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Archive for the ‘Raymond James’ Category


FINRA Fines Raymond James Financial Services, Inc. $2 Million for Failing to Reasonably Supervise Email Communications

The Financial Industry Regulatory Authority (FINRA) announced today that it has fined Raymond James Financial Services, Inc. $2 million for failing to maintain reasonably designed supervisory systems and procedures for reviewing email communications. In addition, Raymond James has agreed to conduct a risk-based retrospective review to detect potential violations evidenced in past emails.

FINRA found that during a nine-year review period, Raymond James’ email review system was flawed in significant respects, allowing millions of emails to evade meaningful review. This created the unreasonable risk that certain misconduct by firm personnel could go undetected by the firm. The combinations of words and phrases – otherwise known as the “lexicon” – used to flag emails for review were not reasonably designed to detect certain potential misconduct that Raymond James, in light of its size, structure, business model, and experience from prior disciplinary actions, knew or should have anticipated would recur from time to time. The firm also failed to devote adequate personnel and resources to the team that reviewed emails flagged by the system, even as the number of emails increased over time.

FINRA also found that Raymond James did not periodically test the configuration and effectiveness of its lexicon-based email surveillance system. The firm’s primary focus was reducing the number of “false positives” that would need to be reviewed rather than ensuring that the system was effectively identifying all potentially problematic categories of emails.

Susan Schroeder, FINRA Executive Vice President, Department of Enforcement, said, “Firms have a clear obligation to reasonably supervise electronic communications, which includes periodically re-evaluating the effectiveness of existing procedures. They should also assess whether their e-mail review and supervisory systems are reasonably designed in light of each firm’s business model.”

In addition, FINRA found that the firm unreasonably excluded from email surveillance certain firm personnel who serviced customer brokerage accounts. Raymond James also failed to apply its entire lexicon to the emails of approximately 1,300 registered representatives who worked in branches that hosted their own email servers.

FINRA previously issued Regulatory Notice 07-59 which provides guidance regarding the review and supervision of electronic communications.

In settling this matter, Raymond James neither admitted nor denied the charges, but consented to the entry of FINRA’s findings.

Raymond James Settles ARS Case and Agrees to $300 million Buyback

As part of a settlement with eight states and the Securities and Exchange Commission, Raymond James Financial Inc. will buy back $300 million in auction-rate securities from clients and pay a fine of $1.7 million.

The states in charge of the settlement are Florida and Texas. Other states involved were Indiana, Missouri, New York, North Carolina, Pennsylvania and South Carolina.

Raymond James has 30 days to extend an offer to repurchase the securities, and the offer must be open for 75 days after that initial bid.

Raymond James Loses $2.5 Million FINRA Arbitration

A FINRA panel ordered Raymond James to pay $2.5 million to investors who alleged that Raymond James failed to divulge ‘risk of illiquidity’ in auction-rate securities market

Raymond James Financial Inc., still carrying $600 million in auction rate securities. The firm is reportedly working to draw down its position in the ARS market, which seized up in February 2008, precipitating the credit crisis. When the market froze, Raymond James clients held $1.9 billion of the securities.

Raymond James ARS Investors at a Total Loss?

Investors with Raymond James Financial, who thus far have only received a four-page letter dated January 2, 2009 from Thomas James, chairman and chief executive officer, in which he says the company cannot repurchase the securities it sold because it doesn’t have enough capital on hand, are still holding out for answers from the St. Petersburg-based financial services firm regarding their illiquid auction rate securities.

The message is of little comfort to clients of Raymond James Financial who currently own about $1 billion in outstanding auction-rate bonds and auction-rate preferred securities. It’s the same scenario they’ve faced since February 2008, when the $330 billion auction-rate securities market collapsed and left hundreds of thousands of investors unable to sell securities that had been touted as cash equivalents.

Facing pressure from state and federal regulators, a number of financial firms such as UBS, Wachovia, Merrill Lynch, Morgan Stanley and others announced plans to repurchase the illiquid securities from their clients. Many already have completed their buyback programs. Clients of Raymond James Financial, however, have been left in a holding pattern.

As it turns out, they may be in for a long wait. Any potential relief is likely tied to Raymond James Financial’s ability to secure a bank loan and buy back the securities after it becomes a bank-holding company. But that process will not be completed until next summer.

Meanwhile, Raymond James Financial remains under investigation by the Securities and Exchange Commission (SEC), the New York Attorney General and the Florida Office of Financial Regulation for its handling of auction-rate securities.

As of December 31, 2008, shares of Raymond James Financial had fallen more than 40% meaning the company’s stock has taken a beating from the firm’s inability to make good on its customers’ auction-rate securities.

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