Ameriprise Fined Millions For Failing To Protect Customers From Misappropriation
Ameriprise Financial Services Inc. (CRD: 6363) is a Securities and Exchange Commission (SEC) registered broker-dealer and investment adviser based in Minneapolis, Minnesota, who has been censured and ordered to pay a $4,500,000.00 civil penalty as part of resolving the SEC’s allegations that the firm neglected to establish and apply procedures and policies with a view towards protecting assets of investors from being misappropriated by its own representatives. Administrative Proceeding File No. 3-18642, August 16, 2018.
The SEC found that between 2011 and 2014, Ameriprise implemented select surveillance mechanisms as part of its supervision and compliance based systems to identify circumstances when a representative (a registered representative of the broker or investment adviser representative) possibly committed fraud through the misappropriation of assets held in a customer’s investment account. Apparently; however, one of its systems was significantly limited and the other malfunctioned, causing the firm to be unable to detect five of the firm’s representatives’ misappropriation of more than $1,000,000.00 in customers’ funds.
The Order indicated that one of the systems used by Ameriprise was the Fraud Early Detection System (“FEDS”), which was meant to uncover circumstances in which representatives tried to change addresses linked to the customers’ investment accounts to alternative addresses linked to the representatives, including addresses of representatives’ homes and businesses. FEDS, according to the Order, failed to work correctly because of a glitch that the firm had not discovered until December of 2013. As a result, Ameriprise customers were defrauded by one of the firm’s representatives, Barbara Josephine Stark, who inappropriately changed the customers’ addresses with those controlled by Stark and her daughter, Susan Elizabeth Walker.
The findings revealed that the firm also employed an automatic transaction-based analysis tool which was designed to detect when a representative endeavored to distribute cash from a customer’s account to an address that the registered representative controlled. Yet, between the 2011 and 2014 timeframe, the analysis tool was apparently not capable of identifying situations when unapproved cash was disbursed from a customer’s account and sent to an address controlled by the representative. The Order reported that the analysis tool was also deficient with regard to uncovering instances where unauthorized disbursements were effected by wire because of the reliance by the firm on manual procedures. The SEC concluded that there were several instances in which fraudulent fund transfers were executed from customer accounts to addresses controlled by representatives.
The SEC identified five registered representatives who misappropriated customer funds and had been terminated by the firm for their misconduct:
- Jennifer Rebecca Johnson (CRD: 2668325) was a registered representative of Ameriprise Financial Services, Inc. based in St. Paul, Minnesota. Evidently, in 2014, she defrauded a customer and misappropriated $21,000.00. On April 26, 2017, Johnson was barred by Financial Industry Regulatory Authority (“FINRA”) from acting as a broker or assisting with a broker-dealer firm.
- Justin Matthew Weseloh (CRD:5321024) was a registered representative of Ameriprise Financial Services, Inc. based in Independence, Ohio. The Order stated that five Ameriprise customers had been defrauded by him between 2011 and 2013. A total of $676,000.00 had been stolen by Weseloh from the customers’ accounts, $373,00.00 of which had been taken from accounts at Ameriprise. Weseloh was barred by FINRA in all capacities on June 17, 2014.
- Jeffrey Scott Davis (CRD: 3081852) was a registered representative of Ameriprise Financial Services, Inc. based in Virginia Beach, Virginia. Between 2012 and 2013, a fraud had been perpetrated by Davis in which five customers were victimized. The Order stated that $200,000.00 in funds had been stolen by Davis from the customers’ accounts. On March 11, 2014, Davis was barred by FINRA from acting as a broker or assisting with a broker-dealer firm.
- Barbara Josephine Stark (CRD: 1328134) and her daughter, Susan Elizabeth Walker (CRD: 1823041), were both registered representatives of Ameriprise Financial Services, Inc. based in Wayzata, Minnesota. Between 2008 and 2013, about 600 hundred fraudulent transactions had been executed by Stark and Walker, resulting in $1,000,000.00 in funds having been misappropriated from customers. FINRA Barred Stark and Walker in all capacities on July 8, 2013.
The Order stated that all of the foregoing representatives committed violations of Section 206(1) and 206(2) of the Investment Advisers Act of 1940. In addition, some of those representatives committed violations of Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 because of their misappropriation involving selling securities from customers’ accounts.
The SEC found that Ameriprise committed violations of Section 206(4) of the Investment Advisers Act and Rule 206(4)-7. Moreover, the SEC found Ameriprise failed to supervise its representatives in violation of Section 15(b)(4) of the Securities Exchange Act as well as Section 203(e)(6) of the Investment Advisers Act.
Gregory Tendrich, P.A. is focused on recovering losses for investors who are victim to misappropriation of funds and sales practice violations committed by registered representatives and their firms. If you have lost money by investing with the foregoing Ameriprise registered representatives, contact Gregory Tendrich today for a review of your case and discussion of your legal options.