AEFA Former Clients v American Express Financial Advisors (AEFA)
Class Action Status Sought to Certify a Class of Former Clients Harmed by American Express Financial Advisors
Between 1999 and 2004, hundreds of thousands of consumers and investors sought and paid for financial advice from American Express Financial Advisors (AEFA). Investors turned to these financial advisors because of their promises of informed, objective, personalized, and unbiased advice. Former AEFA clients allege that despite these promises, AEFA charted a course of business that defrauded and manipulated their fee-paying advisory clients, using the financial advisory segment of its immense sales organization to advance their interests, rather than the client's interests.
On August 1, 2005 American Express Financial Advisors (AEFA), a division of American Express, was served with a motion filed by leading Arizona plaintiff lawyers. The motion asked Federal Court in Arizona to certify a class of more than 500,000 former AEFA clients. The Motion for Class Certification is scheduled to be heard in Fall 2005. 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.
The class certification motion argues that as AEFA continued its scheme, executives enriched themselves by creating incentive programs for financial advisors to sell American Express products, which created a direct 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.
This is not the first class action motion that AEFA has received. 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.
