MINNEAPOLIS, Aug. 1, 2005 (PRIMEZONE) -- American Express Financial Advisors (AEFA), a division of American Express (NYSE:AXP) was served today with a Motion, asking the Federal Court in Arizona to certify a class of more than 500,000 former AEFA clients (As of August 1, 2005, AEFA is known as Ameriprise Financial, Inc.). In the Class Certification motion, the former clients allege that AEFA violated fiduciary duties and perpetrated a scheme to defraud its investing clients through the Company's sale of Financial Plans.
Between 1999 and 2004, hundreds of thousands of former AEFA clients sought and paid for financial advice based on the Company's promise of informed, objective, personalized, and unbiased advice. According to the former clients, despite these promises, AEFA betrayed this trust and utterly failed to deliver unbiased financial advice. Instead, the former clients allege that the Company charted a course of business that defrauded and manipulated AEFA's fee-paying advisory clients, using the financial advisory segment of its immense sales organization to advance AEFA's interests, in violation of the Investment Advisers Act (IAA).
The class certification motion argues that in perpetrating its scheme, AEFA executives enriched themselves by creating incentive programs for financial advisors to sell American Express proprietary products, which created an inherent conflict of interest that impaired the advisor's ability to render objective and unbiased advice. According to the Motion, this kind of scheme constitutes a breach of fiduciary duty under the federal regulation for investment advisors, the IAA. The IAA allows for rescission -- or money back -- for violations of the Act.
On February 17, 2005, the State of New Hampshire Bureau of Securities Regulation commenced an action, with similar charges; that case has now reached settlement. AEFA settled those claims by agreeing to pay a total of $7.5 million to the State of New Hampshire, with up to $2 million in restitution paid to individual purchasers of the Financial Plans residing in New Hampshire.
The Motion for Class Certification is anticipated to be heard in Fall 2005.
Copies of the New Hampshire Complaint, New Hampshire Settlement, and the non-confidential portions of the Class Certification Motion are available at www.zimmreed.com
More information on this and other class actions can be found on the Class Action Newsline at www.primezone.com/ca.