Ameriprise 2009 Annual Report Download - page 50

The Company has not provided a formal capital support Certain legal and regulatory proceedings are described below.
agreement or net asset value guarantee to any of the 2a-7 Funds. In June 2004, an action captioned John E. Gallus et al. v.
American Express Financial Corp. and American Express
The Company and its subsidiaries are involved in the normal
Financial Advisors Inc., was filed in the United States District
course of business in legal, regulatory and arbitration proceedings,
Court for the District of Arizona, and was later transferred to the
including class actions, concerning matters arising in connection
United States District Court for the District of Minnesota. The
with the conduct of its activities as a diversified financial services
plaintiffs alleged that they were investors in several of the
firm. These include proceedings specific to the Company as well as
Company’s mutual funds and they purported to bring the action
proceedings generally applicable to business practices in the
derivatively on behalf of those funds under the Investment
industries in which it operates. The Company can also be subject
Company Act of 1940 (the ‘40 Act). The plaintiffs alleged that fees
to litigation arising out of its general business activities, such as its
allegedly paid to the defendants by the funds for investment
investments, contracts, leases and employment relationships.
advisory and administrative services were excessive. Plaintiffs
Uncertain economic conditions heightened volatility in the seek an order declaring that defendants have violated the ‘40 Act
financial markets, such as those which have been experienced and awarding unspecified damages including excessive fees
from the latter part of 2007 through 2009, and significant allegedly paid plus interest and other costs. On July 6, 2007, the
regulatory reform proposals may increase the likelihood that Court granted the Company’s motion for summary judgment,
clients and other persons or regulators may present or threaten dismissing all claims with prejudice. Plaintiffs appealed the
legal claims or that regulators increase the scope or frequency of Court’s decision, and on April 8, 2009, the U.S. Court of Appeals
examinations of the Company or the financial services industry for the Eighth Circuit reversed the district court’s decision, and
generally. remanded the case for further proceedings. The Company filed
with the United States Supreme Court a Petition for Writ of
As with other financial services firms, the level of regulatory
Certiorari to review the judgment of the Court of Appeals in this
activity and inquiry concerning the Company’s businesses
case, and such review is expected to occur later this year after the
remains elevated. From time to time, the Company receives
Supreme Court issues its opinion in a similar excessive fee case
requests for information from, and/or has been subject to
now pending before it.
examination by, the SEC, FINRA, OTS, state insurance and
securities regulators, state attorneys general and various other Relevant to market conditions since the latter part of 2007, a large
governmental and quasi-governmental authorities concerning the client claimed a breach of certain contractual investment
Company’s business activities and practices, and the practices of guidelines. In April 2009, the client presented a formal Request
the Company’s financial advisors. Pending matters about which for Arbitration. The parties subsequently submitted to mediation
the Company has during recent periods received information and, in the fourth quarter of 2009, executed a definitive
requests include: sales and product or service features of, or comprehensive settlement agreement. We do not anticipate any
disclosures pertaining to, mutual funds, annuities, equity and future provision in respect of this matter, and our business
fixed income securities, insurance products, brokerage services, relationship with the client is expected to continue for the
financial plans and other advice offerings; supervision of the foreseeable future because the client’s investment mandate has
Company’s financial advisors; supervisory practices in connection been renewed and extended.
with financial advisors’ outside business activities; sales practices
In July 2009, two issuers of private placement interests (Medical
and supervision associated with the sale of fixed and variable Capital Holdings, Inc./Medical Capital Corporation and affiliated
annuities and non-exchange traded (or ‘‘private placement’’) corporations and Provident Shale Royalties, LLC and affiliated
securities; information security; the delivery of financial plans and corporations) sold by our subsidiary Securities America, Inc.
the suitability of particular trading strategies, investments and (‘‘SAI’’) were placed into receivership, which has resulted in the
product selection processes. The number of reviews and filing of several putative class action lawsuits and numerous
investigations has increased in recent years with regard to many arbitrations naming both SAI and Ameriprise Financial as well as
firms in the financial services industry, including Ameriprise related regulatory inquiries and actions. The class actions and
Financial. The Company has cooperated and will continue to arbitrations generally allege violations of state and/or federal
cooperate with the applicable regulators regarding their inquiries. securities laws in connection with SAI’s sales of these private
placement interests. The actions were commenced in September
These legal and regulatory proceedings and disputes are subject to
2009 and thereafter, seek unspecified damages, and are still in
uncertainties and, as such, the Company is unable to estimate the
their earliest procedural stages.
possible loss or range of loss that may result. An adverse outcome
in one or more of these proceedings could result in adverse Item 4. Submission of Matters to a Vote
judgments, settlements, fines, penalties or other relief that could
of Security Holders.
have a material adverse effect on the Company’s consolidated
financial condition or results of operations. None.
ANNUAL REPORT 2009 35