Adviser named in private-placement suit says he did nothing wrong

A Securities America adviser named last week in a class action said he had no way of knowing that securities he sold would later blow up.
The adviser, Bradley Hofhines, said in a statement to The Idaho Statesman newspaper that he was unaware of any problems with an offering from Provident Royalties LLC. The Securities and Exchange Commission this summer charged Provident with fraud, and many investors have begun legal action to get money back.
In his statement, Mr. Hofhines did not mention Securities America Inc. but said he did the right thing when he sold the Provident shares.
“I will say that I sold the product properly given the information I had and the due diligence that was performed on this company,” according to the Idaho paper. “I certainly had no way of predicting or uncovering the alleged intentional fraud at Provident, nor how the economic collapse has magnified the problems.” Mr. Hofhines did not return calls Thursday seeking further comment.
Mr. Hofhines and his firm, Summit Retirement Advisors LLC, were sued in federal court in Idaho last week by investors seeking class action status for their suit.
The lawsuit alleges that Mr. Hofhines and his firm failed to disclose to clients that returns from investments in Provident Royalties securities did not come from revenue generated by actual investments in oil-and-gas properties.
Rather, investor funds were commingled, and funds raised from later offerings were used to pay so-called dividends or “returns of capital” to earlier Provident investors.
Mr. Hofhines, whose practice is based in Meridian, Idaho, is affiliated with Securities America, an independent-broker-dealer subsidiary of Ameriprise Financial Inc. Both those companies are named in the suit.
Securities America has been named in at least three potential class actions stemming from a series of private placements that went afoul. This could be the first time an adviser has been identified, however.
In July, the SEC charged Provident of Dallas with committing fraud in the sale of $485 million of preferred stock and limited-partnership offerings in oil and gas deals.
A Securities America spokeswoman declined to comment on Mr. Hofhines remarks.