Articles Posted in Cease and desist

Ameriprise Financial ServicesThe Securities and Exchange Commission (SEC) has issued a civil penalty of $4.5 million against Ameriprise Financial Services as part of a settlement order concerning the company’s alleged failure to prevent the theft of more than $1 million in customer funds by several of its brokers.

According to the SEC’s order, the matter concerns activities that took place between 2011 and 2014, a period during which Ameriprise allegedly failed “to adopt and implement policies and procedures reasonably designed to safeguard retail investor assets against misappropriation by the firm’s representatives.” Though the firm maintained automated systems that were designed to prevent and detect misappropriation, one such system “did not function properly and a second faced limitations” during that period, preventing the company from identifying the misappropriation by five representatives of more than $1 million in client funds.

The first system, according to the SEC, was known as the Fraud Early Detection System. Its functions included the identification of “situations where a representative attempted to change the address associated with a client’s account” to one under the representative’s control—an activity considered to be “suspicious” and potentially indicating inappropriate activity. The SEC’s order states that a “technical error” in the system was not detected until late 2013, and consequently the system “did not function properly,” namely by failing to identify instances of inappropriate address changes. As such, one Ameriprise representative “was able to perpetrate a fraud” on two retail clients without the firm’s awareness.

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