Securities America, Inc., charged last year with improper sales of Medical Capital Notes in Massachusetts, has agreed to make full restitution to 63 Bay State investors, Secretary of the Commonwealth William Galvin said Monday.
The broker-dealer will pay $2.8 million in restitution within 10 days. A class action settlement in a Texas case is expected to result in repayment of 40% of investors losses to Massachusetts investors. Additionally, the receivership proceeding regarding Medical Capital Holdings is expected to result in recovery of another 10% of investor losses.
However, if the class action settlement is not approved, Securities America will pay an additional $2.24 million to the Massachusetts investors, with a further provision that if all those payments do not return investors 100% of their principal, Securities America will make up the difference. Those payments would be due 90 days after all appeals are ended in the class action and final receivership payments are made.
In January, 2010, Massachusetts charged Securities America, Inc. with selling about $697 million in promissory notes issued by Medical Capital Holdings, Inc. without telling investors they were high-risk investments. Medical Capital defaulted in August, 2008.
The notes were offered under a Regulation D exemption that allows sales to sophisticated and accredited investors, but the Massachusetts Securities Division charged that Securities America sales tactics ignored warnings of their own analysts and pitched the notes to unsophisticated investors.
