Commitments and Contingencies |
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| Commitments and Contingencies Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Commitments and Contingencies |
Commitments and Contingencies
Operating Leases
The Company and certain of its subsidiaries are obligated under several non-cancelable lease agreements for office space, expiring in various years through February 2025. Certain leases have provisions for escalation based on specified increases in costs incurred by the landlord. The Company is a sublessor to third parties for a portion of its office space as described below. The subleases expire at various dates through August 2020. As of December 31, 2015, minimum lease payments (net of lease abatement and exclusive of escalation charges) and sublease rentals are as follows:
Deferred rent of $1,551and $1,514 at December 31, 2015 and 2014, respectively, represents lease incentives related to the value of landlord financed improvements together with the difference between rent payable calculated over the life of the leases on a straight-line basis (net of lease incentives), and rent payable on a cash basis.
Litigation and Regulatory Matters
In October 2011, a suit was filed in the U.S. District Court for the District of Delaware by James Zazzali, as Trustee for the DBSI Private Actions Trust, against 50 firms, including two of the Company’s subsidiaries, and their purported parent corporations, alleging liability for purported fraud in the marketing and sale of DBSI securities. The plaintiff alleged, among other things, that the defendants failed to conduct adequate due diligence and violated securities laws. In September 2014, one Company subsidiary entered into a settlement agreement resolving all claims against it; in December 2015, the remaining Company subsidiary entered into a settlement agreement resolving all claims against it; the amounts paid by such subsidiaries in connection with the settlements were not material.
In December 2012, a purported class action suit was filed in the Superior Court of California for San Mateo County against Worldwide Energy & Manufacturing, Inc. (“WEMU”), certain individuals, and Ladenburg as placement agent for a 2010 offering of WEMU securities. The complaint alleged that the defendants, including Ladenburg, were liable for violations of state securities laws. On May 13, 2015, the court approved the parties’ settlement agreement entered into on August 11, 2014 that resolved all claims in the complaint in exchange for Ladenburg's payment of $1,325. Such amount was accrued at December 31, 2013 and paid in December 2014.
During the period from June 2013 to September 2014, seven former clients of Triad filed arbitration claims concerning the suitability of investments in tenant-in-common interests purchased through Section 1031 tax-deferred exchanges. Five clients settled such claims between April 2014 and February 2015. In April 2015, the remaining two claimants entered into settlement agreements with Triad. The amounts paid by Triad in connection with the settlements were not material.
From April 2014 to July 2015, eleven arbitration claims were filed on behalf of 64 individuals against Securities America and another brokerage firm concerning purported unauthorized trading and unsuitability of investments made on their behalf by a registered representative.
In October 2014, the parties to one of the arbitration claims resolved all claims on behalf of 29 individual claimants. In June 2015, the parties to another of the arbitration claims resolved all claims with one claimant. In January 2016, the parties to the remaining nine arbitration claims resolved all claims by the remaining claimants. The amounts paid in connection with those settlements were not material. In addition, Securities America has received notice of potential claims which would involve 31 individuals seeking reimbursement of investment losses that are not material.
In December 2014 and January 2015, two purported class action suits were filed in the U.S. District Court for the Southern District of New York against American Realty Capital Partners, Inc. (“ARCP”), certain affiliated entities and individuals, ARCP’s auditing firm, and the underwriters of ARCP’s May 2014 $1,656,000 common stock offering (“May 2014 Offering”) and three prior note offerings. The complaints have been consolidated. Ladenburg was named as a defendant as one of 17 underwriters of the May 2014 Offering and as one of eight underwriters of ARCP’s July 2013 offering of $300,000 in convertible notes. The complaints allege, among other things, that the offering materials were misleading based on financial reporting of expenses, improperly-calculated AFFO (adjusted funds from operations), and false and misleading Sarbanes-Oxley certifications, including statements as to ARCP’s internal controls, and that the underwriters are liable for violations of federal securities laws. The plaintiffs seek an unspecified amount of compensatory damages, as well as other relief. In December 2015, the plaintiffs filed an amended complaint. Motions to dismiss that complaint are currently pending. The Company believes the claims against Ladenburg are without merit and, if they are not dismissed, intends to vigorously defend against them.
During the period from March 2015 to February 2016, eight arbitration claims and one lawsuit (U.S. District Court for the Middle District of Alabama) were filed against Triad and others by a total of 43 individuals concerning purported misrepresentations and unsuitability of trading in their advisory accounts. All or most of the transactions at issue were effected through an investment advisory firm not affiliated with Triad or the Company. The lawsuit was transferred to arbitration. Seven arbitration claims, including the transferred lawsuit, allege an aggregate amount of $1,484 in compensatory damages and other relief. Two arbitration claims sought an unspecified amount of compensatory damages and other relief. Those two arbitration claims, involving a total of 34 individuals, were settled in February 2016 and the amounts paid by Triad in connection with those settlements was not material. The Company believes the remaining claims are without merit and intends to vigorously defend against them.
In September 2015, a client of a former Triad registered representative filed an arbitration claim concerning the suitability of investments in tenant-in-common interests purchased through Section 1031 tax-deferred exchanges. The claim, which seeks compensatory damages for purported investment losses totaling $3,714 and other relief, is currently pending. The Company believes the claim is without merit and intends to vigorously defend against it.
In September 2015, Securities America was named as a defendant in lawsuits brought by the bankruptcy trustee of a broker-dealer (U.S. Bankruptcy Court for the District of Minnesota) and by a customer of that broker-dealer (U.S. District Court for the District of Minnesota). The lawsuits allege that certain of the debtor broker-dealer’s assets were transferred to Securities America in June 2015 for inadequate consideration. The complaints seek an unspecified amount of compensatory damages, and other relief. The Company believes the claims are without merit and intends to vigorously defend against them.
Commencing in October 2013, certain states have requested that Securities America provide information concerning the suitability of purchases of non-traded REIT securities by their residents. Securities America has complied with the requests. Securities America has not received notice of, and does not expect, any further action by any of the states.
Since July 2015, the Company’s broker-dealer subsidiaries have been reviewing the extent to which they failed to waive mutual fund sales charges for certain customers who purchased shares in mutual funds beginning in July 2009 that provided fee waivers for certain charitable and retirement accounts. The Company’s broker-dealer subsidiaries intend to reimburse such mutual fund sales charges, with interest, to the affected customers; the cost to the broker-dealer subsidiaries is not expected to be material. The Company does not believe that the broker-dealer subsidiaries will be subject to disciplinary action in connection with these reimbursements.
In November 2015, two purported class action complaints were filed in state court in Tennessee against officers and directors of Miller Energy Resources, Inc. (“Miller”), as well as Miller’s auditors and nine firms that underwrote six securities offerings in 2013 and 2014, and raised approximately $151,000. Ladenburg was one of the underwriters of two of the offerings. The complaints allege, among other things, that the offering materials were misleading based on the purportedly overstated valuation of certain assets, and that the underwriters are liable for violations of federal securities laws. The plaintiffs seek an unspecified amount of compensatory damages, as well as other relief. After the defendants removed the complaints to the U.S. District Court for the Eastern District of Tennessee, the plaintiffs filed motions to remand, which are currently pending. The Company believes the claims against Ladenburg are without merit and intends to vigorously defend against them.
In January 2016, an amended complaint was filed in U.S. District Court for the Southern District of Texas against Plains All American Pipeline, L.P. and related entities as well as their officers and directors. The amended complaint added Ladenburg and other underwriters of securities offerings in 2013 and 2014 that in the aggregate raised approximately $2,900,000 as defendants to the purported class action. Ladenburg was one of the underwriters of the October 2013 initial public offering. The complaints allege, among other things, that the offering materials were misleading based on representations concerning the maintenance and integrity of the issuer’s pipelines, and that the underwriters are liable for violations of federal securities laws. The plaintiffs seek an unspecified amount of compensatory damages, as well as other relief. The Company believes the claims against Ladenburg are without merit and intends to vigorously defend against them.
In the ordinary course of business, in addition to the above disclosed matters, the Company's subsidiaries are defendants in other litigation, arbitration and regulatory proceedings and may be subject to unasserted claims primarily in connection with their activities as securities broker-dealers or as a result of services provided in connection with securities offerings. Such litigation and claims may involve substantial or indeterminate amounts and are in varying stages of legal proceedings. When the Company believes that it is probable that a liability has been incurred and the amount of loss can be reasonably estimated (after giving effect to any expected insurance recovery), the Company accrues such amount. Upon final resolution, amounts payable may differ materially from amounts accrued.
The Company had accrued liabilities in the amount of approximately $1,358 at December 31, 2015 and $359 at December 31, 2014 for certain pending matters. For other pending matters, the Company was unable to estimate a range of possible loss; however, in the opinion of management, after consultation with counsel, the ultimate resolution of these matters is not expected to have a material adverse effect on the Company's consolidated financial position, results of operations or liquidity.
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