Raymond James has agreed to pay $15 million in disgorgement and penalties to the Securities and Exchange Commission, which claims the brokerage improperly charged advisory fees to retail investors over a five-year period.
The regulator alleges that between January 2013 and May 2018, Raymond James & Associates, Raymond James Financial Services Advisors and Raymond James Financial Services improperly charged advisory fees on retail accounts that had been inactive at least a year and charged excess commissions on brokerage client investments in unit investment trusts.
The firm agreed to be censured and to pay out $12 million in disgorgement to impacted clients and $3 million in civil penalties. The companies have also agreed to make distributions to the victims.
"We are pleased to have these matters concluded and have revised our policies and procedures to address the supervisory enhancements required by the SEC at Raymond James and a number of competitor firms," said Raymond James spokesman Steve Hollister, in a statement. "The firm has completed remediation with the appropriate clients and looks forward to continuing to provide best-in-industry service in support of their goals."
The SEC claims RJA and RJFS Advisors failed to regularly review 7,708 advisory accounts that were inactive for at least a year and thus were not able to figure out whether the fee-based accounts that clients were in were suitable for them. Meanwhile, Raymond James earned about $4.9 million in advisory fees from those accounts, the SEC said.
Further, RJA and RJFS advised brokerage clients to sell UITs before maturity and buy new ones without determining whether such advice was suitable for the clients, which generated about $5.5 million in excess fees for the companies on 2,044 accounts.
The sales and purchases ended up costing the clients bigger sales commissions than would have been charged if they had simply held onto their UITs to maturity and then bought new ones. The two brokerage units failed to disclose their conflict of interest in recommending the sale of the UITs without applying about $660,000 in inapplicable sales load discounts to investors in 5,468 accounts, which netted $51,000 in improper fees.
“Investment advisers and broker/dealers have on-going obligations to their clients and customers,” said C. Dabney O’Riordan, co-chief of the SEC Enforcement Division’s Asset Management Unit. “Raymond James’ failures cost their advisory clients and brokerage customers millions that will be repaid as part of this settlement."