Securities America, Inc - Medical Capital Holdings and Provident Royalties Losses

Omaha-based Securities America came under heavy scrutiny from federal regulators following their improper sale of $697 million worth of Medical Capital Holdings promissory notes. In January 2010 Massachusetts Security Division charged the firm with selling Medical Capital Notes to 60 investors without disclosing material facts and risks.

Securities America never alerted customers that Medical Capital had never audited its finances, and was investing in areas outside its expertise—a yacht, mortgages on non-existent hospitals, film production, and all-expenses paid trips given to Securities America employees. Medical Capital Notes were sold by Securities America from 2003 through 2009.

Medical Capital Notes were sold as private securities, otherwise known as private offerings. Small businesses are permitted to raise assets by selling promissory notes to investors with a net worth of $1 million or greater, and their offerings are not made public. Brokers benefit from this deal with high commissions, ranging from 7% to 10%.

This is not the first incident for Securities America, a firm that boasts on its Web site as being one of the nation’s leading independent firms dispensing financial advice. In June 2005, Securities America was fined over $12 million by the National Association of Securities Dealers for giving mutual funds preferential treatment in exchange for revenue sharing. In July 2003, an arbitration panel awarded $5.5 million after Securities America had employed a broker using a false name.

The Financial Industry Regulatory Authority has its own pending investigation against Securities America for the sale of Medical Capital Notes. Broker-dealers whose advisers sold these private securities may face investor lawsuits or arbitration claims, and securities regulators have indicated they would be stricter in regulating private offerings.

If you were advised to buy private offerings of Medical Capital through Securities America or any firm, we urge you contact us immediately. We may be able to help you recover on your lost investment.

Fogel & Associates is currently pursuing claims against broker-dealer firms for negligence, negligent misrepresentations and omissions, and breach of fiduciary duty. Our investigation includes potential claims against brokerage firms such as Securities America, National Securities Corporation, Wedbush Morgan, Capital Financial Services, Workman Securities, QA3 Financial Corporation and GunnAllen Financial.

FURTHER READING:

• Blog entry: State Regulators Charge Securities America with Improper Sale of Medical Capital Notes
• State Seeks Restitution for Securities America Investors
• B-D’s Feel the Heat From Securities Fraud Cases
• Mass. Regulator Charges Securities America