For the most part, transactions that occur within the securities industry are handled fairly and honestly.  However, there are instances in which disputes and problems occur, resulting in the need for a neutral, third-party securities mediator to resolve the matter.  As a form of Alternative Dispute Resolution (ADR), securities mediation is a way for both parties involved in a dispute to sit down and discuss their individual circumstances without the inconvenience and high costs of a lengthy litigation process.

Last year, the brokerage firm Securities America was prompted into mediation by a sitting federal district court judge, Royal Furgeson in Dallas.   Judge Furgeson rejected a class action settlement that would have allowed Securities America to pay $21 million to settle the class action suit.   As a division of Ameriprise Financial, the firm came under fire for a broker’s sale of two private placements: Medical Capital and Medical Capital Holdings, and Provident Royalties.  The hundreds of millions of dollars in claims were due to the fact that both placements were frauds. 

Retired United States District Judge James M. Rosenbaum was selected as the mediator and all parties met in Chicago for the mediation proceedings.  Securities America decided to go ahead with the mediation process due to the fact that the Dallas federal judge ruled that the multiple arbitration claims brought against them would not be lumped together in one class-action lawsuit.  Realizing the extensive costs that would be involved, Securities America saw no other choice than to use mediation in an effort to save time and money.  According to a spokesman, a flood of arbitration claims and victories by defrauded clients would cripple the firm. 

After the first few rounds of mediation talks, Janine Wertheim, the Securities America Inc. VP and chief marketing officer, sent an email with the following news: “We made substantial progress in our mediation.  All interested parties have committed to a process that we hope will result in a full and final resolution of these matters.”

According to a report on WealthManagement.com, “Ameriprise Financial has been working with Securities America, Inc. (SAI), an independent subsidiary of Ameriprise, and plaintiffs to help SAI resolve legal matters related to sales of Medical Capital and Provident Royalties securities.”  The report, written by Diana Britton, continued to state that “It has been highly debated whether Ameriprise will help SAI with its financial obligations.  In its annual report, Ameriprise said it set aside $40 million in legal reserves to cover litigation related to the private placements.  The report also said the firm was on the hook for about $400 million in outstanding obligations.”