Two Raymond James-affiliated brokerages have agreed to return at least $8.25 million in commissions and pay more than $4 million to settle allegations that they overcharged customers for hundreds of thousands of equities transactions over a 5-year period.
The North American Securities Administrators Association, which represents state financial watchdogs, announced Tuesday that it reached the settlement with Raymond James & Associates and Raymond James Financial Services, both St. Petersburg, Florida-based brokerages under the wealth management giant Raymond James Financial. NASAA's investigation into Raymond James was led by securities regulators in Alabama, California, Illinois, Massachusetts, Montana and Washington.
The settlement is just the latest example of state regulators working together to rein in the securities industry. In May,
In the Raymond James case, the firm's brokerage subsidiaries were accused of too often defaulting to a $75 "minimum equity commission" charge for even small transactions, according to Massachusetts Secretary of the Commonwealth William Galvin's office. Raymond James collected the $75 commissions over a 5-year period starting in July 2018, even though it had the option of placing customers making relatively small trades into a separate fee schedule charging much lower amounts, said Galvin's office.
For transactions worth less than $300, for instance, the alternate schedule would have charged anywhere from $0 to $35, according to Galvin's office. NASAA and the state regulators working on the case eventually found that the Raymond James subsidiaries collected $8.25 million in excess commissions on 270,000 trades initiated by customers throughout the U.S.
Massachusetts and the other state regulators accused Raymond James of failing to have safeguards in place to prevent such overcharging. Galvin's office said there were many transactions on which the commissions exceeded 90%.
In a statement, Galvin noted this isn't the first time Raymond James has gotten in trouble for overcharging clients. Raymond James Financial and its two broker-dealer subsidiaries
"It is clear from these actions that there is a continuing need for state regulators to work together to protect the best interests of investors," Galvin said in the statement.
Read more:
Justin Mayfield, a Raymond James spokesperson, said the firm is "pleased to resolve this matter regarding commissions charged in a specific population of small principal amount equity trades generated by our automated commission process.
"All impacted clients will be reimbursed the excess commission amounts plus interest and we are implementing the necessary adjustments to our equity commission schedule," Mayfield added. "Our commitment to putting clients' interests first remains our top priority."
Raymond James has more than $194 billion in assets under management, according to
NASAA and the state regulators' settlement calls on Raymond James to pay back the $8.25 million it overcharged customers plus 6% interest. Clients in Massachusetts will be reimbursed $185,000 at a minimum, according to Galvin's office.
Raymond James also must pay $4.2 million to cover administrative and other costs the states incurred while conducting their investigation. NASAA will receive $75,000 of that total.
"This settlement shows once again that state securities regulators will take swift and decisive action to protect investors," Andrew Hartnett, the president of NASAA and president and deputy commissioner of the Iowa Insurance Division, said in a statement. "NASAA has spent a lot of energy and resources on the pocketbook issues that are so important to Main Street investors."
Read more:
Raymond James also agreed to take steps in the next 60 days to prevent further charges of unfair commissions and to bar commission rates exceeding 5% unless there is a documented reason for an exception.
Charlie Clark, the director of the Washington State Department of Financial Institutions, said the case shows the benefits of cooperation among state regulators.
"In working together we are better able to identify instances such as this where investors have been harmed, determine the best form of repayment and penalty, and ensure course correction to protect Washington investors in the future," he said in a statement.
