This blog’s first article asks if a company that clears trades is liable for its hedge-fund customer’s Ponzi scheme. The second article asks if a rating company is liable for the Ponzi scheme of a hedge fund that the company gave its highest rating to. This article asks if you can trust a financial-planning company whose present and former employees have sued it for putting underperforming, high-commission mutual funds in their 401(k) plans. That suit was brought by five former and one current employee against Ameriprise Financial, the United States’s largest employer of certified financial planners.

     The employees’ suit claims that Ameriprise’s mutual funds perform poorly, and that they charge fees that are three to five times higher than the fees that Vanguard’s mutual funds charge.

     Ameriprise financial planners have gotten into trouble in the past for improperly trading mutual funds, losing laptop computers that contained confidential customer data, and steering customers to investments that charged excessive commissions. Those types of wrongdoing, while shocking, occur fairly regularly in the financial-planning industry, though an investor can recover losses from that wrongdoing by bringing a securities-arbitration claim. But Ameriprise has also perpetrated more unique misfeasance. Thus:

•    Ameriprise advisers have forged clients’ signatures on documents;
•    brokers at Securities America, an Ameriprise unit at the time, sold millions of dollars in medical-bill receivables that turned out to be part of a Ponzi scheme;
•    Ameriprise makes much of its income from selling its own insurance and annuities, and by selling investments in its own mutual funds. But how can Ameriprise financial planners give objective advice about, say, the best annuity for an investor to buy, when Ameriprise wants its financial planners to sell Ameriprise annuities even if they are less profitable for the investor than other companies’ annuities?
•    Ameriprise’s financial products often pay undisclosed commissions to Ameriprise financial planners and others.

     An investor must therefore be careful in choosing a financial planner. The financial planner may work for a company that wants to place its own insurance, annuities, and mutual funds, and the planner may receive commissions that improperly influence the advice that the planner gives the investor. (See “Financial Planner’s Red Flags,” N.Y. Times at page B-1 (15-OCT-2011)).

     The wrong of a financial planner’s advising an investor to buy overpriced insurance, an overpriced annuity, or an overpriced and underperforming mutual fund—so that the planner will reap a large commission and her company will make a large profit—can be rectified by the investor’s bringing arbitration or a lawsuit. Attorney Stephen A. Katz is available for a free consultation, if an investor thinks that she has been victimized by that kind of wrongdoing.

News in Securities Arbitration and Investor’s Lawsuits

Will a Financial Planning Company Act in an Investor’s Best Interest?

Will a Financial Planning Company Act in an Investor’s Best Interest?

     This blog’s first article asks if a company that clears trades is liable for...
Goldman Sachs Appeals $20.5 million

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Can a Hedge Fund Rating Company Be Trusted?

Can a Hedge Fund Rating Company Be Trusted?

     The previous article asked whether a company that clears trades for a fraudulent hedge...


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Attorney Stephen A Katz
Stephen A Katz, P.C.

111 John Street, Suite 800
New York, NY 10038-3180
(212) 349-6400
(800) 251-3529
(646) 308-1170 (fax)

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