In October 2007, two state securities regulators pursued actions against Ameriprise Financial Services, Inc., the entity formerly known as American Express Financial Advisors. Both actions relate to what some might describe as a lax culture of compliance and involve brokers forging signatures, and the firm's failure to reasonably supervise brokers.
In New Hampshire, the state securities regulator filed charges against the firm on October 22, 2007. See the paperwork online here. In that case, the state initiated an examination following allegations from former employees regarding delivery of financial plans to customers and allegations of widespread forgery of signatures of customers and employees at the firm. The state noted in its papers that the firm had a "culture where compliance officers [were] ignored and bullied when their opinions conflicted with those of management." The state is apparently seeking a $10 Million fine, disgorgement of fees and commissions earned, costs and other relief for the alleged violations of the state securities act. Note that that case involves allegations only, and has not been litigated or settled. I'm sure Ameriprise's story might be somewhat different.
But in Georgia, Ameriprise settled charges with the Secretary of State's office on October 1, 2007. In that action, the state found that the firm failed to reasonably supervise the activities of two salespersons by failing to detect that customers signatures were being forged on documents. The state fined the firm $40,000, censured it, imposed costs and imposed certain continued monitoring and reporting of activities to the state. Also, the firm agreed to make a "voluntary" (really, that's what it said - ed.) contribution to the Investor Protection Trust for investor education in Georgia.
Both of these actions are significant, even if the fine of $40,000 by Georgia is pocket-change for Ameriprise. Actions like this can certainly cause significant damage to a firm or broker's reputation and ability to earn and maintain client trust and confidence. This relates to our previous posts in forgery issues, regulatory image, and stupid ways to ruin reputations. I'm sure the avid readers of BDLawBlog already see the lessons to be learned here, so I won't repeat them now. But a new point not previously made: note that New Hampshire credits ex-employees with making allegations to the state. Are your folks gruntled or disgruntled? To find out more about that, visit Jay Sheperd's great blog Gruntled Employees.
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