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SEC Fines Ameriprise $4.5 Million for Failing to Prevent Theft by Five Brokers

The Securities and Exchange Commission has fined Ameriprise Financial Services Inc. $4.5 million for failing to safeguard retail investor assets from theft by five of its representatives.

The Securities and Exchange Commission has fined Ameriprise Financial Services Inc. $4.5 million for failing to safeguard retail investor assets from theft by five of its representatives. The registered representatives include Barbara J. Stark and her daughter Susan Walker, Jeffrey Scott Davis, Justin Weseloh, and Jennifer R. Johnson.

According to the SEC’s order, the five Ameriprise representatives allegedly committed numerous fraudulent acts, including forging client documents, and stole more than $1 million in retail client funds over a four-year period.

The SEC found that Ameriprise, one of the nation’s largest registered investment advisers and broker-dealers, “failed to adopt and implement policies and procedures reasonably designed to safeguard investor assets against misappropriation by its representatives.”

According to the complaint, Stark, who had been a representative for 24 years, operated as a franchise advisor from an office in Minnesota. She was assisted in that office by her daughter Walker.

From 2008 and continuing to 2013, the pair engaged in approximately 600 fraudulent transactions and misappropriated $1 million in client funds. They forged client signatures on dozens of Ameriprise forms, including those to change the address of a client, to disburse funds via check, and to transfer funds by wire.

Ameriprise learned of the fraud after state regulatory authorities contacted the firm to inquire about the representatives’ activities. After discovering the misconduct, Ameriprise terminated Stark and Walker in March 2013, and FINRA barred the pair in July 2013 for failing to appear for testimony.

Walker later pled guilty to mail fraud and tax evasion in connection with the misappropriation of funds and was sentenced to 88 months in prison and fined $1 million. The mother-daughter duo were also sanctioned by the state of Minnesota for their misconduct.

Davis was a Virginia-based representative for 13 years when he was terminated. He was on heightened supervision by Ameriprise for engaging in unauthorized activities in client accounts, and during that time misappropriated $200,000 in funds from client accounts through a combination of ACH transactions and forged checks.

Davis’ fraud was discovered after one of the victims complained to Ameriprise about unusual money movement activity in his account. Davis later pled guilty to wire fraud in connection with the misappropriation of funds and was sentenced to 54 months in prison.

Weseloh was an Ohio-based representative for three years when he was suspended and subsequently resigned while under investigation for misappropriating client funds. From 2011 to 2013, he allegedly stole $676,000 from client accounts through unauthorized wire transfers, of which approximately $373,000 was from Ameriprise accounts.

Weseloh’s fraud was discovered in September 2013 when an office employee found evidence in a trash can that he had been attempting to copy the signature of a family member from whom he was attempting to steal funds. He was later barred by FINRA in June 2014.

Johnson was an Ameriprise representative for seven years when she was terminated for stealing $21,000 in from a client through unauthorized check disbursements.

Johnson’s fraud was discovered in February 2016 when Ameriprise’s new automated money movement system detected her third attempt to wire client funds to an account associated with Johnson Builders, which she previously disclosed to Ameriprise as an outside business activity. She later pled guilty and was sentenced to five days in prison and five years of probation, plus restitution.

The SEC noted that Ameriprise has implemented a new system to safeguard clients’ money and has reimbursed all impacted clients for the losses they incurred.

Without admitting or denying the findings, Ameriprise agreed to be censured and pay a penalty of $4.5 million.

Ameriprise has approximately 9,700 representatives, maintains approximately 3,800 branch offices, and has approximately $198 billion in assets under management.

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