Corporate & Securities Law

Securities America: Arbitration Claims vs. Class Actions

By Keith Griffin

Private-placement deals pushed by Securities America in Medical Capital Holdings and Provident Royalties have left investors stranded on a financial limb. Now, they have a new worry - and that is whether to resolve their complaints through arbitration or roll their claims into two existing class-action lawsuits again Securities America.

Ewald Groetsch is one of those investors facing such a dilemma. As reported March 4 by the New York Times, Groetsch lost $500,000 after investing in Medical Capital Holdings which, like Provident Royalties, was charged with fraud by the Securities and Exchange Commission (SEC) in 2009.

According to the New York Times story, Groetsch - who suffers from dementia - became lonely after his wife died in 2003 and struck up a relationship with a broker from Securities America. Groetsch eventually put the majority of his portfolio into a risky security - i.e. Medical Capital.

As for the Securities America broker, he portrayed the investment as ?safe and secure.? That wasn?t the case, however, and Groetsch ultimately lost his entire investment.

Groetsch has since filed an arbitration claim with the Financial Industry Regulatory Authority (FINRA).

The lawyers in the class-action case involving Medical Capital and Provident Royalties contend that investors? arbitration claims could threaten the financial position of Securities America and its ability to pay for a proposed settlement. The plaintiffs? lawyers disagree, stating that such reasoning is misleading.

Earlier this year, arbitration proved successful for at least one investor who sued Securities America. In January, FINRA awarded Josephine Wayman nearly $1.2 million for her claim against the broker/dealer.

Full post as published by Representing Investors on March 07, 2011 (boomark / email).