Faced with hundreds of arbitration claims that could cost upwards of $300 million in awards, Securities America, a brokerage unit of Ameriprise FInancial, has agreed to meet with a mediator.  All sides are scheduled to meet Thursday in Chicago.  According to a notice of mediation, "all interested parties [are invited] to participate" - that would include investors whose arbitration cases against Securities America are also pending.

Securities America troubles relate to sales of private placements from Provident Royalties LLC and Medical Capital Holdings Inc.  Regulators accused those 2 companies of fraud in 2009, and Sec-Am clients allege the brokerage didn't conduct adequate due diligence of the offerings.

The judge who signed the notice rejected a plan that would have obliged all Securities America clients affected in the purchase of allegedly fraudulent private placements to join a proposed class-action settlement.  That plan was agreed to by one group of investors who moved for class action and by Securities America. It called for a total combined payout of $21 million to $24 million. The idea enraged other investors, however, who would have been required to abandon their pending arbitration claims and become part of the settlement.

The class-action settlement would have netted investors 3.5 cents on the dollar, after legal fees, if all investors had been obliged to participate, according to Hugh D. Berkson, a lawyer for Hermann, Cahn & Schneider LLP in Cleveland, who represents investors in some of the arbitration cases.

Any settlement of arbitration claims, however, could be a hard sell. "My clients aren't interested in thinking of anything even near 5 cents on the dollar and they don't have to because of the judge's ruling [on Friday]," he said.  "This is a bad situation for everyone," a Securities America spokesperson said in a statement. "We are hopeful we can come to a reasonable resolution."   [WSJournal, 3/22]