Ameriprise Pays $17.3 Million to Settle SEC Charges of Undisclosed Compensation

Ameriprise Financial Services Inc. will pay out $17.3 million to settle a U.S. Securities and Exchange Commission charge that it failed to disclose revenue from selling certain investments several years ago.

According to the SEC, the Minneapolis-based company made millions offering particular real estate investment trusts to brokerage customers. The company is accused of demanding "revenue sharing" payments of about $30.8 million for sales of Carey and CNL REITs and did not disclose that income -- a situation that the SEC determined is a violation of securities laws.

"None of this $30.8 million -- or the conflicts of interest created by these payments -- was disclosed by either Ameriprise or the Carey REITs and CNL REITs. As a result, Ameriprise sold more than $3.5 billion worth of shares of the Carey REITs and CNL REITs to its brokerage customers during the relevant period without disclosing such payments," according to the SEC order.

The commission's investigation also determined that Ameriprise was using a "variety of mislabeled invoices to the REITs" to collect the revenue-sharing payments.

Paul Johnson, a spokesman for Ameriprise, said, "This is a very old case that hinged on issues of revenue-sharing disclosure that ended in early 2004. We long ago expanded our disclosures to ensure that our clients received the information from us directly as well as through the prospectus of the product issuer."

Ameriprise agreed to pay $17.3 million to settle the enforcement action, the SEC said, though the company did so without admitting or denying the findings. The SEC said its investigation continues.

In May, Ameriprise, along with Allstate and Principal Financial Group, were given preliminary approval by the U.S. Treasury Department to receive federal bailout funds under the government's Capital Purchase Program, a part of the Troubled Asset Relief Program. All of them declined the federal government's financial aid (BestWire, May 15, 2009).

Ameriprise became independent of American Express Co. shortly after the period in question.

Ameriprise Group has a current Best's Financial Strength Rating of A (Excellent).

In late afternoon trading on July 13, shares of Ameriprise were trading at $23.09 a share, up 4.29% from the previous close.

(Jesse A. Hamilton, Washington bureau manager: Jesse.Hamilton@ambest.com)