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Ameriprise unit is ordered to pay up to $9.3 million to 3 investors

From Bloomberg News

An Ameriprise Financial Inc. subsidiary must pay as much as $9.3 million to three retired American Airlines pilots who claimed a broker squandered their retirement savings on mutual funds with high fees and trading costs, an NASD arbitration panel said.

Ameriprise’s Securities America subsidiary and Robert P. Gormly Jr., a broker who once worked for the company in Texas, are jointly liable for $3.9 million in actual damages and $2.4 million in attorney fees, NASD arbitrators said in a ruling last week. Securities America must also pay $3 million in punitive damages.

The ruling marks the second major arbitration award this year to Ameriprise clients who claimed the company’s brokers hurt their retirement funds by choosing unsuitable investments. Minneapolis-based Ameriprise, which was spun off last year from American Express Co., reached an agreement with the NASD -- an industry regulatory body formerly known as the National Assn. of Securities Dealers -- in September to pay $16.3 million to settle a case brought by former Exxon Mobil Corp. workers.

“Securities America sought in good faith to resolve this matter prior to the arbitration, and now that we have received the panel’s award, we will work with the clients to arrange for prompt payment to them,” Paul Johnson, a spokesman for Omaha-based Securities America, said of the pilots’ case.

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The award “is really what we had hoped for,” Richard Elliott, an attorney representing the pilots, said Wednesday. Gormly, also a former airline pilot, “had an affinity with the others and they trusted him,” he said.

Gormly, who left the company in 2004, didn’t respond to messages seeking comment at his firm in Flower Mound, Texas. An attorney listed by the NASD as representing Gormly and Securities America in the arbitration didn’t return phone messages seeking comment.

NASD arbitrators in May ordered Securities America to pay $22 million to 32 former Exxon employees. Ameriprise initially said it would appeal the award, then reached the September settlement with NASD regulators.

In that case, the company agreed to pay $13.8 million in restitution, plus a $2.5-million fine for failing to supervise a broker involved. The company also agreed to hire a consultant to review its marketing of investment recommendations for retirees.

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The NASD said a broker coaxed Exxon employees into retiring early by cashing out their company-sponsored investment plans and reinvesting the funds with Securities America. Despite investment losses, the broker suggested he could win returns of 11.5% to 18%, the NASD said.


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