Who’s Watching the Watcher? No One, Apparently

The NASD fined Raymond James Financial Services $2.75 million today for inadequate sales supervision of its producing branch managers.

The NASD fined Raymond James Financial Services $2.75 million today for inadequate sales supervision of its producing branch managers.

How inadequate? According to the NASD release, the roughly 1,100 producing branch managers at RJFS—the independent brokerage arm of Raymond James Financial—had three sales managers overseeing their activities. But for daily supervision of activities like transaction approvals and account openings, producing managers supervised themselves.

It’s not the first time the firm has been dinged for inadequate supervision in its independent branch network. Dennis Herula, a broker in Cranston, R.I., went to jail for fraud and his branch manager was barred for life from serving in a supervisory capacity at any broker/dealer (read that story here).

Particularly shocking is the case of Donna Vogt, a producing manager who worked for RJFS from her home office in Cambellsport, Wis. Vogt maintained approximately 700 accounts, many of which were retirement age or older. Despite that fact, 90 percent of the accounts had their investment objective listed as “growth” and risk tolerance as “medium.”

According to the NASD release, Vogt treated all her customers’ investments the same, regardless of age, financial status, investment experience or objectives. NASD found instances where Vogt sold elderly clients unsuitable variable annuities and aggressive mutual funds. The unsuitable transactions went on undetected for four years. Why? Because, according to the release, “the person who reviewed and accepted customer account documents was Vogt herself.” In a statment responding to the NASD release, Raymond James says Vogt was immediately fired upon discovering her conduct and all related client complaints were settled. Additionally, the firm has since invested millions of dollars in technology and personnel in its compliance, sales management and supervision areas. Neither RJFS nor Vogt admitted nor denied the charges, but they did consent to the NASD’s findings.

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