A nearly $2 million fine amounts to hardly anything for a company the size of Raymond James.
But that's not the eye-popping part of the larger broker-dealer's recent settlement with the Financial Industry Regulatory Authority, say securities lawyers. It's that the fine stems from the firm's alleged failure for years to report hundreds of customer grievances touching on everything from "forgery, theft, or misappropriation of funds or securities," according to FINRA.
FINRA alleged Raymond James failed to follow that requirement with roughly 450 customer-written grievances submitted between January 2018 and September 2021. After FINRA told the firm of its failure, it did disclose about 360 of those complaints in spring 2023, according to the settlement.
"By that time, the disclosures were, on average, over three years late, and one was eight years late," the settlement states.
A Raymond James spokesman declined to comment.
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"How many people were able to attract new customers that they may not have attracted if this had been on BrokerCheck?" Schulz said. "If you are talking about nearly 400 complaints, the number could be massive."
The Raymond James case suggests one reason these "scarlet letters" aren't being handed out is that, "bad acts are just being buried."
FINRA also accused Raymond James of failing to revise registration documents known as forms U4 and U5 for individual representatives after they had received customer complaints. Form U4 is used to register individual brokers and asks for listings of any previous complaints. Form U5 is used to inform regulators that a given representative has been fired or left a firm for some other reason.
Both forms can lead to disclosure on BrokerCheck, FINRA's public-facing database clients use to research the history of individual brokers. FINRA's settlement with Raymond James alleges the firm failed to use forms U4 and U5 to make timely disclosures for roughly 90 complaints between January 2018 and September 2021.
"On average, the firms disclosed those complaints 175 days late — and in some cases, nearly two years late," according to the settlement.
FINRA's settlement notes that Raymond James did report at least 20 customer grievances under a separate rule requiring the firm to submit summaries of the complaints it has received once a quarter. Still, that system required manual logging of data, which Raymond James failed to ensure was being done properly, FINRA alleged. The settlement also accuses Raymond James of failing to research customer complaints and failing to forward them to employees who were responsible for making needed changes to Forms U4 and U5.
Separately, FINRA accused Raymond James of breaching its duty to make sure investments it was making on behalf of clients in fact suited their needs. FINRA rules require firms to ensure any investment they recommend aligns with their customers' goals, retirement plans, income needs and similar considerations.
FINRA, for instance, alleged that Raymond James inadvertently used a data filter that prevented millions of investment purchases from being taken up into its automatic surveillance system and gauged for suitability. It also said the automated system was not equipped to review certain types of transactions, such as purchases of certain mutual funds.
FINRA said Raymond James reported these failures on its own. In a later review, it identified roughly 630 mutual fund purchases and other investments that were possibly unsuitable.
"Customers incurred approximately $111,724 in excessive sales charges and commissions in connection with these transactions," according to FINRA.
FINRA's settlement includes a $525,000 fine and $26,169 in restitution for Raymond James & Associates, the firm's division with 8,200 direct-employee advisors on its payroll. Raymond James Financial Services — the firm's independent channel, with roughly 7,100 registered representatives — was hit with a $1.3 million fine and nearly $85,555 in restitution.
