Securities America Inc. will make a final payment of $1 million to investors of Medical Capital Holdings
In 2011, Massachusetts ordered Securities America to pay $2.8 million in restitution to make the investors of Medical Capital Holdings whole. At the time, that settlement referred to the potential for pending actions. This $1 million in restitution, which was announced Thursday morning, is the final settlement in the Massachusetts case against Securities America.
Approximately sixty investors, many of them seniors, bought promissory notes issued by Medical Capital Holdings. The Massachusetts case was a $1.7 billion Ponzi scheme sold mainly through independent broker-dealers.
Brokers typically receive a 7% commission for selling private placements; broker-dealers usually collect a 1% due diligence fee from the private placement’s sponsor company, which also pays for a due diligence report that broker-dealers use when evaluating such offerings.
Between 2003 and 2009, Medical Capital Holdings raised $1.7 billion by selling private notes, purportedly to buy discounted medical receivables such as unpaid doctor or hospital bills that the firm would collect at full price.
Dozens of independent broker-dealers sold the Medical Capital Holdings (MedCap) notes. But Securities America was by far the largest seller, and its advisers sold $697 million.
Securities America received more than $26 million in compensation, according to the Massachusetts Securities Division. MedCap went under in 2009.
The Massachusetts Securities Division sued Securities America in January 2010, alleging that the Securities America clients were not sophisticated investors, a requirement to purchase private placements.
The foregoing information, which is all publicly available, is provided by The White Law Group.
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