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Ameriprise Financial Services, Inc.

Background Information

Ameriprise Financial, the successor entity to American Express Financial Advisors, Inc. has been registered as a broker-dealer since 1971. Headquartered in Minneapolis, Minnesota, they are a leading global financial institution with over $681 billion in assets under management and administration.

Regulatory Violations

Ameriprise Financial Services, Inc. has been the subject of many regulatory investigations, some which resulted in disciplinary actions by regulators.

Overconcentration of Non-Traded REITs

In 2013, the Commonwealth of Massachusetts Securities Division fined Ameriprise Financial $400,000 and ordered them to offer restitution to all Massachusetts customers who purchased non-traded REITs in excess of Massachusetts’ 10% maximum concentration and/or income/net worth requirements. Ameriprise also agreed to certify that it has conducted a comprehensive review of its policies, procedures and supervision for the sale of all alternative investments.

Revenue Sharing in REITs Offers and Sales

The SEC charged Ameriprise $17.3 million for violating the Securities Act of 1933 and Securities Exchange Act of 1934. They found that Ameriprise received approximately $30.8 million in undisclosed compensation or “revenue sharing” in exchange for including REITs on their brokerage platform. They also unlawfully offered and sold shares of a REIT to brokerage customers without an effective registration statement.

Failure to Supervise

In 2009, Ameriprise settled with the Commonwealth of Pennsylvania for $1.8 million for alleged failure to reasonably supervise certain agents and alleged dishonest or unethical practices relating to internal policies.

Proprietary Mutual Funds – Inadequate Disclosures of Material Information

Ameriprise settled with the State of Illinois in June, 2008 for failing to provide adequate disclosures of material information regarding its proprietary mutual funds, including the existence of certain revenue sharing agreements, financial incentives to sell the funds and the limited transferability of those funds to other brokerage/advisory firms. They agreed to pay fines of $1.5 million. They also agreed to develop a method to identify and waive severance fees for certain customers that attempt to transfer their accounts to other brokerage/advisory firms.

Revenue Sharing Agreements with Mutual Fund Families

The SEC charged Ameriprise $31 million in disgorgement, penalties and prejudgment interest for failure to adequately disclose certain material facts to its brokerage customers in the offer and sale of mutual fund shares and interests in 529 College Savings Plans. Those facts related to revenue sharing agreements it had with certain mutual fund families, which constituted a conflict of interest in offering and selling these shares. The $31 million was to be distributed to current and former customers of Ameriprise.

Recommendations of Mutual Fund Shares

In 2005, the NASD (now known as FINRA), charged Ameriprise $13 million for recommending purchases of Class B mutual fund shares without considering or adequately disclosing that an equal investment in Class A shares would generally have been more advantageous for certain clients and for failure to adequately supervise representatives in providing adequate disclosure of or consideration to the benefits of the various mutual fund share classes as they applied to individual clients. Class A shares are subject to a front-end load, or initial sales charge, when originally purchased and have modest annual fund expenses. This reduces the initial amount invested. The majority of the front-end load is paid to the selling broker-dealer as a commission. In addition, Class A share investments have breakpoint discounts that reduce the commission paid to the selling broker-dealers. These breakpoints occur with additional purchases of shares of the same funds (i.e. up to $50,000 initial sales charge can range from 3% to 5.5%, from $50,000 to $99,000 sales charge can range from 2.5% to 4.5%, and so on.) Class B shares do not carry front-end sales charges and breakpoint discounts are not available regardless of the size of the investment. Instead, Class B shares have significantly higher annual fees than Class A shares and may be subject to a CDSC (Contingent Deferred Sales Charge) if redeemed prior to the expiration of a holding period specified in the prospectus. Because of these differences in sales charges, availability of breakpoints and amount of ongoing fees and expenses associated with different share classes, generally an equal investment in Class A shares will yield a better return than a similar investment in Class B shares.

Because Ameriprise consistently recommended purchases of Class B shares instead of Class A shares, they violated the suitability requirement. In determining the suitability of a particular share class, representatives must weigh the consequences of the class selection by considering the potential effect of the comparative sales loads and annual expenses over the customers contemplated duration of the investment.

Silver Law Group

Silver Law Group is a nationally recognized securities and investment fraud law firm with Martindale-Hubbell® Peer Review Ratings™ “AV” rated lawyers that handle all securities arbitration matters on a contingency fee basis. The Law Firm, at no cost to investors will review account activity and account statements to determine whether there was any misconduct, whether there are damages and the legal causes of action. We investigate all sales practice violations, while taking into consideration the investor’s age, investment background, and the relationship between the investor and the brokerage firm and its financial advisor. According to securities industry rules and regulations, unsuitable investment advice, securities concentration, fraudulent misrepresentations and omissions of material facts, breach of fiduciary duty, conflicts of interest, variable annuity switching are among the causes of action that may be available to investors in claims for damages against brokerage firms and their financial advisors in a securities arbitration claim filed with the Financial Industry Regulatory Authority (FINRA). We represent investors in FINRA arbitration claims on a contingency fee basis.

To learn more call us at (954) 755-4799 or Toll Free at (800) 975-4345

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