Last week, the Massachusetts Securities Division’s Enforcement Section filed a complaint against Securities America, Inc. (Securities America) claiming that the company omitted information and mislead investors. In the complaint, Massachusetts claims that Securities America violated a state securities act in connection with the sale of millions of dollars worth of Medical Notes to investors.
According to the state of Massachusetts, Securities America sold investors roughly $697 million worth of Medical Capital notes issued by Medical Capital Holdings, Inc. (Medical Capital). Securities America offered the notes to investors in a number of private placements, meaning the securities were considered too risky to be solicited or sold to the general public. The complaint alleges that Securities America did not properly disclose the material risks associated with the notes prior to selling them to investors.
In a statement concerning the issue, Massachusetts Secretary of the Commonwealth, William Galvin, said:
“Our investigation showed that Securities America ignored their own due diligence analysts and sold these notes to unsophisticated investors without telling them the risks involved. People invested their life savings, while this dealer hid from them the truth of what they were getting into.”
In addition to allegedly misleading investors by Securities America, since August of 2008, Medical Capital has been in permanent receivership and has defaulted on every one of its outstanding note obligations. This means that approximately $1.079 billion of notes are in default, leaving millions of investors’ dollars – including the life savings of many – frozen. The civil complaint also seeks restitution for investors whose dollars are now illiquid.
From approximately 2003 to 2009, Medical Capital issued over $1.7 billion in Medical Capital notes. Acting as a placement agent between the notes and investors, Securities America handled the sale of roughly 37 percent of the total notes issued, or $697 million.
In connection with the sale of the notes in Massachusetts alone, Securities America received nearly $30 million in compensation. This does not include the untold millions of dollars worth of compensation received from countless more allegedly mislead investors in other states.
Although Massachusetts filed this complaint on behalf of investors within its state lines, this case of financial fraud affects investors throughout the United States. If you invested in Medical Capital notes using Securities America, please contact an attorney experienced in securities fraud immediately to discuss protecting your rights under the law.
Click on the following link to read the official complaint filed by the Commonwealth of Massachusetts
Click on the following link to read the Boston Herald’s article, State seeks restitution for securities of America investors.