Ameriprise Financial Services, formerly known as American Express Financial Advisers, has been cited and fined by regulators extensively in recent months for so-called “selling-away violations.” Selling-away occurs when a financial adviser sells a client an investment product that has not been vetted and approved by the brokerage firm. Because they have not been subjected to a rigorous investigation, these products often turn out to be highly risky and sometimes outright scams like ponzi schemes. Regulators have fined Ameriprise for failing to properly supervise the activity of sales persons who have sold the unapproved products. The firm also faces significant exposure to defrauded investors as a result of these situations.
According to a recent article in Bloomberg Markets, Ameriprise has had an abundance of selling-away problems recently. These problems include the following:
- Ameriprise failed to supervise one of its representatives in Ottumwa, Iowa, who took $514,000.00 of client funds and invested them in a personal restaurant venture. The adviser, Timothy Stabile, was indicted in April 2007 for allegedly stealing money from his client, an aging widower suffering from dementia.
- Similarly, a New York-based Ameriprise adviser allegedly took $1.7 million of her clients’ money and invested it into a fraudulent California house-flipping scheme.
- Yet another Ameriprise adviser allegedly convinced his clients, an elderly couple, to invest more than $2 million in a Paris Hilton film called “Bottoms Up.” The investment represented more than one half of the films entire budget. In order to invest in the venture, Ameriprise adviser Daniel Roberts allegedly convinced the couple to cash in bonds, mutual funds, and other conservative retirement savings, assuring them they would get a 15% return plus a share of the movie’s profits. The movie was a dud, going straight to DVD.
- Another Ameriprise adviser based out of Orlando, Florida, allegedly offered his clients an investment that guaranteed a 100% return on Costa Rican real estate. Ninety-eight of his clients invested almost $12 million. The representative, Christopher Coulther, had asked Ameriprise to approve the investment, but Ameriprise never did. Coulther nevertheless offered the venture to his clients, some of whom cashed in their retirement savings in order to invest.
Although selling-away is often cited as the basis for disciplining brokers and advisers, Ameriprise and its brokerage unit Securities America, Inc. is the only large financial firm to have been disciplined in recent months for selling-away violations. The problem is more common among small and medium-sized broker dealers who employ a loose system of off-site supervision, according to Fred Joseph, President of the North American Securities Administrators Association. “The selling-away that occurs in remote branch offices usually isn’t happening at Merrill Lynch or Smith Barney,” Joseph said. “They don’t let it happen.”
Financial regulators worry that these types of investments may increase now that independent advisers are obtaining more assets to invest as a result of clients abandoning Wall Street Funds in recent years.
Page Perry is an Atlanta-based law firm with over 125 years collective experience representing investors in securities-related litigation and arbitration. The firm also has an active practice in representing institutional and individual investors in claims against brokerage firms. In the 18 months, the firm has won arbitration award for clients in the amounts of $1.7 and $3.9 million. For further information, please contact www.pageperry.com.