US states want Securities America suits to proceed

* U.S. states ask federal judge to deny injunction

* Massachusetts, Montana filed briefs Monday

* State group warns injunction would chill other states

By Joseph A. Giannone

NEW YORK, March 15 (Reuters) - State regulators pursuing complaints against Securities America Inc have asked a federal court judge to deny an injunction request by private investors pursuing a class-action lawsuit against the brokerage that would halt their legal actions.

Massachusetts, Montana and the North American Securities Administrators Association (NASAA) filed briefs on Monday in Dallas Federal Court asking the court to deny a request by the class-action for a preliminary injunction that would halt state administrative proceedings against Securities America, a unit of Ameriprise Financial Inc (AMP.N).

A class-action of investors against Securities America recently asked the federal court to halt Massachusetts and Montana regulators from continuing their proceedings.

A hearing for the class-action suit is scheduled for Friday.

State securities regulators have investigated allegations of wrongdoing by Securities America related to its sales of private placements issued by two companies, Provident Royalties and Medical Capital Holdings.

The Securities and Exchange Commission filed fraud charges against the two companies in July 2009. Last year Massachusetts charged Securities America with improper sales of Medical Capital notes, while Montana filed a cease-and-desist order.

A flood of investors filed arbitration claims against Securities America, arguing the brokers failed to conduct proper due diligence before marketing the private placements.

Lawyer Daniel Girard, who represents the 2009 class-action, warns that Securities America does not have the capital to pay the more than $300 million claimed by investors seeking damages through arbitration.

Girard recently reached a settlement agreement with Securities America to create a $21 million fund. He argues it is better for every client to get partial reimbursement than to have investors at the back of the arbitration line get no money back.

NASAA said that, if the Dallas Federal Court judge granted the injunction, their authority to enforce the rules would be hurt "by defendants who would run to federal courts to plead poverty."

NASAA, a group representing regulators from 50 states, warn that, if the court grants a request by private litigants to stop regulators in Massachusetts and Montana, it would squander these states' efforts and create a "chilling effect" for other states.

Massachusetts and Montana in their joint brief filed Monday argued a federal court does not have the authority to stop them from policing securities fraud in their own states.

(Click on [ID:nN03109863] to see March 3 story on the proposed settlement.) (Reporting by Joseph A. Giannone; editing by Andre Grenon)