Securities America, Inc. (CRD#10205) has many different complaints filed by FINRA (Financial Industry Regulatory Authority), state regulatory organizations, and investors. At the Law Offices of Robert Wayne Pearce, we have investigated Securities America, its regulatory and customer complaints, and have also represented investors with claims of fraud, negligence, and breach of fiduciary duty against this organization and its financial advisors.
If you believe you have a claim against Securities America, you should strongly consider hiring an investment loss lawyer. You should not wait until it’s too late to file a claim. The Law Offices of Robert Wayne Pearce, P.A., offers free consultations. Give us a call at 800-732-2889. Let’s discuss your case and see what we can do to help you get the compensation you need and deserve.
Can I Sue Securities America?
If you’ve lost money caused by Securities America and/or its employees’ misconduct then the answer is, YES, you can sue Securities America but the odds are you signed away your right to sue in court and agreed to resolve your dispute in a FINRA arbitration proceeding. Attorney Robert Wayne Pearce has over 40 years of personal experience in FINRA arbitration proceedings and knows very well how you can not only sue Securities America in FINRA arbitration proceedings, but WIN that arbitration. The easiest way to know if you have a viable case against Securities America is to call Attorney Pearce at our office at 800-732-2889.
What is Securities America?
The company was founded in 1968 and has been engaged in its broker-dealer and investment advisory businesses Securities America (CRD# 10205) was founded in 1984. Since then there have been several ownership changes and restructuring of its business lines. The company is now controlled by Advisor Group Holdings and headquartered in Lavista, Nebraska. Its independent broker-dealer Business Model has grown through acquisition and organic development of primarily one and two person registered representative offices supervised remotely. Today there are over 2500 registered representatives in every state. It is now affiliated with one of the largest broker-dealer and investment advisory firms in the United States with over 11,000 financial advisors.
Securities America Has Many Different Regulatory Problems
Securities America rapid growth has not been without consequences. There have been approximately 55 Federal, state and self-regulatory body disclosure events; that is, final and formal proceedings initiated by a regulatory authority (e.g., a state or federal securities agency like the U.S. Securities and Exchange Commission (SEC) or self-regulatory body like the Financial Industry Regulatory Authority (FINRA) and the North American Securities Administrators Association (NASAA) ) for a violation(s) of investment-related rules or regulations. In addition, there have been hundreds of customer complaints filed against Securities America for misconduct by its securities sales and investment advisory representatives that are not reported by the firm on its Central Depository Record.
We have reported and written about these regulatory problems and customer complaints over many years. Securities America is a repeat offender: there are over 20 FINRA reported disciplinary proceedings citing the firm with one form of supervisory lapses or another.
A BRIEF OVERVIEW OF SOME OF THE REGULATORY PROBLEMS SECURITIES AMERICA HAS FACED OVER THE YEARS*
Securities America has been repeatedly censured, warned, and fined millions for its own misconduct and failure to supervise its army of financial advisors.* A few of the notable FINRA Sanctions for its Supervisory Failures are below:
Securities America Censured And Fined By FINRA For LJM Preservation & Growth Fund Investments
FINRA investigated and found that Securities America failed to reasonably supervise representatives’ recommendations of an alternative mutual fund—the LJM Preservation & Growth Fund (LJM). Specifically, Securities America permitted the sale of LJM on its platform without conducting reasonable due diligence and without a sufficient understanding of its risks and features, including the fact that the fund pursued a risky strategy that relied, in part, on purchasing uncovered options. Securities America also lacked a reasonable supervisory system to review representatives’ LJM recommendations. LJM’s value dropped 80% during an extreme volatility event in February 2018 and the fund ultimately liquidated and closed, resulting in hundreds of thousands in losses for Securities America’s customers. FINRA concluded Securities America violated FINRA Rules 3110 and 2010 and censured, fined and ordered Securities America to pay restitution with interest to the customers invested in the fund.
Securities America Censured And Fined By FINRA For Failing To Supervise Investments In Variable Annuities
FINRA investigated and found that Securities America failed to establish, maintain and enforce a supervisory system and written supervisory procedures reasonably designed to ensure that representatives’ recommendations of variable annuities complied with applicable securities laws and regulations and FINRA Rules. As a result, FINRA concluded Securities America violated FINRA Rules 2330(d), and (e), NASD Rule 3010 and FINRA Rule 3110 and FINRA Rule 2010, and censured and fined the brokerage firm.
Securities America Sanctioned For Cheating Customers Out Of Mutual Fund Sales Charge Waivers
During the relevant period FINRA found that Securities America disadvantaged certain retirement plan and charitable organization customers that were eligible to purchase Class A shares in certain mutual funds without a front-end sales charge (the “Eligible Customers”). The Eligible Customers were instead sold Class A shares with a front-and sales charge or Class B or C shares with back-and sales charges and higher ongoing fees and expenses. During this period, Securities, America failed to establish and maintain a supervisory system and procedures reasonably designed to ensure that Eligible Customers who purchased mutual fund shares received the benefit of applicable sales charge waivers. As a result, FINRA found that Securities America violated NASD Conduct Rule 3010, FINRA Rule 3110, and FINRA Rule 2010 and then censured Securities America and ordered a Remediation to determine the amount of restitution each of the Eligible Customers were entitled, and, once determined to pay that restitution with interest to each of those customers.
Securities America Sanctioned For Cheating Customers Out Of UIT Sales Charge Discounts
Securities America failed to apply sales charge discounts to certain customers’ eligible purchases of unit investment trusts (“UITs”) in violation of FINRA Rule 2010, In addition, FINRA found Securities America failed to establish, maintain and enforce a supervisory system and written supervisory procedures reasonably designed to ensure that customers received sales charge discounts on all eligible UIT purchases in violation of NASD Rule 3010 and FINRA Rule 2010. In settlement of those violations, Securities America was censured, fined and ordered to pay restitution to the affected customers.
Securities America Censured And Fined By FINRA For Failing To Do Due Diligence And Supervise Investments In CSMIF Preferred Notes
During the relevant period, FINRA found Securities America allowed one of its representatives to sell Preferred Notes of CSMIF (the “Preferred Notes”), a security, without first conducting adequate due diligence regarding this product. Further, FINRA found that Securities America in approving the Preferred Notes did not follow its own written supervisory procedures regarding due diligence. FINRA concluded that Securities America’s conduct violated NASD Rules 3010 and FINRA Rule 2010 and issued a censure along with a fine against the broker-dealer for once again violating FINRA’s Code of Conduct.
Securities America Censured And Fined By FINRA For Inaccurate Reports To Customers
FINRA investigated and found that Securities America failed to establish, maintain, and enforce a reasonable supervisory system regarding the use of consolidated reports by its registered representatives. Securities America made a consolidated reporting system available to its registered representatives which allowed the representatives to enter customized values for assets and accounts held away from the brokerage firm; however, the Securities America did not have a satisfactory system to supervise the accuracy of valuations provided to the customers, in violation of NASD Rules 3010(a) and (b) and 2110 and FINRA Rule 2110. FINRA found that Securities America’s failure to adequately supervise the valuations used on the consolidated reports, resulted in inaccurate statements being sent to customers, in violation of NASD Rules 2210(d)(1) and 2110 and FINRA Rule 2010. FINRA also found that Securities America also failed to retain some of the consolidated reports, in violation of Section 17 of the Securities Exchange Act of 1934 and SEC Rule 17a-4 thereunder; NASD Rules 3110, 3010(d)(3), and 2110, and FINRA Rules 4511 and 2010. As a result, FINRA sanctioned Securities America and imposed a censure and fine on the brokerage firm.
Securities America Censured And Fined By FINRA For Failing To Monitor Emails With False And Misleading Statements To Customers
FINRA investigated and found that Securities America failed to have a supervisory system, including written procedures, in place regarding electronic communications with customers that was reasonably designed to achieve compliance with applicable federal securities laws and regulations and with applicable FINRA and NASD Rules. Specifically, FINRA found that Securities America’s email monitoring system did not identify numerous emails sent to customers by registered representatives that contained misrepresentations or misleading statements relating to two private placements—IMH Secured Loan Fund, LLC (the “IMH Fund”) and Medical Provider Funding Corporation V (“Med Cap V”). As a result of Securities America’s email monitoring system not identifying these emails, the emails were not reviewed by anyone at Securities America, including supervisory personnel, to determine whether the emails contained statements that were inconsistent with applicable requirements. By failing to have a supervisory system, including written procedures, in place regarding electronic communications with customers that was reasonably designed to achieve compliance with applicable with applicable securities laws and regulations and with applicable FINRA and NASD Rules, SAI violated NASD Rules 3010(a), 3010(d)(2), and NASD Rule 2110. Once again, FINRA censured and fined the brokerage firm.
Securities America Sanctioned For Failing To Supervise Private Placement Investment Recommendations
FINRA investigated and found Securities America failed, once again, in its supervisory practices and procedures. Specifically, FINRA found Securities America failed to conduct adequate product due diligence on the Shale Royalties 15, Inc. and Shale Royalties 20, Inc. private placements offered by Provident Royalties, LLC pursuant to Regulation D sufficient to have reasonable grounds to believe that the offerings were suitable for any customer in violation of the first prong of the FINRA Rule 2310, the “Suitability Rule.” In addition, FINRA found Securities America failed to enforce a supervisory system reasonably designed to achieve compliance with applicable securities laws and regulations and NASD and FINRA Rules in connection with approving the sale of these two private placements. FINRA concluded that Securities America’s conduct violated NASD Conduct Rules 2310, 3010 and 2110 and FINRA Rule 2010, censured and fined the brokerage firm.
Securities America Sanctioned For Cheating Customers Out Of “Breakpoint Discounts”
Most mutual fund companies sell shares that charge front-end loads. These mutual fund companies typically offer discounts at certain pre-determined levels of investments, which are called “breakpoints.” These discounts are commonly referred to as “breakpoint discounts.” As a result of FINRA’s investigation of various brokerage firms, including, Securities America, it was ordered to send letters and claim forms to their customers who purchased front-load mutual funds, notifying them that they might be due refunds as a result of the firm’s failure to provide breakpoint discounts. Shortly thereafter, FINRA conducted a review of compliance by Securities America and found that the firm did not accurately complete the self-assessment and trade-by-trade review, as ordered by the regulator. FINRA, by reason of the foregoing, concluded Securities America violated NASD Conduct Rule 2110, censured and fined the brokerage firm.
Securities America Sanctioned By FINRA For Mutual Fund Share Class Sales Abuse Of Customers
FINRA, formerly the NASD, investigated and found that Securities America effected transactions where it made recommendations to clients to purchase Class B and Class C mutual fund shares through its registered representatives. In connection with its recommendations, Securities America did not consider on a consistent basis, that an equal investment in Class A shares would generally have been more advantageous for certain clients.
In particular, the Firm did not consider that large investments in Class A shares of mutual funds entitle clients to breakpoint discounts on sales charges, generally beginning at the $50,000 investment level which are not available for investments in Class B and Class C shares. In fact, clients may be entitled to breakpoints based upon a single mutual fund purchase, multiple purchases in the same “family of funds” and/or mutual fund investments held, at the time of the new purchase, by members of the client’s “household,” as that term is defined in the prospectus of the fund in which the shares are being purchased. Unlike Class A shares, Class B shares are subject to contingent deferred sales charges (“CDSCs”) for a period of time, generally six years, as well as higher ongoing Rule 12b-l fees for as long as the Class B shares are held. The CDSCs and the higher ongoing Rule 12b-l fees can significantly and negatively affect the return on clients’ mutual fund investments.
In addition, FINRA found that Securities America’s supervisory and compliance policies and procedures during the review period were not reasonably established, maintained and/or enforced so that the Firm, at the point of each sale, provided consideration to, on a consistent basis, the benefits of the various mutual fund share classes as they applied to individual clients.
As a result of the foregoing, FINRA concluded that Securities America violated NASD Conduct Rules 2110, 2310, and 3010 and ordered it to be censured and fined, and further, to conduct the remediation and subsequently pay restitution to all customers who were disadvantaged by its rule violations.
Securities America Sanctioned For Not Supervising Investment Strategy In Managed Accounts
FINRA, formerly the NASD, investigated and found that Securities America failed to establish a system reasonably designed to supervise the activities of a registered representative managing customer accounts in an investment strategy known as Gormly’s Bull Bear Investment Strategy (implemented exclusively through discretionary trades).
FINRA found Securities America was well aware of the investment strategy being employed as it approved Gormly’s communications with clients and the accounts he managed frequently appeared on its exception reports. Notwithstanding, Securities America took no action to supervise the registered representative and’s mismanagement of the accounts until it received the complaint by that time it was too late.
In its belated review of the accounts, a Securities America report was created which described the investment strategy; noted that “the majority of [Gormly’s] clients are down significantly;” placed Gormly under a heightened supervision plan; and required him to meet with each customer in the presence of a supervisory employee of the firm to fill out a new risk tolerance questionnaire and discuss an alternative investment strategy for those not comfortable with the Bull Bear Investment Strategy or not meeting suitability standards for the strategy. By this time, however, most of the losses incurred by customers in the Bull Bear Investment Strategy had been realized and many customers had moved their accounts to other firms. By virtue of such conduct, FINRA concluded Securities America violated NASD Conduct Rules 3010(a) and 2110.
In addition, FINRA investigated the Securities America stockbroker’s investments for customers in The Rydex Dynamic Funds and found the firm failed to review all discretionary accounts at frequent intervals in order to detect and prevent transactions which were excessive in size or frequency in view of the financial resources and character of the account. By virtue of such conduct, Securities America, Inc. violated NASD Conduct Rules 2510 and 2110.
Once again, Securities America was subjected to a censure and a monetary fine and permitted to go about its business as usual.
Securities America Sanctioned For Not Supervising Variable Annuity Exchanges
FINRA, formerly the NASD, investigated and found that Securities America, once again, violated NASD Conduct Rules 3010 and 2110 by failing to establish and maintain an adequate supervisory system, including written procedures, reasonably designed to achieve compliance with applicable securities laws and regulations, and with the applicable Rules of the NASD; this time with respect to its variable annuity exchange business.
First, FINRA found Securities America’s written supervisory procedures were inadequate. Its Compliance Manual was outdated and failed to reflect the current electronic monitoring system in use at the firm. The Trade Review Team (“TRT”), a group within the Compliance Department at the home office, reviewed Securities America’s variable annuity exchanges. Among other things, TRT relied on a section of the firm’s WSPs, referred to as the “Variable Product Guidelines” (“Guidelines”) to provide guidance on how to evaluate a proposed exchange for suitability. But the Guidelines failed to provide adequate guidance to individuals reviewing exchanges. For example, the Guidelines required that an exchange transaction must be “in the best interest of and [be] suitable for the client.” But they did not provide guidance on how this standard was to be applied. In addition, the Guidelines mandated that TRT undertake a “further review” in certain circumstances, but failed to describe what that “further review” should entail.
Second, Securities America’s supervisory system was inadequate, primarily due to the firm’s failure to properly implement its system and procedures and adequately document the conduct of the same. Certain transactions that required “further review” were not adequately reviewed and, to the extent such review occurred, no documentation of such review was maintained. In addition, Securities America requested that TRT track frequent replacements by representatives, but it did not give TRT sufficient tools to do so.
In light of these and other supervisory deficiencies relating to variable annuity exchanges, SAI violated NASD Rules 3010 and 2110 for which it was censured and fined.
Securities America Censured And Fined $2.5 million For Multiple Supervisory Failures
FINRA, formerly the NASD, investigated and found Securities America’s system of supervision at times failed to adequately supervise the activities of the registered representative in connection with numerous activities described below.
First, FINRA found that Securities America allowed its representatives to operate without adequate supervision, when they knew, or should have known, that representatives were making misleading and unwarranted written and oral representations that customers could establish monthly withdrawal programs based on high rates of return, and was encouraging customers to retire early from their jobs on the expectation of high rates of return without adequate disclosure of the risks associated with seeking such returns. An examination of correspondence sent by the representatives would have alerted the firm to problems. By virtue of such conduct, the Firm violated NASD Conduct Rules 3010(a) and 2110.
Second, FINRA found in connection with variable annuity subaccount exchanges effected by the representative on a discretionary basis, Securities, America failed to approve promptly in writing each discretionary order entered and to review all discretionary accounts at frequent intervals in order to detect and prevent transactions which were excessive in size or frequency in view of the financial resources and character of the account. By virtue of such conduct, the Securities America violated NASD Conduct Rules 2510 and 2110.
Third, FINRA found that Securities America failed to file with NASD Advertising Regulation certain of the representative’s advertising and sales literature that contained communications relating to investment companies, which communications were not fair and balanced and which omitted material facts in various slides and sales literature. By virtue of such conduct, Securities America, Inc. violated NASD Conduct Rules 2210(c)(1), 2210(d)(1) and 2110.
Forth, Securities, America’s supervisory procedures with respect to the registered representative were not adequately enforced at all times in the following areas;
a. Review of investment recommendations for the accounts of retirees;
b. Review of correspondence, sales literature, seminar materials and advertising;
c. Filing of materials relating to investment companies with NASD Advertising
Regulation prior to use as required by NASD Conduct Rule 2210(c)(1);
d. Review and approval of discretionary accounts and trading in discretionary accounts;
e. Variable annuity subaccount exchange transactions; and
frequent trading of mutual funds.
FINRA found and concluded that all such acts, practices, and conduct constitute separate and distinct violations of NASD Conduct Rules 3010(a) and (b), and 2110 by Securities America and warranted a censure and monetary fine in the amount of $2.5 million.
Securities America Censured And Fined $2.4 million For Conflicted Sales Of Mutual Funds
FINRA, formerly the NASD, investigated and found violations of NASD Conduct Rule 2830(k), which prohibits member firms from favoring or disfavoring the sale or distribution of mutual fund shares on the basis of brokerage commissions received by the firm, prohibits member firms from arranging for a specific amount or percentage of brokerage commissions to be directed to the firm conditioned on the firm’s sale of mutual fund shares, and prohibits member firms from recommending the purchase of mutual fund shares on the basis of brokerage commissions received or expected to be received by the firm from any source.
It discovered that Securities America during the relevant period maintained a revenue sharing (shelf space) program known as the Premier Partner Program and that various mutual fund complexes paid a fee in return for preferential treatment, which included enhanced access to the firm’s sales force and highlighted treatment on Securities America’s recommended list and its website.
The fund complexes that participated in Securities America’s revenue sharing program paid their fees, in part, by directing over $7.9 million in brokerage commissions to the brokerage firm whose receipt of these commission payments violated NASD Conduct Rules 2830(k) and 2110. As a result, FINRA censured Securities America and issued a fine in the amount of $2,400,000.
*Above are only some of the regulatory disciplinary actions filed against Securities America by FINRA. NASSA and other state securities regulator investigations and enforcement actions account for another 40 more BrokerCheck disclosures.
Securities America Customer Complaints
There have been scores of customer complaints filed against Securities America stockbrokers and investment advisors over the years. We have launched many investigations of current and former Securities America advisors:
- Robert Kasten of Securities America, Inc
- Wayne Wagner of Securities America, Inc
- Alan Vandeweerd of Securities America, Inc.
- Benjamin Young of Securities America
- Giustino Destefano of Securities America, Inc.
- Elliot Packer of Securities America, Inc.
- Arthur Dietz of Securities America, Inc.
- James Hager of Securities America
- Craig Senn of Securities America
- Luann Chapmangatts of Securities America
- James Hager of Securities America
- John O’Hagan of Securities America
- Scott Dorer of Securities America
- John Klevens of Securities America
- Pamela Maybury of Securities America
- Kevin Phillips Formerly With Securities America
- Henry Sandigo of Securities America
- Thomas Schaible of Securities America
- Antonio Reyna of Securities America
- Scott Werdebaugh of Securities America
- Leah Brooks of Securities America
- Adam Henley of Securities America
- Timothy Johnson of Securities America
- Peter Mars of Securities America
- Nicholas Trifiro of Securities America
- Julia Miller of Securities America
- Thomas Zitzmann of Securities America
If you have lost money investing with any of these Securities America advisors or others within this brokerage firm, it’s important that you reach out to an investment loss attorney quickly because the statutes of limitations can bar your claims. Call us at 800-732-2889.
Why Does Securities America Have So Many Regulatory Problems And Customer Complaints?
Independent broker-dealers are notorious for their lax supervisory practices and procedures. The business model of these franchise type operations is to open many offices nationwide for steady growth of fixed monthly revenues without the costs attendant to a full-service branch office with on-site manager, compliance officer and operation personnel. The registered representatives of these independent broker-dealers generally operate as separately incorporated businesses. They are not employees of the broker-dealer and therefore not controlled in the same manner as full-service brokerage firm representatives. The registered representatives control their structure and costs to maximize profits and often leave the protection of investors’ rights and interests as their lowest priority.
The typical supervisory organization of independent broker-dealer operations is to have other independent contractors operate Offices of Supervisory Jurisdiction (OSJs) to monitor the registered representatives from geographically remote offices and then report to the main franchisor’s compliance office at national headquarters. The supervisors at the OSJs are not employees of the franchisor and often run their own brokerage, insurance and other businesses. They are not devoted full-time supervisors of the smaller branch offices. Consequently, OSJ managers cannot and do not supervise the day-to-day operations of the registered representatives of these Independent broker-dealers.
Generally, there is no immediate review of new accounts opened, securities transactions, business records, cash or securities receipts and deliveries, correspondence and business activities unrelated to the securities brokerage operation at these independent brokerage firms. The lax supervision leaves investors who have transferred their accounts to the smaller independent broker-dealer vulnerable to sales of securities that have not been reviewed or authorized by anyone other than the sales representative earning a commission. There may be no one onsite to detect forgeries of clients’ signatures on documents, the placement of inaccurate information about a client’s investment objectives and financial condition to document the suitability of a particular investment recommendation. Oftentimes there is no daily review of sales literature and client correspondence to protect against misrepresentations and misleading statements being made to investors. In fact, it is not unusual for there to be only one compliance audit visit per year at many of these offices.
These Independent brokerage business operations are worrisome to the North American Securities Administrators Association (NASAA), which has documented more instances of sales abuse and consequently investor losses at these firms than the traditional brokerage firms with branch offices with on-site managers and compliance personnel.
Did Securities America Advisor Misconduct Cause You Investment Losses?
When financial advisor misconduct has caused you to lose substantial value to your investment accounts, you have the right to seek reimbursement from the responsible parties. Securities America is responsible like any employer for its financial advisors acts and omissions. In addition, it has an independent duty to supervise its stockbrokers and investment advisors. These cases can be extremely complex, and so having the support of a reputable attorney who is experienced in recovering investment losses for investors is key to your success. Many customers make the mistake of contacting Securities America without representation with an attorney about their complaints and have their complaints denied.
Consult With An Attorney Who Recovers Investment Losses Caused By Securities America Today!
The attorneys at The Law Offices of Robert Wayne Pearce, P.A., have helped countless investors over the last 40 years recover the losses from their investment accounts that were caused by broker negligence or misconduct. The firm has extensive experience with Securities America cases, and Attorney Pearce is committed to seeing that those responsible for the losses you have suffered are held fully accountable.
Give us a call at 800-732-2889. Let’s discuss your case and see what we can do to help you get the compensation you need and deserve.