SLUSA Precludes JPMorgan Securities Allegations Involving Mutual Fund Sales
As preempted by the Securities Litigation Uniform Standards Act, the U.S. District Court for the Northern District of Illinois dismissed what would have been a would-be state law class action against JPMorgan Securities LLC (JPM) and related entities over mutual-fund sales practices that allegedly maximized defendants’ revenues at cost to fund investors. Per the securities lawsuit, financial advisers were pressured and given incentives to sell the defendants’ proprietary mutual funds rather than ones run by third parties, placing their own financial interests before those of clients. The would-be class includes advisory clients from 2008 through that paid management fees and had assets in the defendants’ proprietary funds.
The defendants sought to have the case dismissed, contending that the claims alleging fraud related to the buying and selling of securities are precluded by SLUSA. The district court concurred, with Judge John Darrah noting that although the complaint presented state law claims involving breaches of fiduciary duty and contract, the allegations’ substance describes a fraudulent scam to sell securities.
Provident Royalties’ Former Executives to Pay $2.3M, Get Prison Time
Earlier this month, four ex-Provident Royalties executives that were involved in the firm’s infamous $500M oil and gas Ponzi scam, received their jail sentences. They also will have to pay $2.3 million in restitution. The men had pled guilty earlier to conspiracy to commit mail fraud over the financial scheme.
Now, Brendan Coughlin and Henry Harrison must serve 21 months in federal prison, while Paul Melbye will serve 18 months. W. Mark Miller is going to prison for six months with another six in home confinement. (Miller was Provident’s CEO and then president, while the other three men founded and ran the firm. Another co-founder, Joseph Blimeline, is already sentenced to 12 years behind bars.)
Prosecutors contend that investors lost their money because of the way Blimeline handled investor capital and that the other three co-founders attempted to conceal his actions or reveal to investors how much trouble the firm was in, allowing them to bring in another $2.3 million. Many broker-dealers that sold Provident Royalties private placements ended up going out of business as a result of their involvement with the sales.
Two Financial Advisors Resume Working at Securities America
Seven years after leaving Securities America Inc., financial advisers Mark Slattery and Shannon Casey are back. The two of them founded CaseSlattery Wealth Partners and they went on to spend more than 10 years at the independent brokerage firm before taking their business to SII Investment Inc. in 2006. Slattery has made clear that they didn’t leave because of anything to do with Securities America but more because they felt like they needed to switch brokerage firms after leaving American National Bank’s investment department, which they ran, and setting up their own advisory firm.
The return of Slattery, who started his career with LPL Financial Holdings Inc. (LPLA) and whose firm oversees $130 million in client assets, is good for Securities America, which took a huge hit a couple of years back because of its sale of private placements that went awry. After that, a lot of financial advisers left. It wasn’t until Ladenburg Thalmann & Co. Inc. (LTS) went on to buy Securities America from Ameriprise Financial (AMP) that the negative buzz around the brokerage firm stopped. Per the end of this year’s first quarter, Securities America was managing $16 billion in client assets and 1,729 advisers.
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