Recent developments in the case against Securities America from victims of the Medical Capital Ponzi scheme might be good news for investors, but top-tier advisors at the broker-dealer are scrambling to find a plan B.

Ameriprise Financial has reportedly offered a settlement of $192 million in the class action lawsuit against its subsidiary. While that might satisfy investors, who lost nearly $400 million through the Medical Capital scheme, advisors at Omaha, Neb.-based Securities America face a dilemma: Do they stay with the firm or do they take a chance on another broker-dealer?

While the fate of those who bought into the MedCap securities may be sealed because their U-4 statements would make them untouchable by other brokers, advisors who avoided the MedCap securities are trying to figure out their next move.
"It is stressful, and it is disappointing that you have to be confronted with this," says Rick Tonkinson of Coral Gables, Fla.-based Rick Tonkinson and Associates, Inc. "Now you have to figure out what your options are. I think the problem for most of the top-tier producers is the 'what ifs' that come along with this."

Tonkinson, one of the top 1% of advisors at Securities America, says he's always enjoyed the Midwestern, small-town America attitude of Securities America, and worries that will be lost if Ameriprise takes greater control of the company.
While some advisors have already jumped ship, Tonkinson says most of top-tier advisors are reluctant to leave Securites America.

As one of the advisors who avoided the Medical Capital securities, he wonders if staying in the same room with those tainted by the scheme will affect his reputation. He's already received numerous offers from competing broker-dealers.

"I would say that most of the top 100 producing advisors with Securities America are being aggressively pursued," he says. "Securities America has done itself no favors in putting their top-tier producers in the situation where they are having serious conversations with other broker-dealers."

Tonkinson says the top 100 advisors represent 50% or more of Securities America's total assets under management. He adds if Securities America survives the litigation, it needs to reassure its top advisors they will still have the capitalization to continue to operate. He notes many advisors fear a mass exodus of top-tier producers.

If so, Tonkinson says it's not an easy decision to make.

"It's almost like a divorce," he says. "If you have a good relationship with a broker-dealer, it's like you're married to them. If you change to another broker-dealer, it's like you got yourself a divorce. It's a gut wrenching decision, and I find absolutely no enjoyment in having to think about a plan B."

Securities America sold about $400 million in an alleged Ponzi scheme involving Medical Capital securities, according to court documents. A Texas court last month rejected a recent settlement agreement of $21 million from Securities America, stating that the firm, which held only about $2 million in reserves, was operating with inadequate capital and inadequate insurance pursuant to their clients' investments.