million in liabilities.
Lawyers for Securities America, a unit of Ameriprise Financial Inc., will mediate with lawyers for a group of plaintiffs in a class action against the brokerage on Thursday, according to a notice filed Monday in a Dallas federal court.
The notice, signed by Judge W. Royal Furgeson Jr. in Dallas, invites "all interested parties to participate." They include investors whose arbitration cases against Securities America are also pending.
Securities America faces potentially more than $300 million in arbitration claims related to sales of private placements from Provident Royalties LLC and Medical Capital Holdings Inc. Regulators accused those two companies of fraud in 2009, and clients allege Securities America did not conduct adequate due diligence of the offerings.
The case will be mediated in Chicago by Retired U.S. District Judge James M. Rosenbaum, according to the order.
Furgeson on Friday rejected a plan that would have obliged all Securities Americas clients affected in the purchase of allegedly fraudulent private placements to join a proposed class-action settlement.
That plan was agreed to by one group of investors who moved for class action and by Securities America.
It called for a total combined payout of $21 million to $24 million. The idea enraged other investors, however, who would have been required to abandon their pending arbitration claims and become part of the settle- ment.
The class-action settlement would have netted investors 3.5 cents on the dollar, after legal fees, if all investors had been obliged to participate, according to Hugh D. Berkson, a lawyer for Hermann, Cahn & Schneider LLP in Cleveland, who represents investors in some of the arbitration cases.
"This is a bad situation for everyone," a Securities America spokeswoman said in a statement. "We are hopeful we can come to a reasonable resolution.
